A Student Loan Client -- Your Thoughts.

[MSbklawyer]

Here's the factual scenario on a client intake today:

She's a 59 year old white lady. Her only income is Social Security Disability and alimony. Together, they add up to about $1100 per month. No dependents. She gets disability because she has been diagnosed with depression, schizophrenia (sp?) and bi-polar. Her rent is only $280 per month because she gets a public housing voucher.

Last year, she got tired of sitting around the house, and in an effort to improve her life, went out and enrolled in some computer, office management, and business courses at a local private college. As a result, she incurred about $8000 in student loans. No degree, just college credits. Her other debts consist of about $26,000 in credit cards and other unsecured debt. She has a paid-for car in reasonably good condition.

Her efforts to find work have been utterly unsuccessful. Her medications make her loopy. She is visibly loopy. She's applied for everything from typist to office manager to convenience store clerk with no success, but she's only been trying for a year.

Her student loan payments add up to about $200 per month. If she pays those and rent, she only has about $600 per month left over for food, utilities, clothes, medical and everything else. Her minimum payments on her credit cards and unsecured debts are about $700.

She doesn't have any money to pay for the adversary proceeding that would be necessary to discharge her student loans, let alone to hire an expert witness to testify to her vocational prospects.

So:

Plan "A": File a chapter 7 and discharge her credit cards and unsecured debts and don't even bother trying to discharge the student loans. The most they could get from her by garnishing her social security is $120 or so per month.

Plan "B": File a Chapter 13 and have her pay the adversary proceeding fees through the plan at about $50 per month and hopefully get her student loans discharged.

Plan "C": File a chapter 7 and ensure my ticket to heaven by doing the adversary proceeding pro bono. Put her on the stand and let the judge observe her utter incoherence and let him come to his own conclusions about her employment prospects without the aid of any expert testimony.

Incidentally, if I did every hard case like this pro bono I'd be filing my own bankruptcy.

This is a real case. A real person. What would YOU do?

[justbroke]

I think the think about student loan dischargeability, just makes you feel defeated, before you even think about attempting to discharge them.

Since you're such the philanthropist... you should go with Option C. I say you might have a good case on the non-dischargeability part because she didn't earn a degree so I don't think the ability to earn is an issue.

[MSbklawyer]

I think the think about student loan dischargeability, just makes you feel defeated, before you even think about attempting to discharge them.

Since you're such the philanthropist... you should go with Option C. I say you might have a good case on the non-dischargeability part because she didn't earn a degree so I don't think the ability to earn is an issue.

Don't feel like you're confined to the plans I came up with. Feel free to get innovative.

I would have to put $1000 or so of my own money into doing an adversary proceeding pro bono. Secretaries don't do pro bono.. Office supply stores don't do pro bono. The post office nor Federal Express does pro bono. Utility companies don't do pro bono. Expert witnesses don't even have pro bono in their vocabulary. If she paid regular chapter 7 fees, that would bring in about $1300. So $300 dollars net fee for about 50 hours of work and travel. That comes to $6 per hour. Not even minimum wage. Creditor's lawyers charge from $180 to $250 per hour.

Maybe I'm on the wrong side.

[DeadManCrawling]

It is so kind of you to be helping this woman!!!

Kudos. It is truly an honor to know you via this board.

That being said, I have a couple ideas and suggestions, some of which may not fit any of the above plans.

I like Plan C of course, but there is a very serious risk that you and others may not be aware of. In any mental disorder, it is VERY hard to predict what will happen under oath, in court. I offer my dad in law as an example. He has moderate to sever Alzheimer's Disease. However, if you spend a half hour to an hour with him, you would NEVER know it. This is called, in the medical profession, "Covering" I think. The gist is that he appears normal for that brief time, but then reverts following the time on stand or in front of "authority figures". It takes a doctor and a number of visits to reveal this pattern. So, you could end up with your client in front of the judge, and she could, for that brief period, appear completely coherent. You may THINK you know that she will appear as she usually does to you, and be totally wrong when the hearing occurs. Then there could be all sorts of issues.

I like the Plan B for this reason. But, even that may not work accordingly. I am not aware of how AP's proceed. My thought would be to have HER speak as much as possible during these proceedings. That way, the judge and trustee will get to know her over a period of time. If you could introduce medical records and psychiatric records especially, during the course of this, you may have a better chance for the judge to see the reality.

Would it then be possible to convert to a 7 and be done with it?

My real concern is that people with these kinds of mental disorders can REALLY put up this facade that seems okay to the outside world, and especially to "authority figures". There are medical definitions for this state, I just cannot remember them.

http://alzheimers.infopop.cc/eve

Is a good site to research the terms and conditions of mental health. This is geared toward Alzheimer patients, but is a good guide for a person in the state you describe.

If I ever graduate law school, I hope to be you.

I mean that with total sincerity, and wish you and your client the best on this one.

-dmc

[backtoschool]

Here is my plan D:

Have her consolidate the loans with Direct Loans, the federal government loan agency, and go into the income contingent plan. This would reduce her payments to less than $50 a month. Most likely, she will not have to pay ANYTHING under the income contingent repayment plan.

