Will bankruptcy remove your student loans?
I worked for Direct Loans so I know a little about these things.
You do have a few options. If your income is very low you could
change pay plans to the "Income Contingency Plan. This plan is
where you make payment according to your income. The payment can be
as low as nothing a month. Usually they have payments of $12 a
month. After 26 years the federal Government will forgive the loan
and you will not have to pay it.
Other options are deferments. You can stop payments for several
reasons. Call Direct Loans for more information. A deferment stops
payment and the Gov. will pick up the interest on the subsidized
portion of your loan. You can get a forbearance, which will stop
payment on your loan, but you will still accumulate interest on all
parts of the loan.
I live in WA State. I did a bankruptcy 7 years ago, but was
unable to include my student loans. I was told by my attorney that
I could have included them if I had paid on them consistently for 5
years prior to the bankruptcy. I had only paid on them for 2 years
straight at any one time... between extensions & forbearance's.
Like many others, I shall be paying on these damn loans with my
Social Security Checks... never mind choosing between eating &
medication. ;)
The only way to discharge a student loan through bankruptcy
would be to demonstrate a hardship. I don't mean 'hardship' as in,
gee its hard for me to pay. I mean a hardship like I'm completely
disabled and cannot work.
Second way out is to emigrate.
Student loans are one of those loans that don't go away. If you
file bankruptcy,student loans are very much not exempt. You still
have to pay up.
The Bankruptcy Code used to say that student loans could be
discharged if they were more than 7 years old AND some other
criteria were met. In the past few years, the Code was changed and
now the Bankruptcy Code says (in 11 USC 523): "(a) A discharge ...
does not discharge an individual debtor from any debt- (8) for an
educational benefit overpayment or loan made, insured or guaranteed
by a governmental unit, or made under any program funded in whole
or in part by a governmental unit or nonprofit institution, or for
an obligation to repay funds received as an educational benefit,
scholarship or stipend, unless excepting such debt from discharge
under this paragraph will impose an undue hardship on the debtor
and the debtor's dependents;"
This means that you can only discharge student loans in
bankruptcy if you can show that repayment causes an undue hardship
on you or your dependents, and like someone said in a posting
above, this does NOT simply mean "Gee these things are hard to
pay." I read a case once where the debtor became paralyzed from the
waist down, and the Bankruptcy Court did not allow him to discharge
all of his student loans since he could still work a desk job. I
think the posting above by the person who used to work for Direct
Loans has some really good ideas to deal with student loans, but
please keep in mind that nothing I say in this posting or in any
other posting constitues legal advice, it is simply my
understanding of the facts.
Please read! If you and your wife owe 80grand you probably don't
owe all of that to federal (staford) loans. federal loans do not go
away but if you went to a private school that is much more
expensive than federal you probably got extra "gap" loans from
bank. those loans get to go! I am about to drop about 50g of 120g.
that's mostly credit cards and student gap loans.
I have declared Chap. 7 Bankruptcy in 2000. It was discharged,
and my student loans were included. However, everyone says I still
owe the money. So the question is, does the Judge's word not count?
If he accepted the bankruptcy lock, stock, and barrell, it doesn't
matter, the student loans still count?
I've been paying them since the mid 80's.... many
forebearances.
If the judges word does count, how do I go about enforcing
it?
Listing Student loans on the bankruptcy petition does not mean
that they are discharged. In order to receive a discharge you must
ask the court specifically to discharge the student loans. This is
done through an adversary proceeding with notice to the student
loan holder. It is much like holding a civil trial during the
bankruptcy proceeding.
The discharge you received said that "all dischargeable debts"
were discharged. This does not include student loans, backed by a
government agency, because they are not dischargeable by statute,
section 523(c)8 of the Code, unless certain criteria are met. These
criteria need to be determine by the court through a "trial."
Due to bankruptcy reforms in 1998 and 2005, it's almost
impossible for the average person to discharge federal or private
student loans through bankruptcy.
Although your student loan can't be discharged in bankruptcy, a
bankruptcy court may be able to ease an overwhelming debt burden.
Some courts may discharge a portion of your student loans, but this
is rare and varies by court.
In most cases, the judge will incorporate your student loans
into your debt repayment plan under Chapter 13 bankruptcy. Any
balance remaining after the payment plan ends will still be due,
but your other debts should be paid off by then
A bankruptcy will not remove student loans but will include the
student loans in the bankruptcy. The debt will be gone, but any
credit report listing will continue to be listed as included in
bankruptcy.
