Should my wife attempt student loan discharge at time of bankruptcy?

[Avand18]

My wife and I are filing chapter 7 next week. In short we gross 80k per year but are 200k in debt. My wife went to college full time for 5 years but only came out with 2 years' worth of transferable credits from to having to cancel so many courses due to her problems relating to epilepsy and some OBGYN conditions. After trying 4 different schools we decided it was no longer practical to continue racking up debt on the remote chance she could rack up any type of certification at all. Throw expensive textbooks into the mix as well which were racking up credit debt.

I suppose it would be a good idea to try and get her student loans discharged due to hardship right? Any fee for this would be far better than paying $230 per month for nothing!

Some other key points... all of her student loans were incurred before we married. She'd begun receiving SSI for epilepsy one year into schooling which was pulled after we got married because our joint income was 3x the state Max to receive any. She has tried numerous jobs since quitting school for which her problems led to her firing or quitting. She has had a decent business on eBay since 2008 but the sales fell off dramatically in 2011 because no one was spending money.

[wipetheslate]

It sounds like your wife may have a good case for at the very least a partial discharge. To have her student loans discharged, you will need to file an Adversary Proceeding. There is a deadline for doing this, which IIRC will be specified at the time you file your Chapter 7.

I filed my Chapter 7 pro se and didn't pay any extra to file the AP, which I handled myself. If I had it to do over again, I probably would have filed a Motion for Summary Judgment as soon as I was able to after filing the AP (I think it's 20 days) instead of waiting the months and months for the trial. Upon filing, my loans will be transferred to the Educational Credit Management Corporation (ECMC) and they had no interest in trying to settle before trial. The whole process just went on way too long, 11 months from filing the AP to trial.

[Avand18]

Thanks. I will write this down and see if my attorney has dealt with or agrees with the Summary Judgement line of action. So what did you do in the meantime?? Not pay your loan payments? I would be confused as to how to handle the situation while it is in limbo...

Also could you PM me with the nature of the reasons for trying to discharge your loans?

[ValleYum]

Thanks. I will write this down and see if my attorney has dealt with or agrees with the Summary Judgement line of action. So what did you do in the meantime?? Not pay your loan payments? I would be confused as to how to handle the situation while it is in limbo...

Also could you PM me with the nature of the reasons for trying to discharge your loans?

You have to have more than 20 posts to send or receive PMs.

[wipetheslate]

I didn't pay my loans while I was in bankruptcy.

I sought a discharge because of serious health issues that developed recently (i.e., I did not have nor could I imagine I would have these health problems when I obtained the student loans well over a decade ago.)

[despritfreya]

It is unlikely that a Motion for Summary Judgment will work. A court can only grant a Motion for Summary Judgment if there is a showing of the absence of a genuine issue of material fact and/or law thus entitling the moving party to a judgment as a matter of law. Further, the evidence presented must be viewed in the light most favorable to the non-movant. Each student loan discharge case is fact intensive and should not be decided in summary fashion.

As to the deadline issue, there is none (unless you have some local rule). I have opened cases long after closing to seek a 523(a)(8) determination.

Des.

[Avand18]

Well if I file an AP then I guess I just won't pay anything on her student loans from the time we file BK until there is a final ruling in the AP trial??

Once again I will do only what my Atty says or allows, I'm just being hypothetical here and am glad to see at least another person who is going through things like this. The trustee, courts and lenders must know that we are trying to come out far enough ahead after BK so that there'd be almost no reason to ever have to file again!

[Avand18]

Oh you've gotta hear this... I met with an Atty today and he told me there will never be a chance of a student loan discharge for the following reasons:

You have to live below the poverty level ($200) per month

You have to never be permanently disabled to the point where you can never work

You can't live with anyone who is above the poverty level no matter what their relationship is to you.


So what kind of crap is this?? Is our legal system really that bad or was this guy BSing us?

[LadyInTheRed]

Have you already retained this attorney? I'd get a second opinion.

[wipetheslate]

Not true at all. Do your own research.

Oh you've gotta hear this... I met with an Atty today and he told me there will never be a chance of a student loan discharge for the following reasons:

You have to live below the poverty level ($200) per month

You have to never be permanently disabled to the point where you can never work

You can't live with anyone who is above the poverty level no matter what their relationship is to you.


So what kind of crap is this?? Is our legal system really that bad or was this guy BSing us?

