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Student loan satisfied but no longer after discharge

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    Question Student loan satisfied but no longer after discharge

    I’ll keep this to the facts. I’m seeking any experience on this matter as my attorney, the two trustees he talked to and a second attorney have never experienced this before and not sure what the best course of action is.

    I filed chapter 7 bankruptcy in 2022. I wrote a check to the trustee due to sale of home. He disbursed funds to creditors which included federal student loan. Bankruptcy is discharged.

    The issue is the student loan. It was $10.6k. The trustee wrote a check to department of education for $6.7k. The servicer amended the official form 410 proof of claim and attached a memo stating the claim for $10.6k had been satisfied and paid in full.

    Exact verbiage:

    “Dear Clerk of Court:

    The follow court claim number 1 has been satisfied by Paid in Full through Payments. Please do not send any more payments to United States Department of Education. The payments received after to being Paid in Full through payments will be returned.
    If you have any questions on this matter, please feel free to contact us using the information below. Thank you for your prompt attention.”

    Fast forward to today and I have a balance for $6.7k. After talking to the servicer, they claim they received two checks from the trustee for $6.7k sent on the same day but the second one was returned due to insufficient funds. They can’t provide proof of the second check and they returned $2.6k to the trustee because they thought they had overpayment. The trustee states they only sent one check and I have a copy of the cancelled check, In total, they were paid out $4k.

    It seems to be the servicer screwed up big time and despite the amended form 410 stating it was satisfied and paid in full, that I am responsible for the balance. I have no idea why they wouldn’t wait for funds to clear before issuing the satisfaction of claim to the court.

    Am I responsible for that balance? I walked away from the bankruptcy with everything being a done deal. The second attorney I spoke to said I should write my state representative and file disputes with the credit bureaus. This upcoming week I’ll call around to different attorneys to see what they think. I get that student loans are non dischargeable but at the same time, even though they only received $4k, they stated it was satisfied. Why should I have to pay for their mistake?

    Any one have any ideas?​

    This looks like it will only be resolved through your attorney(s) and that may lead to litigation by reopening the bankruptcy case and filing a motion to have the court address the issue. The issue is likely one of accord and satisfaction. The problem is likely that you -- through the Trustee -- did not tender the check "in to the claimant as full satisfaction of the claim." In other words, the Trustee was just paying down a portion of the $10.6K claim with no "good faith" tendering of that amount to satisfy the claim completely. You probably also don't meet the second prong of the A&S test since the amount would have needed to be in dispute before the check was tendered. You would have also have needed to make a clear indication on that check or in a letter attached to the check that it was entered in full satisfaction of the claim.

    So I don't think A&S is a winner and is probably why everyone is shrugging their shoulders. No one wants to tell you that someone messed up and you still owe. I don't know if the update of the Bankruptcy Form 410 Claim is good enough either because they thought you paid $6.7K twice, then return $2.6K which would mean you paid $10.8K total so satisfy the claim in full.

    It's a mess. The question is, did you pay the debt, how much did you pay, and whether there is someone that can get the debt forgiven. I think the note to the "clear of the court" is otherwise meaningless. It is the claim that controls and the fact that student loans are nondischageable on their face.

    (There are competing issues here. First, student debt is nondischargeable. That means it always passes through bankruptcy unless a complaint was filed that was granted allowing the debt to be discharged. Otherwise nothing affects it. Payments may reduce the amount but will never make it dischargeable. Second, the issue is what exactly was on the amended 410? Surely it was not amended to be $0.00.)

    Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
    Status: (Auto) Discharged and Closed! 5/10
    Visit My BKForum Blog: justbroke's Blog

    Any advice provided is not legal advice, but simply the musings of a fellow bankrupt.


      That sounds like a frustrating situation. I can only imagine the rollercoaster of emotions you must be experiencing.


        Originally posted by EvaGuerra View Post
        That sounds like a frustrating situation. I can only imagine the rollercoaster of emotions you must be experiencing.
        Incredibly, your student loan was satisfied, but it's disheartening to hear that it's now showing as discharged. Have you reached out to your loan servicer to try to resolve the issue? Sometimes, these kinds of discrepancies can be sorted out with a simple phone call or email. Also, it might be worth seeking advice from financial experts or forums like [URL removed by moderator] to see if anyone else has experienced something similar. Hang in there – hopefully, it's just a minor hiccup that can be easily resolved!​
        Last edited by justbroke; 04-28-2024, 10:56 AM. Reason: [moderator removed URL... you can provide the name but not the link.]


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