Student loan owners won't honor discharge

[Bob Walker]

My wife tells me today that the people handling her student loan will not accept the discharge letter from the Trustee. The person on the phone said her Supervisor says that she still has to pay the debt.

My wife asked for a copy of the letter they received from the Trustee, but they said that they could not send it, so we have to get our own from the Trustee.

The amazing thing about this is they have a different interpretation of the word "discharge" and even though the letter says to discharge the debt, they say they will still pursue collection!!!

Are we missing something here or doesn't "discharge" mean that the debt is no longer collectible?

Thanks for your reply

[HenriettaHen]

Bob, most student loans are not discharged. Didn't your attorney tell you this ??

Eeeek! You must be freaking.

Here's the text from the back of Form B18. (Discharge)

FORM B18 continued (10/05) EXPLANATION OF BANKRUPTCY DISCHARGE IN A CHAPTER 7 CASE This court order grants a discharge to the person named as the debtor. It is not a dismissal of the case and it does not determine how much money, if any, the trustee will pay to creditors. Collection of Discharged Debts Prohibited The discharge prohibits any attempt to collect from the debtor a debt that has been discharged. For example, a creditor is not permitted to contact a debtor by mail, phone, or otherwise, to file or continue a lawsuit, to attach wages or other property, or to take any other action to collect a discharged debt from the debtor. [In a case involving community property: There are also special rules that protect certain community property owned by the debtor's spouse, even if that spouse did not file a bankruptcy case.] A creditor who violates this order can be required to pay damages and attorney's fees to the debtor. However, a creditor may have the right to enforce a valid lien, such as a mortgage or security interest, against the debtor's property after the bankruptcy, if that lien was not avoided or eliminated in the bankruptcy case. Also, a debtor may voluntarily pay any debt that has been discharged. Debts That are Discharged The chapter 7 discharge order eliminates a debtor's legal obligation to pay a debt that is discharged. Most, but not all, types of debts are discharged if the debt existed on the date the bankruptcy case was filed. (If this case was begun under a different chapter of the Bankruptcy Code and converted to chapter 7, the discharge applies to debts owed when the bankruptcy case was converted.) Debts that are Not Discharged. Some of the common types of debts which are not discharged in a chapter 7 bankruptcy case are: a. Debts for most taxes; b. Debts incurred to pay nondischargeable taxes; c. Debts that are domestic support obligations; d. Debts for most student loans; e. Debts for most fines, penalties, forfeitures, or criminal restitution obligations; f. Debts for personal injuries or death caused by the debtor's operation of a motor vehicle, vessel, or aircraft while intoxicated; g. Some debts which were not properly listed by the debtor; h. Debts that the bankruptcy court specifically has decided or will decide in this bankruptcy case are not discharged; i. Debts for which the debtor has given up the discharge protections by signing a reaffirmation agreement in compliance with the Bankruptcy Code requirements for reaffirmation of debts. j. Debts owed to certain pension, profit sharing, stock bonus, other retirement plans, or to the Thrift Savings Plan for federal employees for certain types of loans from these plans. This information is only a general summary of the bankruptcy discharge. There are exceptions to these general rules. Because the law is complicated, you may want to consult an attorney to determine the exact effect of the discharge in this case.

[CATCHMEIFYOUCAN]

From what I heard you are now allowed to discharge student loans (govt funded loans). Some debts are no longer dischargeable.

http://www.moranlaw.net/answerstudentloans.htm

Bankruptcy in Brief
a service of the Moran Law Group

Can I discharge my student loans in bankruptcy?
Student loans are no longer dischargeable in any chapter of bankruptcy unless you can prove that repaying the loan creates an undue hardship on you or your family. Prior law allowed their discharge once they had been in pay status for 7 years. The law changed in the fall of 1998.

Proving hardship usually requires showing that you can't provide a minimum standard of living for yourself and your dependents if you have to repay the loan. Some courts will discharge part of the loan on a showing that repaying it all would be a hardship.

Student loans are sometimes unenforceable due to school closures, fraud, etc. Chapter 13 can provide a way to cure defaults on student loans, or to pay them off over the course of the plan.

Best of Luck, Catchmeifyoucan

[lrprn]

From what I heard you are now allowed to discharge student loans (govt funded loans).

From CMIYC's quote - "Student loans are no longer dischargeable in any chapter of bankruptcy unless you can prove that repaying the loan creates an undue hardship on you or your family."

The key here is what constitutes 'undue hardship'. The three-pronged Brunner criteria used by most bankruptcy courts to decide if student loans can be discharged in bankruptcy is very difficult to prove:
1. That the debtor cannot both repay the student loan and maintain a minimal standard of living.
2. That this situation is likely to persist for a significant portion of the repayment period of the student loans.
3. That the debtor has made good faith efforts to repay the loans.

Folks who are completely disabled have been denied discharge of their student loans in bankruptcy.

Bob, I'm sorry to say that unless your wife's school closed before she finished the term she borrowed money for or some other very unusual circumstance, even though she filed bankruptcy, she will still have to pay back her student loans. That's been a part of the bankruptcy law since 1998.

The possible silver lining here...have your wife check out Income Contingent Repayment of her student loans - http://www.finaid.org/loans/icr.phtml . The maximum repayment period is 25 years. After 25 years, any remaining debt will be discharged (forgiven).

[keepmine]

To attempt to discharge a SL, you must have a hearing before a bk judge. The SL and thenrest of your bk are seperate issues at this point. The trustee will handle the other stuff in the usual manner.