Need help on Adversary Proceeding

[Bob Walker]

We know that student loans can only be discharged in Chapter 7 by proving a hardship and that most likely the loan will never be able to be paid off. Our BK was done back in 2006 and the case closed, so we know we will need to reopen it to do this proceeding.

My wife now works part-time making only about $150 per week and has no plans to ever work full-time again. My paycheck pays all the bills and in fact for the past two years we separated our joint checking account so that I could prove all bills were paid by only me.

What would we have to do to show the Judge that her student loan should be discharged due to hardship? She'll never be able to pay back over $20,000 in student loans that are over 15 years old, especially considering 15% of $150 is only $22.50 per week or $90 per month....that's barely enough to cover the interest each month!

Need assistance please!

Thanks

Bob

[wonderingrov]

Be prepared to spend a lot of money on litigation if you want to proceed on this route, and be aware that the odds are stacked in favor of the creditor when it comes to student loans.

Just to prepare you, I am on disability - but was classified as 'improvement possible' after a stroke. My attorney told me fighting it was a possibility - but that with the litigation required (expert witnesses to try to prove that I would NEVER be able to work again, etc.), that the bare bones minimum in litigation costs would be $5,000 - and the rates at her law firm are fairly reasonable. She also stated that the likelihood of discharge - even after a stroke - wasn't very good.

I just wanted to post this to give you an idea of what you would be up against if you do decide to proceed.

[justbroke]

I think you're too late. You should have opened the Adversary Proceeding prior to your case closing. The lender (student loan creditor) will probably claim res (res judicata), basically saying that you should have brought it up before the last date to file a complaint to determine dischargability. As such, you are barred from bringing forth such a complaint after the close unless there was excusable neglect.

It's unfortunate that I must say this, but you should have filed a dischargeability complaint in 2006, not 4 years later. In all fairness, most people don't get their student loans discharged anyhow unless they show that they will never be able to work for medical reasons, or that their chosen profession will never pay.

[Bob Walker]

Thanks

Thanks for the info. We didn't know we had to file this type of proceeding until after the case closed and the creditor came by trying to pay. We didn't have an attorney and had to do all of this ourselves because we had no money.

As far as proving out income, she is a party planner making $12 per hour and I doubt she will make much more than that amount, maybe $15 if she is lucky or as inflation goes up.

Would that be good enough?

[justbroke]

Would that be good enough?

No.

However, search this Forum for student loans. I recall that there was recent changes that may allow you to reduce your student loan balance based on certain criteria, including affordability and whether you'll ever reasonably pay it back.

[HHM]

1. Student loans can ONLY be discharged by showing a hardship. There is no "specific" law that is reducing student loans. BUT, some courts are discharging the collection penalties and interest etc.

2. Actually, (sorry justbroke), you can file the AP now. I have seen this strategy done. Keep in mind, once a debt is in a BK, it is ALWAYS "in" the BK. Also, an AP is a separate proceeding from the BK itself. However, going back to 2006, that may be a little more of an uphill climb. But procedurally, there is no apparent obstacle to filing the AP now, to prove a hardship.

[justbroke]

2. Actually, (sorry justbroke), you can file the AP now.

Wouldn't, though, the affordability or hardship be determined under the financial status of the individual at the time the Bankruptcy was filed, not in 2010 (4 years later)?

I know that you can file a complaint, post-discharge, to challenge dischargeability. However, I didn't think you could do so based on circumstances that changed, post-petition, post-discharge and post-close.

What drove me to say that I didn't think so, was that the poster wrote that his wife "now" makes about $150 a week and works part time. Indicating to me, through some "construction", that she made more in 2006.

[sidhesadie]

What was her degree for the loans in? What did she previously work as?
Unless there is some physical reason why part time party planning is the only job she can do (which, frankly, seems unlikely) then the fact that she doesn't 'plan' to do more isn't going to qualify as a hardship. By hardship, they mean things like, you are now a parapalegic. Or had a stroke and can no longer speak or write. As in, you cannot work.
A lack of jobs in your field or low paying jobs doesn't qualify. My ex boyfriend had a degree in a field he could not find work in, from 20 years ago (the degree). 60K in student loans, with all the penalties.
The only work he could find was $12 an hour at a cabinet shop.
This was not considered a hardship. They were more than happy to just garnish $20 a week until he dies.

I don't know anything about the AP, but I think you might want to look a little more carefully into your chances of getting anywhere on a hardship claim before you put the time into it.