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Sunday, April 14, 2013

7th Circuit OKs $25K student-loan discharge for ‘destitute’ paralegal

At ABA Journal:

A "destitute" paralegal who has made reasonable efforts to repay her student loan debt is entitled to a bankruptcy discharge of the remaining $25,000 or so despite the fact that she never enrolled in a federal income-contingent repayment plan, a federal appeals court has ruled.

Reinstating a bankruptcy court's determination that Susan M. Krieger is entitled to the discharge and reversing a federal district court's decision to the contrary, the Chicago-based 7th U.S. Circuit Court of Appeals said the bankruptcy court had discretion to decide whether requiring Krieger to repay the student loan debt would be an undue hardship.

In a Wednesday opinion (PDF) authored by Judge Frank Easterbrook, the 7th Circuit also said that requiring Krieger to enroll in the income-contingent repayment plan as a show of good faith, was contrary to the purpose of bankruptcy law.

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