Student Loans Undue Hardship

[jplt80]

Hello all! I'm a newbie to the forum. I have seen a lawyer about filing Chapter 7 Bankruptcy and he thinks that due to some problems I have health wise, my underemployment and the insanely high payment my student loan company is requesting, that I may qualify for an undue hardship discharge. I am gathering my paperwork to file and we will be filing an adversary proceeding to see if we can get my loan discharged. Does anyone know anything about this?

Also, he thinks my cosigner (my mom) may be able to file bankruptcy and be relieved of her responsibility on the student loan without doing a hardship proceeding. Does anyone know anything about this either?

[HHM]

What do you want to know exactly?

If your attorney thinks you have a shot at a hardship discharge, that's good. Hardship discharges are notoriously difficult to get because the burden of proof is so high as to what qualifies as a hardship. You basically have to prove that you could NEVER pay back the loan even if you had 20 years to do so. Short term hardships are not enough.

As to your mom, I am not sure. The standard answer would be that she would not be relieved from liability. The very purpose of having a cosigner is to allow the creditor to seek payment from the cosigner in the event the borrow defaults. Thus, unless there is some technicality specific to student loans and hardship discharges that relieves the cosigner as well, your mother will be stuck with the bill. The only good news, she should be able to discharge the debt in BK, because, "I think" the student loan exceptions to discharge do not apply to her because she did not receive the educational benefit of the loan.

[jplt80]

Student Loans Undue Hardship

I basically just wanted to know what you guys knew about the hardship discharge and how student loans are handled in bankruptcy. I'm very scared and just wanted to get some feedback.

My mom was already thinking about filing bankruptcy and since she is the non-student cosigner, we thought it would release her from the student loan.

[HHM]

That is probably too open-ended a question.

However, look at it this way, if you lose on the hardship discharge, you are in no worse shape than if you had never filed for the hardship discharge. So the good news, is you will not be any worse off for having filed for the hardship discharge; and by filing it, you given yourself a "chance" to have the debt discharged.

Without knowing the specifics of what you are claiming as a hardship(s), no one here can really say what your chances are, so your best bet is to rely on your lawyer. Whatever the hardship, it would have to be something that would effect your earning potential for the foreseeable future (i.e. 5-10+ years) whereby you could not earn enough money to meet your basic necessities AND pay the student loan.

Incidentally, did you ask your lawyer if he has ever actually handled one of these cases, they are not too common, so not many lawyers have experience in brining them (that is not to that you should fire your attorney if he hasn't, but if it is his first time, you can use that to negotiate lower attorney fees).

As for the hearing itself, you will probably be called to testify and would be cross examined by the creditors attorney's...and you would be required to present evidence as to the nature and extent of the hardship. Most student loan hardship discharge hearings last 1/2 day.

[lrprn]

I basically just wanted to know what you guys knew about the hardship discharge and how student loans are handled in bankruptcy. I'm very scared and just wanted to get some feedback.

My mom was already thinking about filing bankruptcy and since she is the non-student cosigner, we thought it would release her from the student loan.

What kind of student loans do you have, jplt80? Federal, private, or a mix of both?

Most courts use the 1987 Brenner decision as the guideline for whether undue hardship exists or not. Three standards must be met:
1. That the debtor cannot both repay the student loan and maintain a minimal standard of living.
2. That this situation is likely to persist for a significant portion of the repayment period of the student loans.
3. That the debtor has made good faith efforts to repay the loans.

The FinAid website explains this in more detail - http://www.finaid.org/questions/bankruptcy.phtml . Scroll down to the Discharging Student Loans Through Bankruptcy section.

As far as your mom goes, did she only co-sign on your loans or did she take out federal or private loans for your education for you to use? We filed Ch 13 bankruptcy and were not held responsible for our son's federal Stafford loans, but we could not discharge the $21K of Parent Plus loans we took out for him, even though we did not benefit in any way by those loans personally.

Here's an excellent explanation of all your options when you can't pay student loans - http://www.nolo.com/article.cfm/pg/1...3/208/135/ART/

And here's what will happen if you default on federal student loans - http://www.nolo.com/article.cfm/obje...3/208/135/ART/

Hope these links help explain what you are up against a bit better. Please come back if you have more questions - we'll do our best to answer them if we can. Hang in there!

[jplt80]

Student Loans Undue Hardship

My student loans are private. So they are a beast of a different color.

How do these differ? My attorney thinks I meet the Brunner test in that I have several emotional disorders that impede my earning ability. Also, I have tried to work with the lender for a good long time now, so that demonstrates good faith. And the payment they are wanting is more than i make in a month!! So that is the hardship. They want such a high payment, I'll never be able to make it. No matter how long they give me.

I was mainly worried about my mom being on the loan, but if she can discharge the debt in bankruptcy, that definitely takes a little of the worry off me.

[jplt80]

Student Loans Undue Hardship

Mom only cosigned the loans. She didn't take any out on her own.

[IOIOIO]

I got a copy of Chuck Stewart's "Bankrupt Your Student Loans and Other Discharge Strategies," and I think it will help you: http://www.stewarteducationservices.com

[lrprn]

I got a copy of Chuck Stewart's "Bankrupt Your Student Loans and Other Discharge Strategies," and I think it will help you: http://www.stewarteducationservices.com

The publication date shows as Fall 2005 and it includes one page in the back regarding the changes regarding student loans and bankruptcy that were included in the new bankruptcy law that went into effect in October 2005. Looking through the table of contents, there's nothing here that you can't find on the web for free, so save your money.

The following are excellent links that explain the same options and don't cost a dime:

http://www.finaid.org/questions/bankruptcy.phtml

http://www.moranlaw.net/studentloans.htm

http://www.nolo.com/article.cfm/pg/1/objectId/63C80677-0D3E-4505-AC3B7782841603F6/catId/2E00F7A7-E208-4858-BD0B8308A4D30D8A/213/208/135/ART/

http://www.moranlaw.net/student_loan_brunner.htm

http://www.ombudsman.ed.gov/bankruptcy.html

[IOIOIO]

The publication date shows as Fall 2005 and it includes one page in the back regarding the changes regarding student loans and bankruptcy that were included in the new bankruptcy law that went into effect in October 2005. Looking through the table of contents, there's nothing here that you can't find on the web for free, so save your money.

The edition I recently bought is the second edition, published May 2006, and is revised specifically for the 2005 changes to the bankruptcy code. Amazon.com lists the current edition here:

http://www.amazon.com/Bankrupt-Your-Student-Loans-Other/dp/1425928552/sr=8-2/qid=1164909163/ref=pd_bbs_sr_2/103-2149659-4110247?ie=UTF8&s=books

I bought it directly from stewarteducationservices.com because I was paranoid about credit card purchases via Amazon that would show me purchasing a guide to bankruptcy! It looks to me as good an investment as the book I bought from Nolo, their essential "How To File For Chapter 7 Bankruptcy," which is also revised for the new laws. The student loan bankruptcy book has detailed case studies and analyses I couldn't find on the web, and provides much more detail about practical methods than the links provided above, plus updated convenient samples, forms, etc. I've read the entire book and found it to be worth the $35.