Undue Hardship

[bluebell]

I filed ch 7 bankruptcy in Utah in Dec 2009. I had roughly 100,000 in student loans, both private and federal and about 30,000 in credit card, etc. When I was talking to lawyers I told them that I wanted to be able to do an adversary proceeding to attempt to get rid of some of the student loan debt. The lawyer I hired said that we would attempt an AP, but then halfway through the process backed out and said no he wouldn't do an AP. Now, I am getting hounded by one of the private loans that is in collections that is for about 40,000 and they refuse to accept my offer of $200 a month payment. My federal loans are on the IBR plan and manageable at the moment. My questions are can I reopen the bankruptcy case and try to do my own adversary proceeding? or do I just wait and hope that a judge sides with me if it comes down to wage garnishment?

A little background on my income and situation. I am now in Arizona teaching at a middle school in a very small town. The most I can hope to make is 45,000 a year and that's if I stay in this district for at least 15 years. I am also a single parent to child with Asperger's. She is 9 and can not be left alone, which requires her to be in daycare when not at school or home with me. It also requires driving two hours round trip to see specialist and get medication, etc. My budget is very tight and leaves me with about $20 left at the end of each month, if I'm lucky.

[tobee43]

ok, now, interesting we were just taking about this situation this morning.

i'm just shooting for the stars here without anywhere solid to refer you to, but....

i do believe there are certain jobs that allow some of your debt of those student loans to be forgiven. there must be some site that lists those occupations...i thought teachers were in there. (could or maybe just refer to inter city teachers), but i know there are some areas of employment that the government will forgive partial loan balances.

worth a shot!

[bluebell]

That is true I can get some of it forgiven, but it is only the federal loans and only after ten years of teaching. Which would work out fine in about 9 years. It's the private loans which all total about 60,000 that are the more difficult to deal with, as they don't do any forgiveness for teachers or income based/sensitive repayment plans.

[tobee43]

10 years...wow, so that's absolutely NO help now.

can you see about refin'ing that 40k worth of loans with someone else??? i can't believe they will not accept the payment. i'm so sorry, these terrible excuse for humans!!

[IamOld]

Would some one know for bluebell if private student loans are also limited to 15% max salary garnishment??

Bluebell...I guess this doesn't qualify for re-consolidation with the feds???

[justbroke]

I thought that garnishment is a State issue and, depending on your state, garnishment could be as high as 25%. In Arizona, you could petition the court to reduce the garnishment to as low as 15% depending on other factors. With the medical issues in your family, the 15% may be achievable.

However, realize that a private student loan is no different than any other unsecured loan. They can sue you in the same manner that a credit card company can sue you.

Also, realize that getting a student loan discharged is near impossible. You would have to prove that you personally will never be able to pay them off due to some medical reason, or you are at an advanced age with no chance of ever improving your earnings. I would never recommend any person attempt a pro se adversary (complaint) against a lender when it comes to student loans. They are non-dischargeable and require a significant burden of proof to overcome. This is probably why your attorney backed away from your AP. It's no simple undertaking.

Additionally, you cannot consolidate private loans through the federal "consolidation" programs.

[ValleYum]

JB? Would she file an AP in Utah or in AZ where she now lives? Difference of districts and case law (I think).

[justbroke]

She would need to file where she filed her original petition, which I think you're saying is Utah. This is why I mentioned that it's a state-specific issue. Utah allows, like most States, up to 25% garnishment. Whether they allow that to be reduced based on a showing of undue hardship... I don't know.

(As for where to file, she could ask for a Change of Venue. This is a highly procedural task and I can't give any advice on which venue in which to file. I do know that if she asks for the Venue to be in Arizona (not where she filed), then the private student loan lender would be wise to challenge the choice of venue... just to frustrate the debtor!)

[IamOld]

So private student loans aren't then limited to 15% like regular student loans....

BUT could the OP not try for an undue hardship? She has the regular student loan, a child with a chronic condition, and the salary is "stuck" at $45k...

[justbroke]

BUT could the OP not try for an undue hardship? She has the regular student loan, a child with a chronic condition, and the salary is "stuck" at $45k...

I don't know. If this is an AP in the Bankruptcy Court, it's about proving that she won't ever make more than $45K and/or can't pay off the loans. That would need to be proven in court. Again, if talking about the AP in Bankruptcy court, I'd think hard about how to do that and in which venue is the correct one.

As for the garnishment at the State level, I may be inclined to find out what you could do in Arizona to reduce the garnishment. I am by no means a garnishment expert.

I do believe that there is an argument that there are no wages left to garnish due to the necessary medical care of the young child.

[bluebell]

Than you for all the advice.

The lawyer ended up screwing up a couple other things during the bk and getting it dismissed at one point because they didn't pay the fee that I had given them the money for. So, his not wanting to the AP had more to do with the fact that he was a crappy lawyer instead of the AP being an issue.

I will look more into the wage garnishment issue, but I would rather have another plan if possible so that I don't have to sit around and wait for them to do something. I would also rather have a permanent solution than something that can come back to haunt me years later.

My understanding though is that BK's are federal and not state issues, so I should be able to refile in another state correct?

[justbroke]

My understanding though is that BK's are federal and not state issues, so I should be able to refile in another state correct?

BKs are both, but are the jurisdiction of the Federal District Court's Bankruptcy Division. You wouldn't "refile"... you'd open your old case. This would (probably) require a procedural motion to change venue since the other case was discharged in a different District. Don't be discouraged, but also don't believe that these types of APs are easy. They are probably the most difficult of adversaries for a plaintiff-debtor to win (period).

If you do this AP, make sure you have a sound argument, and expert witnesses to testify as to why you'd never be able to pay this loan. Especially considering that you may receive some reduction of principle or other concessions as a teacher after 10 years in the profession. These are points the lender will fight you on. Make sure your ducks are lined up and all quacking in unison.

[ttg1]

She needs to do the AP in the 9th, which means AZ. By far and away that Circuit is the most friendly to discharging student loans. In fact, there is even a small section in the Nolo BK 7 book about it. So while I agree that getting SL debt discharged is difficult, she's now in the best Federal circuit for it. If she can't win in the 9th she can't win anywhere.

[bluebell]

ttg1- Is the book you mention the Nolo How to file for Chapter 7 Bankruptcy or The New Bankruptcy, will it work for you?

Would it be worth it to buy the book? I have a feeling if I do this I will have to do it on my own, the lawyer I had did even say that people have more success when they do an AP on their own.

[ValleYum]

https://ecf.wawb.uscourts.gov/cgi-bin/show_opinion_doc?77,455677

Here is one from the Western District of Washington (9th District) - where a young couple won an AP for student loans - they had a child with emotional issues and actually got to claim medical expenses for their dog - because the pet was deemed needed for their child! They had both 'topped out' in pay scale.

HHM had a good one too in one of his stickies - where some of the Sallie Mae loans were discharged due to their not working out payment arrangements - so some were d/c and some weren't (8th District): http://www.mow.uscourts.gov/bankrupt...rman/marie.pdf