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Regardless of whatever anything says, your student loans are not discharged...

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  • Regardless of whatever anything says, your student loans are not discharged...

    Ok, this question is getting to repetitive...so let's address it once and for all.

    Regardless of what your credit report says, regardless of what the idiot agent at your student loan servicer says, STUDENT LOANS ARE NOT DISCHARGED in bankruptcy.

    Also, there is NO Distinction between private and government student loans in this context. The BK code simply states "loans...for an educational purpose".

    The ONLY TIME student loans are discharged in bankruptcy is if YOU file an adversary proceeding in bankruptcy court and demonstrate that paying your student loans would be a financial hardship, or raise a technical defense (e.g. the school closed before you finished your degree, or the school misrepresented your eligibility).

    There is no accidental discharge of your student loan. If you didn't file an adversary proceeding, your student loans ARE NOT DISCHARGED.
    Last edited by HHM; 11-28-2009, 09:45 AM.

  • #2
    Originally posted by HHM View Post
    STUDENT LOANS ARE NOT DISCHARGED in bankruptcy.

    The ONLY TIME student loans are discharged in bankruptcy is if YOU file an adversary proceeding in bankruptcy court and demonstrate that paying your student loans would be a financial hardship.

    So what you're saying is that student loans are rarely discharged in bankruptcy, except in severe hardship cases.

    My mother has worked in the student financial aid field for almost 30 years and told me yesterday that she's seen student loans discharged in BK on several occasions. Typically, it's someone like a single parent earning minimum wage with 5 kids.

    Comment


    • #3
      What about in Ch 13 are interest rates lowered?
      Filed Chapter 13 on 3-31-10. 341 completed 5/20/10
      $2900+ a month 0% payback to unsecured creditors
      Discharged 6/30/2015

      Comment


      • #4
        Originally posted by frustrated51 View Post
        What about in Ch 13 are interest rates lowered?
        Nope, nothing happens to them.

        Comment


        • #5
          Originally posted by siestaguy View Post
          So what you're saying is that student loans are rarely discharged in bankruptcy, except in severe hardship cases.

          My mother has worked in the student financial aid field for almost 30 years and told me yesterday that she's seen student loans discharged in BK on several occasions. Typically, it's someone like a single parent earning minimum wage with 5 kids.
          Point is, you have to file an adversary proceeding in BK court to get the discharge. They are not discharged by simply listing the debt in your BK petition. i.e. student loans are not accidentally discharged.

          Comment


          • #6
            not so fast...

            Whether or not student loans must be discharged in an adversarial proceeding is currently up for debate. You need not be so absolute in your sticky response. I'm sure you have seen the current case pending before the supreme court:

            United Student Aid Funds v. Espinosa

            Espinosa's non-adversarial discharge was upheld by the appellate court.

            Comment


            • #7
              First, the date of this thread start is April 2009, that decision came down in Dec 2009.

              Also, the underlying chapter 13 case for the decision was filed in 1994, pre-2005 BAPCPA. Second, the debtor in that case actually paid his student loan "principal" in that case, but proposed to discharge the interest. That is actually consistent with Pre-2005 BAPCPA rulings, however, there have been no Post BAPCPA rulings along these lines.

              So, perhaps you should get your facts straight before saying the information is inaccurate.

              Nevertheless, it will be an interesting case for the Supreme Court.
              Last edited by HHM; 05-28-2011, 10:55 AM.

              Comment


              • #8
                Originally posted by HHM View Post
                First, the date of this thread start is April 2009, that decision came down in Dec 2009.

                Also, the underlying chapter 13 case for the decision was filed in 1994, pre-2005 BAPCPA. Second, the debtor in that case actually paid his student loan "principal" in that case, but proposed to discharge the interest. That is actually consistent with Pre-2005 BAPCPA rulings, however, there have been no Post BAPCPA rulings along these lines.

                So, perhaps you should get your facts state before saying the information is inaccurate.

                Nevertheless, it will be an interesting case for the Supreme Court.


                I mean no disrespect. But if you are going to have a sticky (the first one in the student loan section) that basically reinforces something that is currently at issue then maybe move it, modify it, or don't get your back up when someone comes along to help out.

                I very much understand Espinosa. It it clearly distinguishable regarding timing but the fact remains that if the Supreme Court signs off on it, then the result will still be a discharge without an AP. The very reason the Court is hearing it in the first place is because it invokes DP.

                Comment


                • #9
                  1099-C from Key Bank "Cancellation of Debt"

                  I have a question related to the discharge of student loan debt. I received a 1099-C from a student loan company stating that they had canceled my debt about a month ago. Up until this point I had no idea that they were going to do this and I was in negotiation with them to start repayments (after they had canceled my debt, but I didn't know this at the time). Every person I spoke with on the phone kept asking me "have you settled your debt with us, we can't find your account?" It was clear to me that something wasn't right.
                  When I received the 1099-C I filed my return and also filed for insolvency. Today I got a letter from my student loan company apologizing for the error, but they didn't mean to send me the 1099 and that I should disregard it. I've already filed, claimed insolvency and am ready to move on. At this point should I assume that Key Bank has canceled my debt and are also trying to collect on it as well? I'm convinced that if I had not been calling them to try and set up payments after going into default that they would not have claimed that it was an error. After I've filed my taxes can they still come after this money? (I have not filed bankruptcy and understand that student loans cannot be discharged in BK). Thanks in advance for your advice.

