Is There Hope for Discharging Student Loans in Bankruptcy?

By Deanne Katz, Esq. on November 20, 2012 | Last updated on March 21, 2019

When you sign off on student loan documentation, lenders make it very clear that bankruptcy will not discharge your law school debt. But that doesn't stop law students who are being crushed by debts from trying anyway.

Case in point: Michael Hedlund, who has been on a journey to decrease his law school debt for the past nine years. Earlier this year, U.S. District Judge Ann Aiken overturned his partial victory from a lower court.

Hedlund is now appealing Aiken's decision to the Ninth Circuit Court of Appeals. While Aiken ruled against him, her opinion reads partly in his favor.

Aiken concluded that Hedlund can't decrease his loans by declaring bankruptcy. But she also spent several pages criticizing the current education system that saddles students with massive debts.

Aiken's four-page outburst in the March opinion also specifically criticized law schools whose tuition price tag far outweighs the potential income most students can expect to earn.

Hedlund's situation is not necessarily unique.

After graduating law school in the late 1990s, Hedlund took and failed the bar exam twice, reports The Oregonian. He took a job as a probation officer, which is not exactly lucrative.

Hedlund still has $85,000 in debt. A lower court had agreed to discharge $50,000, but Aiken reinstituted the original amount. Still, she is only the most recent judge in this long case. Some have decided differently.

What is different about Hedlund's position is that he went to law school before the market took a nose-dive. Aiken expects more cases like his to bubble up with the current job crisis, according to the ABA Journal.

She's probably right.

While Hedlund's bankruptcy case is not yet a success, it shows that even judges who don't side with him legally still think the student loan system is broken. That means there may just be hope for indentured servants -- sorry, "students" -- everywhere.

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