Adam Minsky, student loan attorney in Boston, has an important post about a recent 7th Circuit Court of Appeals decision that allows the discharge of a federal student loan.

Adam writes:

A new decision issued by the 7th Circuit Court of Appeals could potentially change this. In Krieger v. Educational Credit Management Corporation, the court upheld a bankruptcy judge’s decision to allow a borrower to discharge $25,000 of federal student loans in bankruptcy. The court concluded that the borrower, a 53 year-old paralegal, had made reasonable good-faith attempts to repay the loan. The court also noted that she was destitute, lived in a rural area and had difficulty finding suitable employment, was a caregiver for her elderly mother, and lacked the resources to look for suitable work elsewhere (no internet, unreliable transportation). The court concluded that the bankruptcy judge had discretion to determine whether the borrower met the “undue hardship” standard, and that this standard should not serve as a blanket prohibition on discharging student loans in bankruptcy.