As the Louisville Kentucky student loan lawyer, I handle many student loan collection defenses and lawsuits. Additionally, I teach other lawyers, write books about it, and graduated from training for it. I am often able to file bankruptcy cases to stop student loan collections or discharge the student loan debt when paying is an undue hardship for my clients. When I’m your lawyer, I give you a complete analysis of how to manage your student loan debt on our website and by in-person appointments.
The bankruptcy code is supposed to make student loans nondischargeable. None-the-less, every year there are approximately 500 undue hardship case filings that seek to discharge student loans. Half the cases are successful in getting one of the hardest discharges possible which is the “undue hardship student loan discharge.” The fact is, almost everyone can make their student loan affordable with an income-based repayment plan if the loan is a government student loan. This article explains just some of the solutions that make every student loan affordable.
The above diagram is a checklist of the questions to see if you can qualify for programs to discharge your loan. Your loan might be dischargeable in bankruptcy if the school does not qualify or you do not qualify as a student. Private student loans have to sue to collect, but they have little or no income-based repayment plans. However, government loans have several repayment options to make loans affordable. For instance, if a loan attempts to garnish wages or social security, you can file a Chapter 13 with a minor monthly payment and stop collections. If the loan is a hardship, there are also undue hardship discharges in bankruptcy. Finally, there are also the Administrative discharges for disability, death of a cosigner, closed schools, and other events.
Some Expenses and Student Loans Can Be Discharged In Bankruptcy
To be dischargeable, the loan must be a “qualified educational debt” as defined by 11 USC 523(a)(8)(B) and 26 USC 221(d)(1). To be a “qualified higher education debt,” the expenses, cost of attendance, eligible educational institution status, and the student must all be eligible under these definitions. These limits on school loans are defined and hidden in the IRS code and section §472 of the Higher Education Act of 1965 (20 USC 1087ll). However, it is not in the bankruptcy code.
- Only debts that were made to “eligible” students are non-dischargeable in bankruptcy. If you were not qualified to attend a college, the loan is dischargeable.
- Only qualified higher educational expenses are non-dischargeable. Often private schools will offer loans that are more than the cost of attendance. This makes the loan dischargeable. Also, debts directly to the school are dischargeable, such as bills from a school for housing and tuition.
- Only loans made for attendance at qualified schools are non-dischargeable.
Loans for Some Schools Do Not Qualify & are Dischargeable in Bankruptcy
Only attendance at an accredited educational institution is non-dischargeable. Your loan is dischargeable in bankruptcy if you attended an unaccredited school. Harvard is an accredited school. Bill’s school of scuba diving or truck driving probably isn’t. To help you, here is a list of qualified schools. If your school is not listed it is probably not an accredited and qualified school.
Veteran Student Loans are Dischargeable in Bankruptcy
Some loans have separate statutes that allow a discharge. For instance, VA student loans are discharged after five years 38 USC 303 a(e)(4). The Department of Defense also issues loans that are dischargeable after five years under 20 USC 6674(f)(3). The Troops to Teachers program bars any discharge even if it is an undue hardship. Heal loans use an unconscionable standard.
The Undue Hardship Standard for Bankruptcy Discharge
The loan is dischargeable if it would be an undue hardship for the student or his dependants if you can’t afford food, shelter, or medical care. Private loans are easier to discharge under this standard because they have no income-based repayment to make private loans affordable. Under the Brunner test, the student loan is dischargeable in bankruptcy if:
- The Debtor cannot repay and maintain a minimal standard of living.
- The situation will continue for a significant portion of the repayment period.
- The Debtor has made good faith efforts to repay.
Undue hardship discharges require that the Debtor has done all he could to try an income-based repayment before filing an adversary case for undue hardship in bankruptcy court. Obtaining an undue hardship is one of the hardest things a student loan lawyer can attempt but it is not impossible.
The loan might qualify for an administrative discharge or another program. The nice part is, many administrative discharges or rehabilitations are simple, short forms. Interestingly, We and Salt list over 60 programs that repay the loan or help repay the loan. For your further information, the following are just some of the more popular administrative discharges:
- Stolen Identity
- Closed School
- Unauthorized Signature
- Public Service
- Disqualified Status
- Unpaid Refund
- Inability to benefit
- Unaccredited school
Private vs. Government Student Loan Collections
Government loans can seize wages, bank funds, tax refunds, and social security benefits without going to court. Private lenders have to sue and win to collect. That may be hard or impossible for private loans. Private loans have higher interest rates and no income-based repayment programs and this is what makes private student loans easier to discharge as an undue hardship. Also, many of the same defenses you make against a credit card debt such as the statute of limitations are valid against private student loans. Additionally, government student loans are exempt from many of the same defenses. You need a student loan attorney who knows how to handle these cases.
If your debt is a private student loan, it is probably bought, sold, and resold. If so it may be uncollectible. There are at least 63 defenses to any lawsuit by a private student loan debt collector including the statute of limitations. Private loans have to sue to collect. The common defenses include:
- Statute of Limitations
- Lack of Standing
- FDCPA, TILA
- Identity theft
- Business Records
The Louisville Kentucky Student Loan Lawyer
This is just a partial list of some of the items to consider if you have a student loan issues. So, if you are suffering from an abusive situation with a student loan, contact my office right away to start the conversation. Nick C. Thompson, Attorney: 502-625-0905