Undue Hardship

[benman65]

I am new to this forum. I really need some advice. I have co signed Private Student Loans for my son which total around $145,000. He is not paying on them and they are calling me night and day. I have not answered the phone, cause I have no idea what to tell them. I have spoken to a lawyer who said I do have a great case for a undue hardship. I have been on Social Security Disibility for 10 years now. My situation has not improved. He feels we could win an AP. The problem is it will cost around $7-10,000. He thinks we can go in and hit them with all the facts up front with the medical and financial and hopefully that would do it. The other option is to do nothing. They can't get blood from a stone. I also co signed a motorcycle loan for my son that it looks like he is having reposessed. If only I knew this would happen I never would have signed these loans in the first place. We are not on speaking terms, I have tried to reason with him.

I appreciate any information anyone can give me. I don't know what to do next. Thanks so much in advance!!!!

[tobee43]

from what i understand in mass....the student loan is viewed most likely by strength and size of the organization granting the student loans dictates how it is treated. and, there does exist a special exception for “undue hardship” cases.

the standards for the bankruptcy courts undue hardship forgiveness for student loans has a bar set so high it might as well not even exist for the vast majority of people with both student loans and special hardships. an example i read about had to do with someone losing both their legs and they danced for their living. (sounds horrible), but they are usually ruthless.

this is from an article october 3, 2010 dealing with hardship cases in mass:

Bankruptcy Appellate Panel Gets Student Loan Test Right



"While the Bankruptcy Code says that student loans may be discharged if the debtor shows “undue hardship,” the Brunner test provides that student loans may only be discharged if the debtor shows: (1) inability, at his current level of income and expenses, to maintain a “minimal” standard of living; (2) the likelihood that this inability will persist for a significant portion of the repayment period; (3) and the existence of good faith efforts to repay the student loans. In essence, it’s undue hardship on steroids—undue hardship in the most extreme. As I tell my clients, this really means you must be physically or mentally disabled to discharge your student loans. Not making enough money isn’t enough.

But last week winds of judicial change blew out of the northeast. In a well-reasoned opinion, the First Circuit Court of Appeals Bankruptcy Appellate Panel rejected Brunner in the case of In re Bronsdon, instead opting to follow the Eleventh Circuit Court of Appeals’ “totality of circumstances” test.

The issue before the Court was whether 64-year-old Denise Bronsdon could discharge $82,000 in student loans. Bronsdon, a law school graduate, unfortunately was unable to pass the bar exam and lives solely on Social Security. She also lives in her father’s den, unable to obtain her own home on her small income. As the Court noted, there was no way someone on Ms. Bronsdon’s income and at her age would pay back $82,000.

But, as I’ve said before, owing student loans is like owing the mob. And this case was no different. The student loan creditor, Educational Credit Management Corporation, (“ECMC”) fought poor Ms. Bronsdon in the Bankruptcy Court, District Court, back in the Bankruptcy Court on remand, and then eventually all the way to the First Circuit Court of Appeals. And at each step along the way, ECMC fought with tenacity only Tony Soprano could rival.

However, despite ECMC’s best efforts to keep Ms. Bronsdon in financial bondage, the Court rejected ECMC’s request for the Court to adopt Brunner and to deny Ms. Bronsdon discharge of her student loans. Instead, the Court, quoting two other Massachusetts bankruptcy cases opining that Brunner “tests too much” and was “overkill,” ruled against ECMC. The Court also stated that the good faith requirement of Brunner was “without textual foundation.” (In layman’s terms, that means it was just made it up.)

The Court explained that it would instead follow the “totality of circumstances” test, which it summarized as follows:

Can the debtor now, and in the foreseeable future, maintain a reasonable, minimal standard of living for the debtor and the debtor’s dependents and still afford to make payments on the debtor’s student loans?

The Court further explained that “courts should consider all relevant evidence–the debtor’s income and expenses, the debtor’s health, age, education, number of dependents and other personal or family circumstances, the amount of the monthly payment required, the impact of the general discharge under chapter 7 and the debtor’s ability to find a higher-paying job, move or cut living expenses.” Essentially, the Court said it would examine the debtor’s circumstances and determine whether repayment would cause the debtor, or the debtor’s dependents, undue hardship. No more, no less.

And in this case finding undue hardship was a no-brainer. In fact, the Court found that requiring repayment of the student loans might lead to Ms. Bronsdon becoming homeless. Given the facts of this case one wonders how ECMC believed that it had any good faith argument against allowing Ms. Brondson’s request to have her loans discharged. I’ll bet even Tony Soprano would have given her a break."

