It is a common misconception among Pennsylvania students that all types of student loan debt are inescapable through bankruptcy. However, laws that protect other types of student loans from being discharged do not protect many private student loans. In fact, some private loan debt may be cleared away within 90 days of filing for a Chapter 7 bankruptcy.
Whether private student loans are eligible for discharge in a Chapter 7 bankruptcy may vary according to state regulations. Private lenders are not legally permitted to collect student loan debt that has expired under the statute of limitations. Once debt has expired under the statute of limitations, it may still be included in a bankruptcy filing, but it can no longer be pursued in court.
In order for a private loan to be protected from discharge, it must meet all standards set by the Internal Revenue Code. These standards require that the loan was issued under a government or non-profit program, that the program is an eligible and accredited institution under the Higher Education Act, and that the loan money was used for a qualified education expense. If the loan does not meet all Internal Revenue Code criteria, it is eligible for discharge. Student loans from a non-accredited academic institution are generally eligible for discharge through Chapter 7 bankruptcy. Private loans borrowed to fund trade or vocational school are usually easy to have discharged.
Many Pennsylvania students might believe that their private student loans are not eligible to file bankruptcy. However, a bankruptcy lawyer may be able to provide further information about which private loans are eligible for discharge. Filing for a Chapter 7 bankruptcy might provide relief from private student loans in addition to other forms of debt.