Private Student Loan CONFUSION-- HELP ME PLEASE

[RyanIsrael]

I’m confused about when a private student loan can be included in bankruptcy. I tried reading the threads but don't understand the rules/law. I’d welcome any help.

Does anyone here know how to tell whether a student loan is private? If it is private, how do you know if it’s one of the ones that can be discharged in bankruptcy?

What does the guarantor have to do with all of this? My loans were guaranteed by a nonprofit organization.

I’ve read that some private student loans are treated just like any other consumer loans in bankruptcy so that a student loan trial isn’t necessary. How can I tell if my private student loans are the kind that do/don't require a special student loan trial?


Ryan in California

[despritfreya]

Student loans (private or government) ARE NOT dischargeable in any bankruptcy UNLESS you file a separate adversary against the lender and prove that payment is a hardship.

Des.

[PhantomPain]

My attorney stated I will continue to pay them while in my chapter 13 plan but will do so at a payment until I am done with my plan. I believe that is what is considered a "Forbearance". Not sue, but I also thought she said stated something about no additional interest can applied to the Student Loans while I'm in my chapter 13. Once I know for sure what the deal is, I'll post it. I have $68K in student loans which is kinda ironic as that is my annual salary.

[PhantomPain]

Since I was 1 point shy of posting a the link I was going to post for some useful information I'll do so now as my last post brought me to the 15 forum points to do so. LOL


Here is useful link http://www.money-zine.com/Financial-...uptcy-Options/ I'm sure if you search you'll find more info.

[RyanIsrael]

[QUOTE=PhantomPain;489627]Since I was 1 point shy of posting a the link I was going to post for some useful information I'll do so now as my last post brought me to the 15 forum points to do so. LOL

That's a very informative link Phantom, so thank you.

[RyanIsrael]

is adversary trial really required?

des,
a lawyer i interviewed told me that some private student loans are treated just like other consumer loans in bankruptcy. i havent hired a lawyer yet and dont know if my loans are the kind that dont require that separate adversary trial. do you know for sure that absolutely no private student loans are treated like regular consumer loans? i cant keep all of this conflicting info straight. if you know where the law is on this please post a link because truthfully i dont know where to find this policy. it seems like it would be cheaper to be able to skip that adversary trial. thank you for posting on my question. anyone else know? please jump in if you do.
ryan

Student loans (private or government) ARE NOT dischargeable in any bankruptcy UNLESS you file a separate adversary against the lender and prove that payment is a hardship.

Des.

[despritfreya]

des,
a lawyer i interviewed told me that some private student loans are treated just like other consumer loans in bankruptcy. i havent hired a lawyer yet and dont know if my loans are the kind that dont require that separate adversary trial. do you know for sure that absolutely no private student loans are treated like regular consumer loans? i cant keep all of this conflicting info straight.

The easiest way to see how this works is to compare the old law with the new one.

Prior to the implementation of BAPCPA only federal insured loans and/or loans funding by a non-profit were non-dischargeable. However, even that was up in the air as any loan that was even remotely funded by federal or non-profit dollars could have been subject to the non-dischargeability provisions of what was then 523(a)(8) which read in part: "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. . ."

Compare the old version to the new version which came in with the 2005 changes: "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 (the new part) any other educational loan that is a qualified education loan, as defined in section 221(d)(1) of the Internal Revenue Code. . ."

There are some additional changes relating to the poor drafting of the old version but I think you get the point. So, as I read this the only "student loans" that would not fit the requirement of hardship discharge are those that are not "qualified education loans" as defined by the IRC.

Hope this helps.

Des.

[KeithDoxen]

Ryan,

As someone who has studied the law on this with a fine-tooth comb, I can assure you that your private student loans are NOT dischargeable in bankruptcy without going through an adversary proceeding (trial).

