Student Loans Among Most Difficult Debts to Discharge
As the U.S. bankruptcy law stands now, private student loans — credit-based student loans issued by private banks without the backing of the federal government — are grouped together with government-backed federal college loans under the category of "education loans," which are exempt from discharge in bankruptcy in all but extreme cases.
In order to have one's private student loans discharged in bankruptcy, a borrower must be able to show that repaying the loans would result in "undue hardship," a legal standard that can be extremely difficult to meet.
In fact, the legal requirements for discharging education loans are so onerous to meet that most bankruptcy attorneys avoid the process altogether.
Lawmakers in both chambers of Congress have proposed legislation that would make private student loans eligible for discharge under U.S. bankruptcy laws, but this law has not yet passed.