Student Loans

[saint782]

In preparing our chapter 7 one topic that keeps coming up is our student loans, we have a little over 100k in student loans between my wife and I, most of it is through two private consolidation loans. I really was not thinking of pursuing this at all but my attorney keeps bringing it up and referred me to someone else who has had a lot of luck recently in getting settlements on private student loans.

I explained the particulars of our case and she seems to think it might be worth pursuing and that the private lenders are "scared" so they are cutting deals to reduce interest and principal.

This whole process is stressful enough so I'm really hesitant to add even more complexity to this , however its a lot of debt too and any reduction would be a big help to us.

Anyone have thoughts on this? I'd hate to have to extend this process any longer than it is already going to take and I'm also worried that if they don't agree to settle does that mean we have to sue them and have a drawn out process, or can we drop it and just let the case close as it would if we had not brought this up?

[justbroke]

As you probably already learned, student loans are typically non-dischargeable and attempts to have them discharged are usually unsuccessful except in the most extreme cases. Yes, there are ways to have them discharged, but there are significant hurdles to have the court agree that they should be discharged.

For private student loans, it's up to the lender and how much they think they'll be able to collect from you over time. Is the attorney charging you a certain amount to attempt to obtain a reduction? Is there any guarantee or range that they may be able to obtain -- such as they believe they can reduce the balance by 10-30%?

My guess is that these negotiations and reductions are useful if you can get that 10-0% reduction in principle and a fixed rate to something in the 1 - 2% APR for the rest of the loan. The nice thing about doing it in the bankruptcy is that any amount forgiven would not be taxable.

I'm sure the attorneys charge "extra" for this negotiation and you'll just have to balance the cost with the value.

[saint782]

Yeah, it's something to think about for sure. I can decide after discharge and the cost would be $1,500. It's a sizeable amount so have to take it into consideration though if as you said it could reduce my APR and get that reduction in principle as well. The attorney I spoke with had some really good luck with this as of late so we shall see.

Thank you for your advice, this forum has really helped me understand things much better.