You say that your loans have a non-profit guarantor. Given my experience with student loans, that probably means that you have fairly conventional private student loans, which are lent by a for-profit institution, such as a bank, and which are often guaranteed by a non-profit (TERI, etc). These loans are considered private because the government is not lending the money, and is not acting as a guarantor. Unfortunately, changes to the bankruptcy code in 1998 and in 2005, after much lobbying by the industry, made these loans nondischargeable. If I have time later I can send you links to the statutes.

Does it surprise me that you got bad advice from a bankruptcy attorney on this matter? No. Most attorneys aren't worth their bar dues when it comes to student loan issues. Many attorneys either get the law wrong, or just admit that they have no clue. I think this is because defaults and bankruptcies on student loans have only exploded in recent years and so this is something that attorneys aren't used to working with. But the problem is just going to get worse, and attorneys in the field need to study up on the subject.

[RyanIsrael]

Ryan,
You say that your loans have a non-profit guarantor. Given my experience with student loans, that probably means that you have fairly conventional private student loans, which are lent by a for-profit institution, such as a bank, and which are often guaranteed by a non-profit (TERI, etc). These loans are considered private because the government is not lending the money, and is not acting as a guarantor. Unfortunately, changes to the bankruptcy code in 1998 and in 2005, after much lobbying by the industry, made these loans nondischargeable. If I have time later I can send you links to the statutes.

keithdoxen, thank you for responding to my thread. please send the statutes or post them here. do you know if it matters whether loans have a for profit or non profit guarantor or lender? i keep seeing this mentioned but cant understand what it's all about.

Does it surprise me that you got bad advice from a bankruptcy attorney on this matter? No. Most attorneys aren't worth their bar dues when it comes to student loan issues. Many attorneys either get the law wrong, or just admit that they have no clue. I think this is because defaults and bankruptcies on student loans have only exploded in recent years and so this is something that attorneys aren't used to working with. But the problem is just going to get worse, and attorneys in the field need to study up on the subject.

gosh i just wish that lawyers would admit when they are unclear about an issue since this is so confusing to begin with. i am super appreciative of all the feedback here and hope people will keep communicating. i'm glad to know i'm not alone.

ryan

[tyson24]

Well, I have upwards of $40,000 in loans federal and private and I just got discharged and my loans are still with me. The bankruptcy is stressful enough without having to worry about excess proceedings, or paying attorneys to represent you in them.

From all I have read and heard from here, law and my own attorney and bk case, they are not dischargeable.

The hardship that may let you discharge those is probably nothing you want anyways.

Good luck

[tyson24]

I found this if you would like to read it for your enjoyment A 2009 hearing on private student loans.

http://judiciary.house.gov/hearings/printers/111th/111-58_52412.PDF

[KeithDoxen]

Hey Ryan,

I sent you the statute via a personal message, but since you asked upthread, here is the statute for all to see

US CODE Title 11, Chapter 5, Subchapter II, Sec 523
(8) unless excepting such debt from discharge under this paragraph would impose an undue hardship on the debtor and the debtor’s dependents, for—
(A) (i) 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
(ii) an obligation to repay funds received as an educational benefit, scholarship, or stipend; or
(B) any other educational loan that is a qualified education loan, as defined in section 221(d)(1) of the Internal Revenue Code of 1986, incurred by a debtor who is an individual;

So to answer your question upthread...

Student loans with a...
Government lender: Nondischargeable under 523(8)(A)
For-profit lender and government guarantor: Nondischargeable under 523(8)(A)
For-profit lender and non-profit guarantor: Nondischargeable under 523(8)(A)
For-profit lender and no government or non-profit involvement: Nondischargeable under 523(8)(B)

[JGra]

I just filed and my sallie mae private signature student loan was included and filed on... It was a co-signed loan with my father and I am continueing making payments on it but I am no longer on the account...

[justbroke]

I just filed and my sallie mae private signature student loan was included and filed on... It was a co-signed loan with my father and I am continueing making payments on it but I am no longer on the account...

Unless you filed a lawsuit within the bankruptcy (adversary proceeding), you did not discharge that debt. They can definitely continue collecting unless you had a judge issue an order specifically discharging the student loan.