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The Bankruptcy StrategistFeaturesBankruptcyLitigation

Tenth Circuit Ruling May Impact Treatment of Student Loans In Bankruptcy

By Charles M. Tatelbaum, Christina V. Paradowski and Brittany L. Hynes
December 01, 2020

A recent ruling in the U. S. Court of Appeals for the Tenth Circuit represents a significant departure from the generalized belief that student loan debts cannot be discharged in bankruptcy, and which, if followed by other circuit courts, could have a dramatic impact on bankruptcy law and its current practice. In re McDaniel, No. 18-1445 (Tenth Cir. Aug. 31, 2020).

The McDaniels filed a voluntary Chapter 13 bankruptcy petition, and disclosed, among other debts, that they had federally insured student loans, as well as a number of private student loans with Sallie Mae, Inc. (now Navient). Throughout the course of their Chapter 13 bankruptcy, the McDaniels paid nearly $27,000 in principal toward the $200,000 that they owed to Navient. Upon completion of their plan payments, the bankruptcy court issued an order granting the McDaniels a discharge of their debts, but did not specify which debts were or were not discharged. As to the student loans, the order simply stated that "debts for most student loans" were not discharged.

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