[Avand18]

Upon further research, to my surprise, what I've said is for the most part true (but maybe not the entire range of truths?):

www-dot-disabilitydischarge-dot-com/Pages/General.aspx

This is the subsite of studentaid.ed.gov that explains the legal circumstances by which student loans can be discharged during bankruptcy. To summarize, you have to basically be:

a) ceritified by your physician as having a permanent disability (that can last from 60 months up to or including death)
b) must live below the poverty line for a family of 2 (regardless of actual family size) - for 48 states this is $14700 per year ($16900 for Hawaii)

If there are any other legal routes to take on this issue, they SHOULD be made known in this forum - this could help a lot of people!!! But what could they be??

wipetheslate, I understand if your circumstances more closely match those stated in the Federal terms for discharge, but if they don't, what other ammo can we use? This is a serious thing, and I'm here to get additional information and not to refute or argue anyone else's case. It's safe to say my wife has been close to death more times than 99% of human beings. The law should not be penalizing us simply because I make decent money!

[wipetheslate]

Quit reading crap websites and talking to crap lawyers that just parrot crap websites. You need to read actual judgements, not random sites that you find by Googling. I find it remarkable you are claiming to be the expert "what I've said is for the most part true" when you don't know diddly squat.

How did you prove you deserved a bankruptcy discharge? You showed your expenses exceeded your income. And you showed that your expenses were reasonable. The same process applies for student loans. Pay attention to what circuit you are in so you know whether the Brunner test (how you could not have come across this if you are truly doing research somewhat baffles me) or totality of circumstances is used.

As far as being disabled, filing bankruptcy is not necessary to get student loans forgiven. However, I believe you have to provide proof of the disability and income for several years after the student loans are forgiven.

As to the whole poverty issue, that is just 100% wrong. Sure, the student loan holder will bring up the poverty level at trial, but it's really a non-issue. Courts have not ruled you have to live in poverty to get a discharge.

[HHM]

I agree with wipetheslate...what you are reading and the "standard" "parrot" advice you are getting is based on what tactics have worked in the past to get student loans discharged. So, by implication, many read that as the only way to get student loans discharged (100% disabled, poverty and likely to stay in poverty, etc).

However, let's be clear, a bankruptcy student loan discharge is an involved process and you really need to be able to prove NO way in foreseeable future to pay "something" to these debts. Even people that have been classified as 100% disabled have lost student loan discharge cases. It is not the fact that you are disabled, it is the nature of the disability and does it really prevent a person from working. E.g. a computer software engineer that is considered 100% physically disabled, but can work from home on a contract basis with a history of earning $80K a year will LOSE in a student loan case.

Not to be a downer, but based on the facts your described, I think you will have a tough time with a student loan discharge. However, it is not like there is any other option on the table, so might as well move forward. Also, I do disagree with one other point mentioned earlier, you can bring the student loan discharge case at any time after the BK. The student loans will always be part of this particular BK, you can actually bring the AP much later.

I think she has a shot at a partial discharge, it will really depend upon in which district you reside and its openness to a pure economic hardship argument.

[karm43]

Is her epilepsy controlled? is the question No one would hire her with this. Does she have a driver license?

[Avand18]

Thanks for the additional opinions, info, and advice. You can always give it to me straight!

karm43: seizures are controlled but most conventional workplaces aggravate a wide range of other symptoms to the point of severely hindering performance and attendance.

Even the best case law versus our age and income would make a mockery of the court (esp. appellate courts) and the lenders, Brunner test or not. In all cases I could find, the major deciding factor of student loan discharge is your "ability to pay" - and I suppose we'd always have the ability to make existing payments on her loans just by virtue of my income.

The sad part in all of this is If we'd known most of what we've learned in 8 years together, we'd have never gotten married. And forget a divorce because I'd get screwed with alimony and she'd be hard-pressed to get SSI back. An AP in this case would be just like your average Joe going to school - lots of aggravation with little prospect of reward.

That said, on a calmer note I guess people in our income bracket should simply augment the loan repayment plan until things like the cars are paid off and then hurriedly pay off the student loans at [(shorter term "X") = current payment + 50% of monthly sum of car payments].

And I always go about advocating against any expensive schooling whenever I get the chance. Even if you are healthy and do finish school, my institution and the companies around where I live don't help their grads and don't hire locals.