Faced with a nearly impossible standard to discharge federal student loan debt in bankruptcy due to undue hardship, creative debtors’ attorneys and the bankruptcy courts are continuing to create pockets of relief wherever possible.
Finding that “non-dischargeability does not immunize the student loan claim from modification,”a bankruptcy court confirmed the debtors’ plan under which their payments would go to the principal on their student loan debt with accumulated post-petition interest to be paid post-discharge. In re Duensing, No. 18-10201 (Bankr. D. Kans. Feb. 22, 2019).
The guarantor of the loans, ECMC, objected to the debtors’ proposed treatment of the student loan debt arguing that, because the reduction of principal would result in declining post-petition interest, the proposed plan effectively discharged her student loan without a finding of undue hardship.