Are Private Student Loans Dischargeable in Denver, Colorado during a Chapter 13 Bankruptcy Case?

Usually not, but that trend may be changing. As a Denver bankruptcy attorney, I know how difficult it can be to navigate student loan repayment/forgiveness options.


In 2005, Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act which made it more difficult to discharge federal or private student loans in bankruptcy. Even so, if a consumer can prove “undue hardship,” their student loans can be discharged in an adversarial proceeding. An adversarial proceeding is similar to a separate law suit which is related to a bankruptcy case, and still heard by the same Bankruptcy Judge because the cases are related.

Undue Hardship

Generally, to prove undue harship, consumers need to pass the Brunner test which was used during a case back in 1987. That test outlines 3 prongs which need to proved in order to establish “undue hardship.” First, a consumer needs to prove that their family cannot maintain a minimal standard of living if forced to pay off the student loan. Second, a consumer must show that their standard of living is extremely unlikely to change for the remainder of the student loan in question. Lastly, a consumer must demonstrate that they have made a good faith effort to repay the loan. Typically, it is very difficult for a consumer to prove all three prongs well enough to convince a Bankruptcy Judge that their student loans should be discharged.

New Case in Denver, Colorado

Bankruptcy Judge Kimberly Tyson ruled on September 24, 2018 in favor of a consumer regarding whether a private student loan constitutes an “educational benefit” under Section 523(a)(8)(A)(ii) of the Bankruptcy Code. If a private student loan does not convey such an “educational benefit,” under this theory, then it is dischargeable in bankruptcy just like credit cards or other personal loans. Judge Tyson outlines the issue in her opinion as follows:

“Absent undue hardship, Section 523(a)(8)(A)(ii) excepts from discharge “an obligation to repay funds received as an educational benefit, scholarship or stipend.” 11U.S.C. 523(a)(8)(A)(ii). The crux of the dispute is whether the Tuition Answer Loans fall within the ambit of this subsection as a matter of law. Courts in other jurisdictions are divided on the issue, with some courts holding private loans that provide an educational benefit to the borrower fit within Section 523(a)(8)(A)(ii) (the view espoused by Navient), and other courts embracing a much narrower view, holding such educational loans are not included within this particular subsection (Plaintiffs’ position). There is no controlling authority on point within the Tenth Circuit. “

Here is the full opinion:…

This case will likely be appealed, but is a sign that the law is evolving regarding student loan debts in the 10th Circuit (which includes Colorado).

Are you struggling with student loan debt? If so, I’d be pleased to explain your options in a consultation. Feel free to schedule time with me using the calendar link in the bottom right portion of your screen or by filling out our contact form.