Many graduate students are facing massive student loan debts, with some of them being forced into bankruptcy.

Law school graduates are one of the biggest student groups to be affected by a student loan debt, and some have recently began fighting back in bankruptcy courts.

Recently, Bankruptcy Court Judge Carla Craig of the Eastern District of New York ruled that bar exam-related loan debt is not the same as a student loan debt.

Instead she declared bar loans as “a product of an arm’s-length agreement on commercial terms.”

Judge Craig declared this ruling in the case of Lesley C., a 2009 law graduate of Pace University School of Law with approximately $30,000 in a student loan debt.

Lesley had failed the bar exam and was forced to file for bankruptcy in 2014. She asked the bankruptcy court to dismiss the unpaid portion of a $15,000 Citibank loan she took when studying for the bar.

Even though this is not the first time a student loan debt situation ended up in court, Lesley’s case is one of the few with positive results.

Judge Craig came to this decision based on the fact that the remaining portion of Lesley’s loan had no “educational benefit” and that “such bar exam loans were to be considered nondischargeable in bankruptcy.”

Lesley later took work as a document reviewer while she planned to take the bar exam again. While she still has to continue to pay off her law student loan debt that specifically incurred while in law school, she is at least feeling relief of being let off the hook from her bar exam loan.

Overview of Student Loan Financial Trouble

Successful cases like Lesley’s have spurred bankruptcy lawyers into encouraging students with loan debts to come forward to see if they can combat the debt. Potentially thousands of individuals who have gone through bankruptcy may have later suffered illegal student loan debt collection after filing bankruptcy.

If the individual had filed bankruptcy while the student loan debt was still active and still experienced harassment from debt collectors, the debt collectors may have violated the Fair Debt Collection Practices Act (FDCPA). The FDCPA was passed by Congress in 1978 to help consumers combat against aggressive tactics used by creditors and debt collectors. Even though debt collection is not inherently illegal, the FDCPA requires collectors to adhere to a certain rules and to determine if the debts are actually valid.

Bankruptcy is another possible protection that may benefit holders of student debt. While common understanding holds that student loans can’t be discharged in bankruptcy, savvy bankruptcy lawyers say that’s not necessarily the case. If a debt collector or lender tries to collect on a student loan debt after the individual’s debts have been discharged in bankruptcy, those collectors may be found liable for FDPA violations. A consultation with a knowledgeable debtor defense attorney may yield valuable insight as to the debtor’s legal rights and options.

DISCLAIMER: Debt collection itself is not illegal. However, creditors and debt collection firms collecting on consumer debts must adhere to the FDCPA and respect bankruptcy discharge injunctions. Even though consumer debt attorneys are investigating these companies, their debt collection practices may be legal.