Law Grads Filing for Bankruptcy with $150,000 in Student Loans

By Cynthia Hsu, Esq. on February 09, 2012 | Last updated on March 21, 2019

Recent law grads filing for bankruptcy seems to make sense. After all, look at the high six-figure cost of law school. Then just read some news about the dismal state of the economy.

Unless you managed to snag a BigLaw job -- or any job, really -- you might be out of luck.

Diana Valle, 26, graduated from the University of Maryland School of Law. She incurred more than $150,000 in student loan debt. Shortly before her commencement, she commenced a legal action. She filed for bankruptcy.

Unfortunately for Valle and the thousands of law students struggling with high debt, bankruptcy isn't usually the end-all solution.

Student loan debt cannot be discharged unless paying the loan would result in an "undue hardship." It's a pretty tough standard. That's why most law grads are stuck with footing a hefty bill.

Valle managed to get contract work at a legal temp agency. She might be one of the lucky ones.

Misty Kennedy, 34, took out $145,000 in loans to attend Appalachian School of Law. She filed for bankruptcy in March 2010, reports Thomson Reuters News and Insight. She has a net income of $1,000 a month from her own law practice. Her loan payments total $700 a month. A court ruled that Kennedy's loans wouldn't be an "undue hardship."

Part of the ruling declared that Kennedy's financial troubles had much to do with her own personal choices.

Oh man. That's gotta hurt.

Luckily there may be some glimmers of hope on the bleak law grad horizon. The ABA has imposed more rules to increase employment data transparency. The economy may soon be picking up.

Yet what about all those (literally) poor students who just graduated that have no viable income? Chin up. Don't give up your hopes and dreams just yet.

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