                  Comment


                  • #10
                    Originally posted by adgardine View Post
                    I very much understand Espinosa. It it clearly distinguishable regarding timing but the fact remains that if the Supreme Court signs off on it, then the result will still be a discharge without an AP.
                    It's true that if the SC signs off on it then then the result will still be a discharge without an AP for this case only. There was not a single justice at oral that felt the underlying decision by the judge was correct. Not a single one.

                    The question that remains, however, is what to do about it at this stage. I think it's an interesting case because it's going to be curious to see where the SC dumps the responsibility. None of the solutions are particularly inviting from a policy point of view.

                    But in the big picture Espinosa changes nothing. It's merely an error correcting case.
                    So the poor debtor, seeing naught around him
                    Yet feels the narrow limits that impound him
                    Grieves at his debt and studies to evade it
                    And finds at last he might as well have paid it.

                    Comment


                    • #11
                      Originally posted by amarchefka View Post
                      It was clear to me that something wasn't right.
                      .
                      Something still isn't right. WHY did they cancel your loan? Banks don't cancel SL willy nilly. How do you know it's not merely an accounting error?

                      BTW, this question deserves it's own thread. It really shouldn't be in this thread.
                      So the poor debtor, seeing naught around him
                      Yet feels the narrow limits that impound him
                      Grieves at his debt and studies to evade it
                      And finds at last he might as well have paid it.

                      Comment


                      • #12
                        Can any tell me I file for chapter 7 in 1997 had a student loan issued in 1994 I hope it was discharged help me understand

                        Comment


                        • #13
                          I know they aren't, but the company doesn't believe me...

                          Sorry to resurrect an old thread, but I have a few questions about this.

                          I am in limbo with my current bankruptcy - chapter 7 with federal exemptions, had the 341 meeting, waiting for discharge. I am planning on attending college next fall, so I called one company that holds a promissory note to some my old student loan from 5 years ago (that I am current on, making payments after a forebearance). I was trying to ask if the note was still active, so I could extend the line of credit on it. All the service rep would tell me was that my loans showed a bankruptcy status and that I needed to discuss it with my financial aid office. I told her repeatedly that I did not declare my loans, that I didn't qualify for undue hardship and hadn't planned on it anyways, but she insisted that they were in bankruptcy and she couldn't give me any more information. I know she is factually wrong, or at least everything I have read and sen tellls me she is. My own bk lawyer has affirmed that I am not pursuing having my SLs discharged. So what gives?

                          Considering that I am not even in college at the moment, I asked if I was supposed to talk to the old college that I was attending when I received the student loans, or the new college that I am not even a member of yet. She said to talk to the new college. She never explained why, and with all my might I still cannot think of a reason they would know more.

                          I did call the financial aid office, and they were very confused, but they took up the challenge. Haven't heard back from them yet.

                          So what am I supposed to do? Call my SL lenders and reaffirm the debt, even though they aren't in bankruptcy anyways? Call the company that runs my SLs and demand to talk to someone who isn't an idiot?

                          Why is this such a common problem?

                          Any help or insight would be greatly appreciated.

                          Comment


                          • #14
                            Tora:

                            The representative you spoke with is technically correct. Your loans are considered to be "in bankruptcy" by the lender until the case is complete. I think they do this just in case you file an AP to discharge the loans. When I filed my Ch 7, my loans too were placed in "bankruptcy forbearance" until I was discharged. Well, all except for one lender, who decided to let the clock run out so that my loans defaulted while I was in bankruptcy.

                            The point is, this is pretty standard operating procedure for lenders. The good news is that as soon as you're discharged, the lender will move to put your loans back into their rightful status. Sometimes it takes a few weeks but usually not longer than that. It sounds like you'll be discharged well before you need financial aid for school next fall. It's really just an administrative hassle that you're dealing with.

                            Comment


                            • #15
                              Just a comment regarding Espinosa.

                              Putting a student loan in your Chapter 13 plan could get it discharged. If it goes through without an objection the loans will be discharged. Plans are binding and final orders, and the court has subject matter jurisdiction over student loans so you aren't going to get it vacated as void under FRCP 60(b)(4).

                              But I suggest not putting your loans in your Chapter 13 plan hoping that it will go unnoticed, they are paying attention and sanctions are a real possibility.

                              So I would say the sticky is very sound advice. No adversary proceeding, no discharge of student loan. Great rule of thumb.

                              At least that's how I understand it all.

                              Comment

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