City of Discharge
October 4, 2005 12:48 PM Subscribe
Can I declare bankruptcy on private school loans?
I attended a private college for a few years, and funded it with a loan from the school. If I declare chapter 7, is it whatever-it-is-when-it's-gone? Self-research has produced conflicting answers.
I attended a private college for a few years, and funded it with a loan from the school. If I declare chapter 7, is it whatever-it-is-when-it's-gone? Self-research has produced conflicting answers.
IANAL, but I handle some bankruptcy stuff on the creditor side.
When you're granted a discharge (what it's called "when it's gone"), the back of the form that the judge signs gives a list of what loans are discharge and what are not. The form specifically lists "most student loans" as *not* being discharged.
This site gives the specific 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'."
From what I have read and understand, it's difficult to prove undue hardship.
And delmoi's right anyway - new laws take effect 10/17, making it harder to file a Chapter 7 bankruptcy.
posted by gnomeloaf at 1:13 PM on October 4, 2005
When you're granted a discharge (what it's called "when it's gone"), the back of the form that the judge signs gives a list of what loans are discharge and what are not. The form specifically lists "most student loans" as *not* being discharged.
This site gives the specific 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'."
From what I have read and understand, it's difficult to prove undue hardship.
And delmoi's right anyway - new laws take effect 10/17, making it harder to file a Chapter 7 bankruptcy.
posted by gnomeloaf at 1:13 PM on October 4, 2005
Response by poster: But these laws take effect six months after the october date, righ?
posted by Homeskillet Freshy Fresh at 1:16 PM on October 4, 2005
posted by Homeskillet Freshy Fresh at 1:16 PM on October 4, 2005
Response by poster: And if this loan went to a collection agency, does that change anything?
posted by Homeskillet Freshy Fresh at 1:20 PM on October 4, 2005
posted by Homeskillet Freshy Fresh at 1:20 PM on October 4, 2005
Nope, a debt is a debt and debt is discharged under chapter 7 bankruptcy filings.
posted by phearlez at 1:28 PM on October 4, 2005
posted by phearlez at 1:28 PM on October 4, 2005
Okay I simplified that inappropriately. Being handed to a collection agency does not change the character or type of the debt, though some agencies do attempt to illegally alter the classification to aid them. You can look up the issues relating to 'factoring accounts' over at Art of Credit to see what I mean.
If something goes through collection and comes out the other side as a lawsuit and becomes a judgement, that DOES alter the nature of the debt for the sake of reporting and statute of limitation. It still does not, however, alter whether or not you can discharge it.
posted by phearlez at 1:31 PM on October 4, 2005
If something goes through collection and comes out the other side as a lawsuit and becomes a judgement, that DOES alter the nature of the debt for the sake of reporting and statute of limitation. It still does not, however, alter whether or not you can discharge it.
posted by phearlez at 1:31 PM on October 4, 2005
Response by poster: Can you prove that to me?
posted by Homeskillet Freshy Fresh at 1:31 PM on October 4, 2005
posted by Homeskillet Freshy Fresh at 1:31 PM on October 4, 2005
The question doesn't really have anything to do with collection agencies or judgments. What it boils down to is while government-sponsored student loans are not discharged in a chapter 7 bankruptcy case, that may not be the case for school-sponsored student loans.
And of course, all the bankruptcy attorneys here in the firm ARE NOT IN THEIR OFFICES.
posted by gnomeloaf at 1:40 PM on October 4, 2005
And of course, all the bankruptcy attorneys here in the firm ARE NOT IN THEIR OFFICES.
posted by gnomeloaf at 1:40 PM on October 4, 2005
IANA(bankruptcy)L, but from what I understand of bankruptcy law, you could probably try and declare banktruptcy to have the loan discharged, but is almost impossible to have the judge discharge the student loan. As gnomeloaf said, you have to prove "undue hardship" - and the bankruptcy court has made that a gigantic, almost impassible hurdle.
In law school, I remember reading one bankruptcy case where the loans were at least partially discharged in banktrupcy, but the circumstances were insane - something like, a single monther with 5 kids in a trailer, the trailer burned down, no insurance, lost her job, got cancer, etc, etc. Then it seemed like the court only grudgingly said that was "undue hardship".
I'd strongly suggust you talk to a banktruptcy attorney soon if you're interested - they'd be able to give you a better idea of what's allowed, what the time frame is, etc.
posted by dicaxpuella at 1:45 PM on October 4, 2005
In law school, I remember reading one bankruptcy case where the loans were at least partially discharged in banktrupcy, but the circumstances were insane - something like, a single monther with 5 kids in a trailer, the trailer burned down, no insurance, lost her job, got cancer, etc, etc. Then it seemed like the court only grudgingly said that was "undue hardship".
I'd strongly suggust you talk to a banktruptcy attorney soon if you're interested - they'd be able to give you a better idea of what's allowed, what the time frame is, etc.
posted by dicaxpuella at 1:45 PM on October 4, 2005
Self-research has produced conflicting answers.
Homeskillet - if you have links, it might be helpful to post them here, so people can help you (a) identify possibly credibility issues, and (b) possibly clarify that what appears to be conflicting information is not.
posted by WestCoaster at 8:32 PM on October 4, 2005
Homeskillet - if you have links, it might be helpful to post them here, so people can help you (a) identify possibly credibility issues, and (b) possibly clarify that what appears to be conflicting information is not.
posted by WestCoaster at 8:32 PM on October 4, 2005
Homeskillet - can you go into more detail about the kind of student loan you have? That would help too.
As for the six month thing, I have confirmed it - the laws go into effect six months after the date the law was signed. The law was signed in April, which means that the laws change on 10/17/05.
posted by gnomeloaf at 6:22 AM on October 5, 2005
As for the six month thing, I have confirmed it - the laws go into effect six months after the date the law was signed. The law was signed in April, which means that the laws change on 10/17/05.
posted by gnomeloaf at 6:22 AM on October 5, 2005
This thread is closed to new comments.
posted by delmoi at 1:04 PM on October 4, 2005