Law Student Exposes the Secret to Wiping Out Student Loan Debt in Bankruptcy

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Accepted wisdom says that there are only two (rather sobering) ways to relieve the burden of student debt:  either pay it off, or depart from this earthly world. 

Until now.

On May 22 the Ninth Circuit Court of Appeals wiped out $58,000 in student loan debt for a former law student in bankruptcy proceedings, sending shockwaves through the formerly impervious facade of student loan debt performance.

Ten years in the making, the ruling could burst the trillion dollar student loan bubble.

This is the case of Michael Hedlund.

His tale seems unexceptional in today's economic hard times… 

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  1. Dave | June 5, 2013

    Is having a family a god-given right no matter one's circumstances? Why would this guy have started a family in his desperate financial straits? Where's the accountability? No wonder the USA is financially doomed.

    • Josh | June 6, 2013

      Where is the accountability for schools and banks making so much money off of people who have to choose between schooling with $150k debt, or a job at the supermarket? If you aren't born into money, that is a real choice you have to make. And to begrudge someone for having a child while still paying that outrageous debt off seems a little high and mighty.

    • paul d | June 9, 2013

      For real I was raised on the standards that before you get yourself involved in something that requires money ( supporting a family) you would get to that part of life where you are financially independent. I don't know if its the fact that people think that's what their suppose to do and then deal with it as it goes. Or since we have a socialist government that's lets its people know that no matter what bad decisions they make financially or early family making that no matter what they choose they will be supported no matter what
      WHAT HAPPENED TO ACCOUNTABILITY AND SELF DEPENDENCE

  2. Capt Richie | June 6, 2013

    Two suggestions for Mr. Hedlund:
    1. Send your bride out to work like lots of us already do.
    2. Condoms are cheaper than kids.

    And for the rest of the Hedlunds out there:
    If college is no longer a good bargain, don't buy it. Self-educate and show the world what you've got.

    • Josh | June 12, 2013

      Absurd. I take it you are setting the world afire with a high school diploma?

      In the real world, where we live, no one hires without a certain degree. No one is taken seriously without a degree. And degrees cost money.

      For every Steve Jobs or Bill Gates, there are a million Hedlunds who tried to do the right thing but became indebted to a system that is designed solely to take advantage of people.

  3. Douglas Robinson | June 8, 2013

    This is not right,..but not a peep or article from the authors of this rag when the government bailed out the banks,..then the auto industry with this guys money as well as ours. Where is the equity in their inability to pay it back?

  4. Chad Martindale | June 9, 2013

    Those who think a person should wait to have a child until they can afford it remind me of the couple in Idiocracy. What an ignorant idea.

    • Derek | November 26, 2013

      So…you must be the football player, from Idiocracy? What an ignorant idea. You are a major reason why we have way to many of the"football players" in our society.

  5. H. Craig Bradley | June 9, 2013

    THE MECHANICS OF TREND CHANGE IN HIGHER EDUCATION

    Schools will have fewer applicants to pay for higher tuition costs which support bloated college bureaucracies. A true "game changer" would cause a tidal wave of defaults and student loan bankruptcies, just like Hedlund. Eventually, fewer young people would apply for loans and tuition would have to decline or if left unchanged, colleges would face declining enrollments and reduced revenue from tuition.

    It is quite conceivable that in the very long run, some smaller colleges would simply go out of business. Even state university systems in so-called "bankrupt" states like California might even have to eventually be mothballed. California has slowly been adding new college campuses. Adding to this less than remote possibility is the fact that in California there are more deaths and emmigration than births and immigration, both of out-of-staters and foreigners.

  6. ozziegeorge | June 10, 2013

    I don't have any legal training but two things occur to me –

    1. The "lender" loaned funds to Mr. Hedlund having assessed him as a borrower/risk AT THAT POINT IN TIME
    2. Mr. Hedlund subsequently changed his circumstances OF HIS OWN VOLITION (marriage, child, etc) which, naturally, altered his repayment abilities

    and therefore I frankly do not see how the Court could have arrived at its decision to discharge the outstandings.l

  7. John | June 20, 2013

    Wow, finally the turning point in student loans. I share the same exact experience as Hedlund. My wife and I owe approximately $200,000 in student loans. We don't come from rich families and we both believed going to college was the right decision for us. However, coming out of college and not being able to pay these loans because she suffered an accident and is disabled and I am supporting my family of three on a salary that is not reflective of my degree. My wife graduated from an Ivy League school and became disabled. We are living on one income and I've been neglecting my student loans to put food on the table and pay rent for our one bedroom apartment that we've been living in for 4 years. I am currently in default and have no hope of getting out of this mess.

    • Tara Clarke | June 21, 2013

      John,

      Thanks so much for sharing your story. I feel for you, and you're definitely not alone!

      Maybe you will be a good candidate for bankruptcy – make sure you read the entire court's opinion in Hedlund to get an idea of the types of things you'll have to show in order to have a shot at getting the debt discharged. I did a summarized version that may be helpful to you: http://moneymorning.com/2013/06/06/how-to-get-out-of-student-loan-debt-in-bankruptcy/

    • The Martins | December 24, 2013

      Maybe you should consider discharging your debt thru the a4v process. I did. Just Google it.

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