In 2005, Chuck Stewart’s life had come to a screeching halt. His partner was in the hospital with a terminal illness and he had only $300 in his bank account. He couldn’t find a job, and the $60,000 in student loans he took on for a doctorate in education weren’t going anywhere. That’s when he decided to file for bankruptcy.
“I spoke to two lawyers and they both said the same thing: ‘It’s going to be extremely expensive and you are going to lose,'” he said.
In a typical bankruptcy, Stewart would have to show that his income was below the median level for the state or that his expenses outweighed his disposable income. With a tower of medical bills and unable to find employment, he likely would have qualified. But because his loans were for school, lawyers said it would be impossible.
Historically, US bankruptcy laws have been passed to give debtors a fresh start: If you’re drowning in credit card bills, an underwater mortgage, or even gambling debt, you can file for bankruptcy and start over. Not so if that same money was spent on an education. Today, student loans – which total more than $1.3 trillion – are one of just a few types of debt that do not generally qualify for bankruptcy, putting them in a category with unpaid child support and criminal fines. <Read more.>