Financial Counseling Certification Program (FiCEP) Practice Exam

True or False: Seniors may have student loan debt because they discharged it in their bankruptcy.

1. True

2. False

3. It depends on the type of bankruptcy

4. Only for private loans

The correct answer is: False

The statement is false because student loan debt is generally not dischargeable through bankruptcy except under very specific circumstances. In most cases, individuals who file for bankruptcy cannot eliminate their student loans. The law requires that borrowers must prove "undue hardship" in order to have their student loans discharged, which is a challenging legal standard to meet. While there may be some exceptions, such as in the case of a limited set of private loans, the overwhelming majority of federal student loans remain with the borrower after bankruptcy proceedings. Therefore, it would not be accurate to say that seniors or anyone else may have discharged their student loan debt in bankruptcy as a common outcome. This understanding helps clarify the nuances surrounding student loan debt and bankruptcy, reinforcing that while bankruptcy can provide relief from many debts, student loans are typically not among them unless extraordinary circumstances apply.