So are student loans able to be discharged? In short, probably not. Student loan debts are nondischargeable in Chapter 7 Bankruptcy cases unless paying the debt would cause the debtor “undue hardship.” This basic rule also applies to Chapter 13 Bankruptcy cases.
Discharge of student loans received popularity in the 1970′s. Many individuals would file for bankruptcy shortly after completing their expensive education. The goal was to discharge these student loans before they began earning money.
The wording of the exception of a “hardship discharge” and what is considered a student loan has recently been broadened so that most student loans made by nonprofit groups or the government are now considered student loans. This only applies to the actual student and not a co-signor. So a parent signing for one of their children could not have this debt discharged. In addition, this exception does not include debts to an educational institution for tuition. If the loan is nondischargeable then the petition on the loan is also not going to be discharged.
So we turn to “undue hardship.” Most published court opinions agree that “undue hardship” means more than garden variety hardships that come with the costs of future payments. Several circuit courts of appeals have developed a three-prong test.
In summation, the debtor cannot maintain a minimal standard of living and his dependents are left with the debt, some additional circumstances in regard to the standard of living would extend over the life of the repayment of the loan, and the debtor has tried to the best of their ability to pay off the loan according to the plan.
The ideal debtor who will successfully discharge student loans are the low-income debtors. The debtor has the burden of proving their hardships. Any reason that makes this loan impossible for the debtor should be made known to your attorney. For example, unemployable debtors, underprivileged debtors, a total lack of available jobs suited for the debtor’s skills, certain disabilities, etc. If any of these situations exist, your attorney will strive to prove any extenuating circumstances to the court to get these student loans discharged.
One of the questions I get asked most as a bankruptcy attorney is, can I discharge my student school loans in bankruptcy? Most bankruptcy attorneys will tell you that it’s not possible, but this is simply not true. The process to discharge debt associated with your education is not a simple or automatic process, it takes some effort, but is well worth it in the end to discharge some or all of your student debt. Section 523(a)(8) of the US Bankruptcy Code states that student loans are exempt from forgiveness, unless it poses an “undue hardship.” For the vast majority of people who have a five figure student loan or loans, paying the exorbitant fees every month certainly feels like an undue hardship, but the bankruptcy court interprets the term of “undue hardship” very specifically. But the good news is that recent cases have been coming out that give students with loan debt some hope for relief.
The simple fact is, that most bankruptcy attorneys will tell you that it impossible to discharge such debts in bankruptcy, is either inexperienced or simply not wanting to go through all the trouble to do so. This is why it is so important for you to find an experience bankruptcy attorney, not simply the cheapest one you find in your Google search. The following is a brief explanation of some of the requirements to discharge your student loans in a Chapter 7 Bankruptcy.
Your first step in obtaining a discharge on your student loans is requesting a discharge. Most people are under the erroneous belief that you cannot obtain forgiveness of these loans, so most never try and most bankruptcy attorneys have no idea of what I’m about to tell you. Here are some interesting statistics to prove this point. According to a Harvard Law School study of people who have student loans and file for bankruptcy, out of that group of people, 99.9% of them never attempt to discharge this debt in their bankruptcy filing. That in itself is a staggering figure. Of those that actually request to have the student debt discharged in bankruptcy, 40% are granted either a partial or total discharge of their loans by the bankruptcy court. Now think about that for a minute, almost half of everyone asking for a discharge of their student loans are receiving them, but 99.9% of people with student loans who file for bankruptcy never even ask. This equates to approximately 70,000 people who file for bankruptcy each year qualify to have their student debt discharged or partially discharged, but only 0.01% of those 70,000 even try. This means 28,000 people a year who could discharge their student debt in the bankruptcy petition they file, never even try. Let that sink in for a minute people…
The second and possibly most important aspect of obtaining a discharge for student debt is, do you qualify? The most commonly used test for determination if a student loan qualifies for a bankruptcy discharge is called the Brunner Standard. This standard is based on the following case: United States Court of Appeals, Second Circuit. Marie BRUNNER, Appellant, v. NEW YORK STATE HIGHER EDUCATION SERVICES CORP., Appellee. No. 41, Docket 87-5013. (Cite as: 831 F.2d 395) the ruling of this case has given us three circumstances that must be demonstrated for a person attempting to discharge student debt to qualify. These rules are as follows: 1. If you were to repay your student loans, you would not be able to maintain a minimum standard of living for yourself and/or your family; 2. The financial circumstances that led you to be unable to afford your student loans is likely to be present throughout the remainder of the repayment period of those loans; 3. You have attempted in good faith to pay back your student loans. If you can simply satisfy the three standards, it is certainly worth your time and money to attempt to have your student loans partially or completely discharged in bankruptcy.
