Generally speaking, student loan debts are not permitted to be included in bankruptcy. This was the exception:
A former law student has won a bid in bankruptcy court to discharge nearly $340,000 in education debt because her diagnosis of Asperger Syndrome rendered her unable to repay the loans.
Even by today’s standards, that is a substantial amount of debt. How did she rack that up?
Todd, who received her high school general equivalency diploma during the late 1980s, at the age of 39, began attending law school in 1992 but did not finish, according to the opinion. She went on to obtain a master’s degree from Towson University and a Ph.D. from an unaccredited online school in 2007. She filed for Chapter 7 bankruptcy in 2009. At the time of her trial, she was 63 and owed $339,361 to three student loan creditors.
Three creditors–meaning that three different banks thought she was a good risk. Did no one do due diligence with regard to the loan applications to determine that she might have difficulty repaying the loans? Or, were the lenders afraid of turning her down for risk of being sued under the Disabilities Act? Or, did her Asperger’s become worse at a time which was opportune for her vis a vis her debt crisis? After all, she did complete a master’s degree (with all the pressures which one would presume are attendant upon such a course of study). Chances are that we’ll not know the specifics to these questions any time soon, if ever.
Regardless of the facts and the outcome in this case, of one thing we can be certain, the number of bankruptcies where a mental disability is put forth as the basis for discharging student loan debts will increase.
For good or for ill, the best way to get more of something is to reward it. If $340,000 in free money isn’t a reward, I’m not sure what is.