Non-federally guaranteed private student loan discharge?

[automatron]

Has anyone ever seen a non-federally guaranteed private student loan become discharged? Caselaw regarding the subject is sparse and there isn't much talk on the internet about it. I haven't seen a straight answer anywhere.

I've got $63K+ in variable interest rate private student loans that I'll be repaying for the next 29 years of my life. I'd do anything to BK these burdensome loans. Last July my payment was $353.00; This July it was $451.00. It changes every three months.

I've even thought about taking up residence in Canada for a few years, filing BK there, discharging my student loans, and then importing the discharge back to the United States. I owe $180K total in federal and private loans and I will pay $1,000 per month for the next 29 years of my life. I'm willing to do ANYTHING to get rid of these things.

Thanks

[StaciMM]

I don't really know the answer to your question, but I do know one of the changes to the BK law next week is that NO student loans will be dischargable.

[abc123]

Private loan dischargeability

I would like to share this with all of you who seem to be having difficulties with the non-profit organization issue as it relates to private student loans taken out through a bank or other commercial/private lender.

Through my research, I have found the following - first the code:

Section 523(a)(8) of the US Bankruptcy Code, at 11 U.S.C., excepts from discharge debts:
"for an educational benefit overpayment or loan made, insured or guaranteed by a governmental unit, or made under any program funded in whole or in part by a governmental unit or nonprofit institution, or for an obligation to repay funds received as an educational benefit, scholarship or stipend, unless excepting such debt from discharge under this paragraph will impose an undue hardship on the debtor and the debtor's dependents".

- do you see the part "or made under any program funded in whole or in part by a governmental unit or nonprofit instiution" - this is the part that should concern you.

Apparently, a number of "private" loans from banks are GUARANTEED by non-profit organizations, one notably large one being TERI - The Educational Resources Institute (www.teri.org). Supposedly this one organization guarantees many private student loans, so it definitely behooves you to contact TERI and find out if they guarantee or are otherwise involved with one of your private loans.

Now, I believe, from what I've heard, that the fact that these are guaranteed mean that the bank lends you the money, but if you default, the GAURANTOR (i see people are having difficulties differentiating between the "co-signor" guarantor, and the fact that some entity may be the GUARANTOR of the loans - they are different) - anyway, the GUARANTOR in this case pays the defaulted amount to the bank, and effectively becomes the new note-holder or loan holder. THIS IS WHERE THE DIFFICULTY COMES IN, AS YOU ARE BASICALLY SEEKING DISCHARGE IN EFFECT FROM A NON-PROFIT.

Now, this does not mean NECESSARILY that these are 100% not dischargeable, but you can see that there is difficulty here, and it "doesn't look good".

CONVERSELY, there apparrently ARE private bank loans that are NOT guaranteed or serviced (again, the servicing vs. guarantee issue is another issue also) by a non-profit organization. An example of this is APPARRENTLY Norwest bank student loans (e.g. "Priority" loans, or "Success" loans) now under WELLS FARGO (norwest bought wells fargo but uses the Wells Fargo name).

But don't quote me on that one, you should definitely check it out for yourself to be sure. Again, I stress again, the word "appears", as in, they say (when you call the main line for the loans) that there is not involvement by a non-profit, nor has there been for some time (again, i don't know how long "some time" is) but IT IS DIFFICULT TO KNOW FOR CERTAIN. Also, TERI, who is a very large non-profit as I said, claims also that they have no connection with Wells Fargo/Norwest loans. But again, you should verify all this for yourself.

ALSO NOTE, this does not address this issue I have seen raised of whether the loan is INSURED by some non-profit entity - although it does not appear from the code that being INSURED by a non-profit is a problem, but that being insured by a "governmental unit" is.

Again, you may draw your own conclusions, but remember that most every bankruptcy lawyer i've spoken to agrees that private student loans are a tough issue.

For instance, outside of non-profit affiliation, etc. there's the second part of the code about "loan or obligation made as an educational benefit, scholarhip or stipend..." - it seems to imply only scholarship, stipend and other moneys given with direct relation to school of that nature, but could this be a problem as well?? I'd actually welcome any thoughts on that part from HHM or anyone else.

Thank you and good luck - but be careful.