The third criteria, if you wish to obtain forgiveness on these debts through bankruptcy, you must take extra steps, which are not covered under your usual attorney client retainer agreement for filing a bankruptcy. What does this mean to you? It means that besides for filing for bankruptcy and the normal legal fees and filing fees associated with that, there will be additional legal work that will need to be paid for this service, outside of the attorney-client retainer agreement for your standard bankruptcy. With the vast majority of debts that are usually filed in bankruptcy, you simply list them in the schedules of the bankruptcy petition. This is not the case for student loans, with student debt your bankruptcy lawyer must file what is called an “adversary proceeding” in bankruptcy court. These adversary proceedings are actually a completely separate lawsuit, filed in bankruptcy court, associated with your bankruptcy filing petition. Essentially what this is, you file a lawsuit against the lenders who own your student loan debt, in order to get some or all of that debt forgiven. It is extremely important to understand that this is a very complex area of law, and one that you should always have an experienced bankruptcy attorney working for you. Many people attempt to file for bankruptcy on their own, I would never suggest this, I will not even attempt to describe this process, as it is not within the scope of this article. Get yourself an experienced bankruptcy lawyer to help you do this.
The fourth important thing that was determined by the Harvard Law school study, which are characteristics that are common to almost all bankruptcy cases that student loan was forgiven are as follows: 1. The debtor (the person filing for bankruptcy protection under the US Bankruptcy Code), was more likely than not, unemployed; 2. The debtor usually had some form of medical hardship, which contributed to this situation; 3. the debtor usually had a lower income than the previous year they filed their bankruptcy petition. These are not clear-cut requirements, which have been described previously in this article, but these are facts that were most likely common to all bankruptcy filings that resulted in the discharge of student loans debt.
Finally, the last important part of the equation is that you must file for Bankruptcy under Chapter 7 of the US Bankruptcy Code. The two most common forms of bankruptcy used are Chapter 7 Bankruptcy and Chapter 13 Bankruptcy. In a Chapter 13 Bankruptcy you (with the help of your lawyer) establish a debt repayment plan (which must be accepted by the Bankruptcy Court), in which you repay a portion of your unsecured debt based on your income and expenses, over a three to five-year period. In a Chapter 7 Bankruptcy you are allowed immediate forgiveness of these unsecured debts, with a few exceptions such as student loans, alimony and child support. To file the adversary proceeding that was described previously in this article, you must be in a Chapter 7 Bankruptcy. This option is NOT available in a Chapter 13 Bankruptcy.
In conclusion, if you think you fit the requirements described in this article and are receiving undue hardship due to the repayment of your student loans, then bankruptcy is an option you should look into. This is why it’s so critical to find an experienced bankruptcy lawyer who understands the US Bankruptcy Code. As in another article I previously published about discharging income tax debt in bankruptcy, discharging student debt is another little-known fact about bankruptcy law that only an experienced bankruptcy attorney would know. One good way to determine if you’re sitting in the office of an experienced bankruptcy attorney is to ask one of the two following questions: Can you discharge student loans in bankruptcy? or Can you discharge income tax debt in bankruptcy? If either of these questions is answered in the negative, you are in the office of the paper pusher and not an experienced bankruptcy attorney. Like anything else in life, you get what you pay for, and shopping for attorneys based on price is a very costly way to learn this life lesson.
