More questions about student loans

[marcie26]

It is my understanding that they cannot be discharged, but I met someone online who says she is getting hers discharged. She is going to ask her attorney how that is, but in the meantime I was curious if anyone knows if there are certain types that are? I have read somewhere that if the court finds it would be an undue hardship they can be, but it rarely happens?I would think it is an extreme hardship considering we only take home $3100 per month (and I might end up staying at home now because daycare costs us $500 per month) and the payment is $500 and the house is $850 - that is not taking into account gas to drive to work ($600) and utilities, food, diapers, etc. Do they take the student loan into account when they figure out what we will have to pay back? Sorry for all the questions - I am just curious how this all works! Thank you

Ok, just found this, but I don't understand if mine is insured or guaranteed by a governmental unit - my loan is a private student loan through ACS:
24. Can I erase my student loans by filing bankruptcy?

Generally, student loans are not discharged in bankruptcy. In 11 U.S.C. sec. 523(a)(8) there are two exceptions to this general rule:

The student loan may be discharged if it is neither - Insured or guaranteed by a governmental unit, nor
- Made under any program funded in whole or in part by a governmental unit or nonprofit institution.
The student loan may be discharged if paying the loan will "impose an undue hardship on the debtor and the debtor's dependents."
Student loans more than 7 years old used to be dischargeable under certain circumstances, but this provision was removed by an appropriations bill passed in October of 1998.

Whether an exception applies depends on the facts of the particular case and may also depend on local court decisions. Even if a student loan falls into one of the two exceptions, discharge of the loan may not be automatic. You may have to file an adversary proceeding in the bankruptcy court to obtain a court order declaring the debt discharged.

[HHM]

1. Discharge of student loans are NEVER automatic. The burden is on the debtor to prove that the student loan can be discharged, hence the filing of an adversarial proceeding.

2. Hardship discharges don't only look at your current circumstances, but also what is likely to happen in the future. Thus, short of some type of permanent disability that effects your ability to earn a living, hardship discharges are very had to get.

3. There is still alot of bad information out there about govt./non-profit student loans vs private student loans and there is still a lack of case law to help clarify the issue. It is hard to say there is the consensus, but the prevailing view seems to be that the new law essentially closed the loophole between private and non-private student loans, thus, so long as the money was loaned for a bonafide educational purpose, the loan cannot be discharged. Plus, there are very few truly "private" students loans. Just because your loan did not come from "the government", doesn't mean the funds you received were not somehow related to goverment or non-profit programs.

Regarding that statute you quoted, you really need to go on and read the entire thing, particularly (a)(8)(A)(ii), and (a)(8)(B)

It is under 523(a)(8)(B), that excepts many private student loans from discharge. To explain why is beyong the scope here, but it references IRS 221(d)(1) which defines educational benefit.

(there are some caveats that depend on the age of your student loans).

[marcie26]

What if I never used the loans for educational purposes? I was stupid and actually used them to try to "consolidate" debt. I thought that private loans were the way to go because they were tax-deductible - stupidest thing I ever did
I don't think the whole statute was there, just bits so I will have to look up the whole thing somewhere - thanks for replying.

[HHM]

How you "used" the money is largely irrelevant, the relevant fact is what was the purpose of the loan. (in fact, how used the money could hurt your chances if the note actually restricts how the funds are to be used and you used the loan for other purposes, that is breach of contract and could make the loan non-dischargeable for fraud).

Just realize, if you really want to try to get these loans discharged, it is going to be an uphill battle. It is not impossible by any means, and if your loans truly are private, then you have a shot, but you will have to spend an significant amount time either learning the ins and outs of the legal world to file it on your own, or spend $3000-$6000 on an attorney to do it for you.

[marcie26]

How you "used" the money is largely irrelevant, the relevant fact is what was the purpose of the loan. (in fact, how used the money could hurt your chances if the note actually restricts how the funds are to be used and you used the loan for other purposes, that is breach of contract and could make the loan non-dischargeable for fraud).

Just realize, if you really want to try to get these loans discharged, it is going to be an uphill battle. It is not impossible by any means, and if your loans truly are private, then you have a shot, but you will have to spend an significant amount time either learning the ins and outs of the legal world to file it on your own, or spend $3000-$6000 on an attorney to do it for you.

I understand - I am very ashamed of myself, but trying to make things better. I don't take issue if I cannot have them discharged - I honestly don't want the headache of fighting it so I would rather just pay it - I hope that it is taken into consideration when we file though because with having two babies it is and will be even with bankruptcy a significant strain on the budget - I was just curious how someone else did get hers discharged.