While most people believe that private student loans are not eligible for a bankruptcy discharge, that is not always the case. Some private student loans are capable of being discharged due to either the type of institution that the borrower attended or the manner in which the money was used.
Although some schools are not accredited, private lenders sometimes still provide student loans to people who attend these institutions. In the event that the school attended was unaccredited, the private student loan is eligible for bankruptcy discharge. Even if the school was fully accredited, the portion of a private loan used for purposes other than education may still be discharged through bankruptcy.
If the private student loan is very old, it may also not be collectible through civil lawsuits filed by the lender or wage garnishments. This can be the case if there has been no payment activity during the applicable statute of limitations, and accordingly the lender may not sue the borrower after that date has passed. The statute of limitations for written contracts such as a loan agreement varies among the states, and an attorney can determine if this can be used as a defense.
The ability to discharge some private student loans through personal bankruptcy is good news for many who are struggling, especially those who attended schools that were unaccredited and whose job prospects may be poor as a result. People who have questions about whether their private student loans may be discharged may want to consult with a bankruptcy attorney. Even if the educational institution in question was fully accredited, a bankruptcy attorney may still be able to assist their clients by providing documentation to the bankruptcy court showing that the proceeds were used for non-educational purposes, leading to a discharge of that portion.