In order to get your bank credit discharged or forgiven, you would need to file for Bankruptcy under Chapter 7 or Chapter 13. You would need to contact a bankruptcy attorney who would be able to guide you through the bankruptcy process and also help you to get the debt forgiven.
There are few basic questions that commonly arise in the mind of the debtor regarding loan discharge and debt forgiveness. The guidelines given below will help to clarify the same.
1.What is the difference between credit discharge and loan forgiveness?
A loan discharge occurs due to circumstances beyond the borrower’s control and the borrower is released from all or part of the loan obligation.
Loan forgiveness is given due to circumstances within the borrower’s control and the Government repays all or a part of the loan obligations.
2.Does bank loan discharge entitle you to a refund?
If your loan is forgiven, you will get a refund on the payment made on the loan. Also, the lender will inform the credit-reporting agencies that the loan has been discharged and any adverse credit history due to nonpayment should be deleted. You may also be eligible to apply for future federal financial aid.
3.What are the eligibility criteria for getting loan discharge or loan forgiveness?
You will qualify for a credit discharge or credit forgiveness if the loan was given under the following conditions – bankruptcy (undue hardship), closed school, death or total and permanent disability or due to teacher loan forgiveness, public service loan forgiveness, income-contingent repayment and income-based repayment
4.How can I apply for a loan discharge?
The government has developed forms for different types of process for you to fill out and send to your loan holder.
5.How does the bankruptcy affect your credit report, if I apply for loan discharge through bankruptcy?
The information that you filed for bankruptcy will be on your credit report for ten years. The information cannot be removed from your credit report but you will be eligible for a good credit score after 10 years.
6.After a loan discharge, what rights do I have against a collector or creditor?
You have the right to be free from harassment and abuse and to send a letter to request that the collector stop contacting you.
If your car insurance is due for renewal and you are considering buying another policy then this article will provide you with important facts that you should know about. Car insurance policies are getting increasingly expensive and you should do all that you can to reduce your costs. How much you have to pay for your car insurance is dictated by a variety of factors as they apply to you and your vehicle.
In this article we will examine coverage limits, your age, gender and marital status, your location and insuring other household members. All of these factors will have a great influence on how much you will have to pay for your policy.
Coverage limits are generally dictated by the price that you are willing to pay for your insurance. A higher level of coverage will generally result in higher premiums. The best way to find a good value policy is to comparison shop. Nowadays it is generally accepted that the best way to do this is by using a car insurance comparison website.
Your age, gender and marital status will have a great effect on the auto insurance rates that you are offered. Insurers rate drivers using a variety of criteria, if you are a young single male driver you will usually have to pay higher rates. If you are a middle-aged female married driver then your rates will be lower. Insurers calculate the best car insurance rates for you by comparing levels of risk. Those groups which are statistically more likely to be involved in an accident have to pay correspondingly higher rates.
Location plays an important part in deciding how much your premiums will cost. Drivers who live in an urban environment will usually pay more than those from a rural area. This is because drivers who live in cities and heavily populated areas are more likely to be involved in an accident, or to have their car stolen or vandalized. Insurers generally offer better rates if you’re able to demonstrate that you keep your vehicle in a garage at night. You may also be able to improve the security arrangements of your automobile by fitting an alarm, immobilizer and steering wheel lock.
Insuring other household members will have an influence on the cost of your policy and the best car insurance rates that you offered. If you have teenage family members living with you and they are added to your policy, then your costs will increase. This may still work out cheaper than if your teenage driver were to have a separate policy in their own name.
In conclusion, there are a variety of different factors which can affect your ability to be offered the best insurance rates. Some of these are coverage limits, how old you are, whether you are male or female and whether you are married or single. Your rates will also be affected by the area where you live and whether other household members are included in your policy.