I owe tuition, room, and board to my former college. Can I discharge this debt in bankruptcy?

If tuition, room, and board debt is not a loan, you can discharge it in bankruptcy.

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Whether you can discharge tuition, room, and board owed to a college or other school depends on whether the debt is an educational loan. If you didn’t sign a promissory note or take out a loan from the school to cover these payments, then you can probably discharge the debt in bankruptcy.

Student Loans Discharged Only in Cases of Undue Hardship

Student loans are not automatically discharged in Chapter 7 or Chapter 13 bankruptcy. Instead, in order to discharge either federal or private student loans, you must bring a separate action within your bankruptcy case (called an adversary proceeding) and demonstrate to the court that repaying your student loans would cause you undue hardship.

Courts have come up with various standards that borrowers must meet in order to prove undue hardship. You can learn about those standards in Student Loan Debt in Bankruptcy.

Tuition Payments Are Usually Not Student Loans

This hardship test, however, applies only to educational loans. While that definition tends to include almost all loans you take out to pay for school, it usually does not include debts you owe to an educational institution for tuition, room, board, and the like.  This is because such debts are usually not structured as a loan or extension of credit.

Exception:  Does It Look or Act Like a Loan?

However, some bankruptcy courts have ruled that the hardship test does apply if the school essentially provided you with a loan to pay the tuition. For example, in a 2009 case the Ninth Circuit Court of Appeals found that a deferred tuition payment agreement was essentially a loan because it was structured as an extension of credit, with monthly billing, late fees, due dates, and collection charges. In re McKay, ruled 558 F.3d 888 (9th Cir. 2009).

If your tuition debt is a loan, then you have to meet the undue hardship test in order to discharge the tuition debt.

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