[Peeps]

I looked at this a while back for my own student loans after recently starting SSDI payments. It's a pretty bleak scenario. There seems to be some leeway if the loans were made through private lenders but if they are government guaranteed student loans it's really hard to do anything but pay them. Or maybe get a hardship deferrment.

I saw numerous people write that it was infinitely more difficult to get student loans forgiven than it was to get approved for disability benefits (and we all know how miserable that can be). There weren't many success stories.

To get the loans forgiven via disability hardship, there are application papers that need to be resubmitted every six months (I think I saw that this has to happen for at least three years) and they need to come from a licensed physician. I'm not sure how many physicians are going to stick their necks out for that or even have the time to fill out the forms and write letters every six months. It appeared that even just one missed 6-month recertification would be grounds for tossing the whole thing. Different lenders might have different processes, so I'm not sure if this is exactly what your lender would require. With government guidelines, there does seem to be a fair amount of similarity between different lenders' requirements. Keep in mind, this is all when working directly with the lender, not through a BK discharge process. It seems they're a little bit less defensive when you work directly with them instead tossing a lawyer at them, but that's just what I saw from different people's blogs.

And the really icky part... disability checks can be garnished for unpaid student loans. The system appears to be favorably poised for lenders on this one. At bare minimum it could be a really long struggle against some long odds.

Your situation sounds very difficult and I wish you all the best in getting through it. If you find the magic formula for success, I'm sure there are a lot of people on this forum who could really use any insights you might gain. Best of luck to you.

[tobee43]

I looked at this a while back for my own student loans after recently starting SSDI payments. It's a pretty bleak scenario. There seems to be some leeway if the loans were made through private lenders but if they are government guaranteed student loans it's really hard to do anything but pay them. Or maybe get a hardship deferrment.

I saw numerous people write that it was infinitely more difficult to get student loans forgiven than it was to get approved for disability benefits (and we all know how miserable that can be). There weren't many success stories.

To get the loans forgiven via disability hardship, there are application papers that need to be resubmitted every six months (I think I saw that this has to happen for at least three years) and they need to come from a licensed physician. I'm not sure how many physicians are going to stick their necks out for that or even have the time to fill out the forms and write letters every six months. It appeared that even just one missed 6-month recertification would be grounds for tossing the whole thing. Different lenders might have different processes, so I'm not sure if this is exactly what your lender would require. With government guidelines, there does seem to be a fair amount of similarity between different lenders' requirements. Keep in mind, this is all when working directly with the lender, not through a BK discharge process. It seems they're a little bit less defensive when you work directly with them instead tossing a lawyer at them, but that's just what I saw from different people's blogs.

And the really icky part... disability checks can be garnished for unpaid student loans. The system appears to be favorably poised for lenders on this one. At bare minimum it could be a really long struggle against some long odds.

Your situation sounds very difficult and I wish you all the best in getting through it. If you find the magic formula for success, I'm sure there are a lot of people on this forum who could really use any insights you might gain. Best of luck to you.

or op could leave the country for 10 years....

[backtoschool]

I am new to this forum. I really need some advice. I have co signed Private Student Loans for my son which total around $145,000. He is not paying on them and they are calling me night and day. I have not answered the phone, cause I have no idea what to tell them. I have spoken to a lawyer who said I do have a great case for a undue hardship. I have been on Social Security Disibility for 10 years now. My situation has not improved. He feels we could win an AP. The problem is it will cost around $7-10,000. He thinks we can go in and hit them with all the facts up front with the medical and financial and hopefully that would do it. The other option is to do nothing. They can't get blood from a stone. I also co signed a motorcycle loan for my son that it looks like he is having reposessed. If only I knew this would happen I never would have signed these loans in the first place. We are not on speaking terms, I have tried to reason with him.

I appreciate any information anyone can give me. I don't know what to do next. Thanks so much in advance!!!!

It is very difficult to win a hardship student loan case. You would have to prove that you can never work again basically. I do not think you should pay the attorney that much money to try to win a case that is very likely not to be winnable.

[tobee43]

It is very difficult to win a hardship student loan case. You would have to prove that you can never work again basically. I do not think you should pay the attorney that much money to try to win a case that is very likely not to be winnable.

basically...it's almost as difficult as if you went to school to be a dancer and actually, ( just the thought of typing this is terrible), one loses their legs and can never dance...

that is about how difficult of a proof that is needed to win a hardship. it's a shame really.