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Can My Spouse & I Discharge Our Student Loans in Chapter 7 Bankruptcy?


Many Iowa couples struggle to make ends meet while also repaying their outstanding student loan debts. Unfortunately, federal bankruptcy laws make it difficult to discharge such debts in bankruptcy. That is not to say student loan debt is never dischargeable–rather, it means the burden is on the debtor to show it would be an “undue hardship” to require them to repay the loan (or loans) post-bankruptcy.

Judge Wipes Out Most–But Not All–of Iowa Couple’s Loan Debt

In some cases, a federal bankruptcy judge may decide some–but not all–of a married couple’s student loans can be discharged. Here is a recent example from right here in Iowa. This case, In re Swafford, involved a husband and wife in their mid-30s with three young children.

The husband works full-time and earns just under $50,000 per year. The wife is a stay-at-home mother who has intermittently worked part-time as a server. Both spouses continue to carry student loan debt. In fact, the husband had eight outstanding loans. The wife only had one outstanding loan.

The couple jointly filed for Chapter 7 bankruptcy and sought discharge of all of their outstanding student loans. The three entities holding the loans objected. They argued a discharge was “unnecessary” and unjustified, given the debtors would not actually suffer an undue hardship and they were eligible for “income based repayment” plans.

The judge overseeing the bankruptcy case did not completely agree with the creditors’ assessment. He held that most of the loans would constitute an “undue hardship” on the couple and were therefore subject to discharge under Chapter 7. The judge noted that in determining whether or not an undue hardship exists, he is required to look at the “totality of the circumstances.”

The judge noted that while the husband is currently employed, his income “is not likely to increase in any meaningful way for the foreseeable future.” And his present salary covers little more than his family’s “necessary household expenses.” Meanwhile, the wife has “little experience other than waitressing” and is “unlikely to find a job that would pay her a wage that would add meaningfully to the family income.”

The judge also pointed out there was “room” for the debtors “to reduce expenses,” meaning they would have more money available to continue making loan payments. That said, the judge said there was “not enough opportunity for reduction to allow for payment of all eight loans.” He therefore decided to discharge the wife’s sole loan and all but the three smallest outstanding loans owed by the husband.

Get Advice from an Iowa Chapter 7 Bankruptcy Lawyer Today

Student loan debt is often the major factor leading individuals and couples to seek bankruptcy protection. But as you can see, filing for bankruptcy is no guarantee of a discharge. That is why it is critical to work with an experienced Southeast Iowa Chapter 7 bankruptcy attorney when dealing with such matters. Contact the Noyes Law Office, P.C., today to schedule a consultation with a member of our bankruptcy team today.


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