You are wonderful to be taking this case, by the way.

[MSbklawyer]

Here is my plan D:

Have her consolidate the loans with Direct Loans, the federal government loan agency, and go into the income contingent plan. This would reduce her payments to less than $50 a month. Most likely, she will not have to pay ANYTHING under the income contingent repayment plan.

You are wonderful to be taking this case, by the way.

They are mostly private loans. I thought about that. But since they are private loans, she's not eligible for the income contingent thing.

Another option I thought about was having her declared to be incompetent and arguing to the judge that she just didn't have the capacity to contract for the loans.

Nobody who looked this lady in the eye would have ever admitted her to a school, let alone loaned her money to go. She is visibly crazy. She has all the markers of a brain injury case, but she swears that she isn't.

[DeadManCrawling]

Oh, and DO please keep us informed of the decision on how to proceed and the progress on this case.

I am interested, if only to know that this lady receives justice.

One of the other cases you mentioned in a post was interesting, sheerly from a legal standpoint, but this one comes down to compassion for another person, and I hope to see nothing but good news on the case.

another thought: If she is truly this incoherent, was she even competent when taking out loans? I know this is a separate issue, but it might be worth pursuing. Surely the lender has SOME obligation? Maybe? Wishful thinking probably, but a thought.

[DeadManCrawling]

We posted at the same time, I think.

Incompetency may be the best avenue, with one of the original plans as a backup to get her-and her medical history-in front of another judge.

You have your work cut out.

again, it is my honor to know that attorneys like you are out there helping people.

[backtoschool]

They are mostly private loans. I thought about that. But since they are private loans, she's not eligible for the income contingent thing.

Another option I thought about was having her declared to be incompetent and arguing to the judge that she just didn't have the capacity to contract for the loans.

Nobody who looked this lady in the eye would have ever admitted her to a school, let alone loaned her money to go. She is visibly crazy. She has all the markers of a brain injury case, but she swears that she isn't.

If she has even one stafford loan, she should be able to consolidate her loans with Direct loans. If her income is so low, then why didn't she take subsidized loans? I would make sure that they are truly private loans that are not subsidized as at least a research step.

It is really really difficult to get loans discharged in an AP, even for crazy people, so this is going to be a complicated case. I think it is so cool that you are going to take it on!

[MSbklawyer]

another thought: If she is truly this incoherent, was she even competent when taking out loans? I know this is a separate issue, but it might be worth pursuing. Surely the lender has SOME obligation? Maybe? Wishful thinking probably, but a thought.

If I were on the lender's side, I would argue that we were bound by all the disability laws and the equal opportunity laws and that we just didn't have any choice but to lend her the money. On paper, she qualifed. We could have been sued if we didn't lend her the money. She had a good credit score. I've thought about it, but a suit against the lender doesn't seem promising.

Her debt collectors have been suggesting to her that she should get her boyfriend to help her. She doesn't have a boyfriend, so they are telling her to get a boyfriend. Prostitute herself, without coming right out and saying it.

I'm not too worried that she would appear crazy to the judge. What worries me is that she's only been out of school one year. I can see the judge saying that she hasn't put sufficient effort into finding employment.

[wolfkingen]

How close is she to being in default on the student loans? Would it be practical to file 7 and then not pay on the student loans awhile to save up the money towards the adversary proceeding?

[anykey]

I have a question. Is $50 the lowest possible monthly payment for a chapter 13?

BTW- if her student loan was out of Greenville- there is a form of conditional discharge is disabled.

[MSbklawyer]

How close is she to being in default on the student loans? Would it be practical to file 7 and then not pay on the student loans awhile to save up the money towards the adversary proceeding?

She's only used up 18 months of her deferments. I think she has 6 months more of possible deferments. But she can't save money. She's nuts. Literally nuts. She ran up the $26,000 in unsecured debts by buying every $19.95 idiodic thing they sell on late night TV. And falling for every "Work At Home And Earn Millions Per Year" scam that was ever made.

I have a question. Is $50 the lowest possible monthly payment for a chapter 13

No, $50 per month was just my estimate of how much this would cost her for an adversary proceeding spread out over a 60 month plan.

Even if I put her in a chapter 13, she would have almost no prospects of completing the plan. She's just not responsible enough to pay the trustee every month.

[lrprn]

This is a tough situation. If this lady attended these classes and actually passed them, that's not going to help prove she's incapable of employment. Do you have her transcript to see how she fared in all these classes she took? If she failed them all, that's one helpful piece of evidence. But if she passed them all, how could she manage to get herself to class and do the work but is not employable?

Do you have any psychologist or psychiatrist friends in your personal or professional network? What's the possibility that one of them might provide a pro bono psych evaluation to bolster your case she isn't capable of holding a job and therefore can't repay her debts, including her student loans?

One more question.....let's say you are successful. What's to prevent this woman from putting herself underwater financially again just as badly in the future?

[anykey]

http://www.ed.gov/offices/OSFAP/DCS/forms/disable.pdf

Here you go.

Oh- If you do this- send it certified. They conveniently do not get the first one I sent regular.