44 N. Y. L. Rev. 605 (2000-2001)
Discharge of Student Loan Debt under 11 U.S.C. 523 (A)(8): Reassessing under Hardship after the Elimination of the Seven-Year Exception

handle is hein.journals/nyls44 and id is 613 raw text is: DISCHARGE OF STUDENT LOAN DEBT UNDER 11 U.S.C.
§ 523(A) (8): REASSESSING UNDUE HARDSHIP AFTER THE
ELIMINATION OF THE SEVEN-YEAR EXCEPTION
I. INTRODUCTION
In 1998, Congress closed one of only two doors available to debt-
ors seeking discharge of student loan debts in bankruptcy.' Prior to
October 7, 1998, the Bankruptcy Code made student loan debts non-
dischargeable unless: (1) the loans first became due more than seven
years before the debtor filed for bankruptcy;2 or (2) not allowing the
student loan debts to be discharged would impose an undue hardship
on the debtor and the debtor's dependents.3 On October 7, President
Clinton signed into law the Higher Education Amendments of 1998,
which eliminated the seven-year exception, leaving only the undue
hardship exception to non-dischargeability.4
This Note argues that undue hardship must be interpreted more
broadly than it has been before, now that debtors are no longer pro-
tected by the automatic seven-year exception.5 Lowering the standards
necessary to establish undue hardship is consistent with the Bank-
ruptcy Code's underlying policy of providing debtors with a fresh start,
free from oppressive debt.6
1. See Craig A. Gargotta, Congress Amends § 523(a)(8) to Eliminate Seven-Year Dis-
charge Provision for Student Loans, 17-NOV AM. BANKR. INST. J. 8, 8 (1998).
2. See Crime Control Act of 1990, Pub. L. No. 101-647, § 3621(1), 104 Stat. 4789,
4964 (codified as amended at 11 U.S.C. § 523(a) (8) (A)) (repealed 1998). Section
523(a) (8) (A) originally required that an education loan be due for a five year period.
See Bankruptcy Reform Act of 1978, reprinted in 1978 U.S.C.C.A.N. 2549, 2591.
3. See Bankruptcy Reform Act of 1978, Pub. L. No. 95-598, 92 Stat. 2549, 2591
(codified as amended at 11 U.S.C. § 523(a)(8)(B) (1994)).
4. See Higher Education Amendments of 1998, Pub. L. No. 105-244, § 971, 112
Stat. 1581, 1837 (1998) (codified as amended at 11 U.S.C. § 523 (a) (8) (1999)). The
primary purpose of the 1998 Higher Education Amendments was to provide federal
funding for student loans at a reduced interest rate. See Gargotta, supra note 1, at 8.
5. For an article making the opposite argument, see Gargotta, supra note 1. To
Gargotta, the elimination of the seven-year exception suggests that Congress now views
'undue hardship as creditor protection rather than debtor protection. See id. at 9.
According to that view, the circumstances that warrant an undue hardship discharge
may have to be more extreme than previously considered. Id.
6. See Robert F. Salvin, Student Loans, Bankruptcy, and the Fresh Start Policy: Must
Debtors Be Impoverished to Discharge Educational Loansi, 71 TUL. L. REv. 139 (1996) (argu-
ing prior to the 1998 elimination of the seven-year discharge that undue hardship

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