Considering filing AP for discharge of student loans

[currerbell]

So, I couldn't wait any longer for Congress to pass the Fairness bill and had to file BK. I have huge student loan debt (private and gov). My atty will not file the AP but he has suggested I do so (I am capable of doing it). I am unable to pay the loans and will have to default on the private loans since they won't work with me on payment amounts (and put me in default when I filed BK).

Long story short, I have some health issues and it looks like I will be officially diagnosed with AOSD (Still's) once they rule out MS and Parkinson's. So it could be worse. I've had to quit my high-stress job, was self-employed but am wrapping that up because we couldn't afford daycare anymore, so now I stay at home with the kids. The thing is, I honestly don't know if I can handle the stress of filing an AP (stress triggers episodes - it's unpleasant, to put it mildly). My 341 is tomorrow and I am sick already over that. But I feel like I have to keep on trucking through this for my family - and going into default, etc would be stressful, too.

So, my question is I know that an AOSD diagnosis (specifically mine, since it's pretty severe) would qualify me for SSDI. I don't *want* to file for SSDI - is it sufficient for Brunner that I *could* qualify for SSDI? I've paid faithfully and fully for 7 years, don't have income to pay now and have small kids, and because of the AOSD, can't really return to my former income level ever.

I know I sound like a rambling whiner - I'm really not. I'm actually kind of tough, but these last few years have just sucked the fight out of me. I am very grateful this site exists - don't really have anyone else to talk to about this. Thanks.

[MSbklawyer]

You've got an uphill battle to say the very least. Especially now, with the income contingent repayment program that has been put in place, unless you're flat on your back in a coma, courts won't let you discharge the debts.

[currerbell]

I wouldn't be discharging the gov loans, just the private. They have no IBR programs.

[wonderingrov]

I'm actually on SSDI due to a stroke last April. From what my attorney told me, it is a whole lot easier to get on disability than it is to get student loan debt discharged in an AP (and getting the SSDI was extremely hard). Basically, she said I would need to expect a MINIMUM of $5,000 in legal fees for litigation (and she is very reasonable on her prices - on the lower end in my area). Even with that, it would be an uphill battle with no guarantees.

Since my student loan debt is down to around $11,000 right now, it really wasn't worth it in my case. Basically, you have to prove that you will NEVER be able to earn enough money to pay back the loan in your lifetime from what she told me.

[currerbell]

Yeah - my inclination is to just give up and not file the AP, but I feel like I have to try as hard as I can. I am capable of doing the whole thing pro se, so fees aren't really an issue. The private loans are about 100K and, even assuming I go back to work and actually make money at some point, I would have to live (and work) a pretty long time and never put any money towards my children's education or my retirement to even come close to paying them off.

On the other hand, I have no assets and income is dwindling, so I am more or less judgment proof. I wonder which is worse?

[KeithDoxen]

You'll basically be collection proof for a long time. I hate the term "judgment proof," because it makes it sound like the creditor can't get a judgment. Of course the creditor can get a judgment, just let them try and enforce it though.

I think you should try the AP though if you're willing to spend the time and money and energy on it.

If you do default on the private loans and the AP doesn't work out, or you decide against it, here are some ways to make sure that you're NOT a low hanging fruit for the student loan company, meaning that they may decide that it's not worth suing you.

First, keep your liquid assets in an Internet bank located out of state. That means that even if they get a judgment against you, they are going to have to domesticate that judgment in the other state in order to get to your assets, assuming that they're able to find your bank. They could always get you to do a debtor's exam, but that will cost them even more money and I think they can only do one per year, which means you'll have time to take whatever liquid assets you have in that account and use it to pay bills or whatever. Even better, move your money into an Internet bank with only a Delaware physical location. Delaware will not allow attachments of bank accounts, even if a foreign judgment is domesticated in the state. That means they'd have to get a judgment, do the debtor's exam, and then go back to the court and ask the judge to force you to take the funds out of your account and hand them over. Sounds like a lot of attorneys' fees on their part, doesn't it?

Also, which state do you live in? If you live in Texas, Pennsylvania, or one of the Carolinas, they can't garnish your wages. But it sounds like you may not have any wages for them to garnish, so that may be a non-issue.

Ultimately, make sure to check your state's exemption laws for assets that are protected from judgments. Make sure your car is worth less than the exempt amount, if you start to build up assets, keep them liquid or in protected form (some states protect 401ks, etc), and generally make it a real pain for them to get anything out of you. That might dissuade a lawsuit until the statute of limitations is up.

Good luck!

[currerbell]

KeithDoxen - you are fabulous - thank you so much. I know we are in somewhat similar positions. I have a little familiarity with collections practices, but I know a lot of it depends on the creditor - some will go after any amount, no matter how small; others only go after bigger judgments against debtors with assets. I would be a high judgment no asset debtor. And, like you, I don't know anything about what Access does.

I am in a garnishment state, unfortunately, but it would seem that by the time they do anything, I won't have any income to garnish. I was thinking that I would have to take my name off of our joint accounts, too. Right now, I don't have any liquid assets. Theoretically, I may have income coming in at some point over the next couple of years that I have already earned, but who knows? I've heard Roth IRAs are another way to protect yourself. I have nothing in retirement right now, so it would be nice.

Best of luck to you and I will keep you posted on what happens! - cb

[HHM]

Granted, I understand that cost can be an issue, but if you are going to do it, you should invest in having it done right. I never quite understood someone going pro se on something as important and possibly life changing as a student loan discharge, after all, would you go to a nurse for open heart surgery?

Keep in mind, you can file the AP at anytime, you don't need to do it at the same time as the underlying BK. The AP is a separate proceeding. Also, if you are going to attempt a discharge, might as well try for both private and gov't. The same rules apply.