Bankruptcy Judge Allows Bankrupt Law School Graduates to Discharge Bar Exam Loans

by San Antonio Attorney

Law-school graduates filing for bankruptcy protection can have the benefit of cancelling their accumulating debt during the time of their bar exams, since these loans are different from the federal student loans.

Judge Carla Craig, a bankruptcy judge in Brooklyn, said that the loan incurred by the bar-exam is a result of an agreement of commercial terms.  This doesn’t necessary fall into the category of student loans that needs to be associated with a borrower filing for bankruptcy.

The decision, based on the most recent ruling, fairly contradicts the accepted idea that student loan debt will be cancelled in a bankruptcy filing under uncommon cases of financial problems.

A perfect example of this case involves a 36-year-old woman named Lesley Campbell, who was a graduate of Pace University School of Law.  Campbell pleaded the court to cancel her unpaid loan from Citibank worth $15,000.

Though Campbell reviewed for her bar exams, she failed to pass the bar exam after graduation.  She took a job instead as a secretary in a hotel management company with a $49,000 annual salary.  Campbell filed for bankruptcy in 2014.

Though the study loan consists of a lesser portion of a $300,000 student loan debt, the situation followed the ruling when the consumer advocacy groups and several federal lawmakers initiated a new law that bankruptcy can be used to alleviate financial problems.

This advocacy has experienced some challenges as the United States Supreme Court just declined a court hearing, which could have made the process easier for eradicating student debt.

The White House revealed last 2015 that it will deliberate circumstances whether bankruptcy can cancel student loans, paving the way for student debt to be on the same level as credit card debt and mortgages.

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