If you are considering filing for personal bankruptcy in Massachusetts, it may be relevant whether or not your educational loans for college are forgiven in the bankruptcy.

The U.S. Department of Education has strict legal requirements that a bankruptcy court must follow in order to forgive educational loans.

Proving A Hardship to the Bankruptcy Court

In order to have an educational loan forgiven in bankruptcy (regardless of whether it is in Chapter 7 or 13), you must show that paying the loan would be an undue hardship. Bankruptcy courts consider three factors when determining if paying the educational loan would be an undue hardship:

1. If you pay the loan, you would not have enough money to maintain a minimal standard of living,

2. You show evidence that the hardship is likely to continue for into the future covering a significant portion of the loan period, and

3. You have made good-faith efforts to repay the loan before filing bankruptcy (often this means that you must have a significant repayment history, such as five years of payments).

The bankruptcy court will expect you to meet all three factors in order to discharge, or forgive, the loan. If you meet all three factors, then the court will dismiss the loan and you will not be required to pay any more of the loan back. Additionally, any collection calls or letters must stop.

Keep in mind that only a very small fraction of students with educational loans are found to meet all three factors. Most students must either continue to pay their current loan payments, start a new repayment plan with lower monthly payments over a longer period of time, or have a portion of their loans forgiven, but still be required to pay back the rest.

No Reaffirmation Requirement for Future Federal Financial Aid

If you decide to return to school in the future after a loan is discharged in bankruptcy, you will be eligible to receive Federal student aid. Under currentFederal rules, if you have had a Federal educational loan that has been discharged you do not have to reaffirm (reassume responsibility for paying) the discharged loan before obtaining new Federal loans.

Are Tuition Bills Covered by a Bankruptcy?


Tuition bills may or may not be included in the debts that can be discharged in a bankruptcy. Courts will assess whether the tuition bill looks more like a contract, which can be discharged in bankruptcy, or an educational loan, which cannot. A key factor in making that distinction is whether or not there is a “promissory note.” If the debtor signed a promissory note to repay the tuition over a set period of time with a set interest rate then the bill likely will not be discharged since it is an educational loan. If there is no promissory note, then the bill is simply a contract, which the court can discharge in bankruptcy.

More Questions on Personal Bankruptcy in Massachusetts?

Call the Law Office of Brian R. Lewis for guidance on all of your bankruptcy questions.