I received a letter today from an online university claiming that my client’s tuition was not dischargeable in a Chapter 7 or Chapter 13 bankruptcy because my client agreed to pay for classes she decided not to take.
Although student loans are usually not dischargeable in bankruptcy, tuition is dischargeable unless the student has signed a promissory note that makes the tuition a student loan. If a student hasn’t received aid from a third party requiring the school to repay and only agreed to pay the school tuition without a promissory note, the debt owed to the school should be discharged with a bankruptcy.
I never heard back from the online university after replying that my client’s tuition was discharged because she hadn’t signed a promissory note or received aid the school had to repay. I later discovered that there is now a trend where schools are asking students to sign promissory notes after starting school and when tuition hasn’t been paid. Students should use caution signing notes after completing or dropping out of school because they could turn tuition into a debt that cannot be discharged in bankruptcy if they have fallen on hard times.