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 might be able to discharge the debt in bankruptcy. Otherwise, if the debt qualifies as a student loan, you’ll need to file a lawsuit and prove that it will be an undue hardship to pay it.
Student loans aren’t automatically discharged in Chapter 7 or Chapter 13 bankruptcy—and wiping them out isn’t easy. 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 to prove undue hardship. You can learn about those standards in Student Loan Debt in Bankruptcy.
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 cover debts you owe directly to an educational institution for tuition, room, board, and the like. But, keep in mind that this is only when such debts aren’t structured as a loan or extension of credit.
Some bankruptcy courts have ruled that the hardship test does apply if the school essentially provided you with a loan to pay the tuition. If you still owe tuition in the form of a loan, then you’ll likely have to meet the undue hardship test to discharge the tuition debt.
An adversary proceeding is essentially a lawsuit. It starts with the filing of an adversary complaint and moves into the discovery phase wherein both sides can gather information from each other. Then, if the case doesn’t settle, the matter gets decided at a trial before a bankruptcy judge.
The judge will consider the evidence presented by both sides. As part of the evidence, an expert will usually testify about your current and future ability to work and employment prospects (or the lack thereof).
Of course, it would be difficult for most bankruptcy filers to complete this process without help. If you’re considering asking the bankruptcy court to discharge your student debt by way of an adversary proceeding, you might want to start by consulting with a bankruptcy litigation lawyer.