There are some debts that bankruptcy does not affect. You can
file bankruptcy to help relieve the burden of credit card and loan debts,
medical bills, back utilities and rent, and so forth.
But some debts are “immune” from a bankruptcy discharge - the
word is “non-dischargeable”. This means that when the smoke clears and the
bankruptcy is over, these debts will still have to be paid
My previous blogs were about taxes and traffic
fines, speeding tickets and their ilk.
The prior two categories of debt are pretty black and white.
Most of these debts do not discharge. Period. Taxes can discharge only under
very specific criteria.
The discharge of Student Loans is not as black and white. It is one
of the few debts listed as otherwise non-dischargeable but in which the court
has some discretion. The judge is allowed to judge…
***
Section 523(a) of the
bankruptcy code (Title 11) lists all of the debts that are not discharged in
bankruptcy. In this blog series I do not want to get bogged down in quoting and
citing the code with all its legalese. I want to make the list of
non-dischargeable debt clear
But in this case, since the “rule” about when a student loan
is dischargeable is so grey … so ephemeral … I want you to read it.
523(a)(8): unless excepting such debt from discharge under this paragraph would
impose an undue hardship on the debtor and the debtor's dependents, for -
(A)(i) an educational benefit overpayment or loan made, insured, or guaranteed
by a governmental unit, or made under any program funded in whole or in part by
a governmental unit or nonprofit institution; or (ii) an obligation to repay
funds received as an educational benefit, scholarship, or stipend; or (B) any
other educational loan that is a qualified education loan, as defined in
section 221(d)(1) of the Internal Revenue Code of 1986, incurred by a debtor
who is an individual …
Over the years the pendulum has swung on what is included in
a “student loan”. The loan itself? Of course. But what about tuition (fees and
costs for admission and classes)? Once upon a time those debts were
non-dischargeable, too. As of now the pendulum swung the other way - towards
those kinds of debt NOT being dischargeable.
As of this writing the pendulum has swung so far as to say a
college cannot refuse transcript requests if you file on tuition. At one point
a school could refuse transcripts.
Once upon a time the tab you had at the school book store was
non-dischargeable. Or at the least the school could refuse your transcript
request until you paid for that stick of gum.
Today, though, only the loan itself is non-dischargeable.
Today.
***
The phrase on which most debtors rely on discharging student
loans is “… unless (the survival - non-dischargeability - of the student loan)
would cause an undue hardship…”
What is an undue hardship?
Most courts look at a person’s past, present and future. Have they tried
their best to pay the loan? Does a review of their current finances allow for
any room for a payment on the loan? And what does their future income and
expenses look like?
Those are the criteria, usually. Some courts are stricter than
others on this. Your local bankruptcy attorney will know will know if
discharging student loans in your district is only just difficult or very very difficult. It’s not easy and it’s
not meant to be easy. I am avoiding editorializing here – ask me personally –
but I think it is fair to say the laws make it quite hard discharge your
student loans.
What do I mean?
If a Debtor is wearing a nice suit during the hearing, will
that hurt his chances? A gold ring? If someone can afford a house payment does
that mean they can afford their student loan?
That sort of thing.
A good local bankruptcy attorney will have the experience and
knowledge of your district to advise you of the possibilities of student loan
discharging in your district.
***
What about Chapter 13s? Even I have to admit that discharging
student loans in a Chapter 13 are close to impossible. If you can make a monthly payment of $100.00
(or more) for three-to-five years you can continue that payment on a student
loan after discharge.
***
I’ll discuss more debts that are non-dischargeable next time.
Copyright
2016 Michael Curry
My name is Michael Curry and I have practiced law in Mount Vernon,
Fairfield, Flora and throughout Southern Illinois since 1992. During that time,
I have helped more than 5,000 people (and businesses) overcome their financial
difficulties by filing for bankruptcy. As a solo practitioner, I will also be
happy to help protect you and your family’s future with estate planning, wills,
powers-of-attorney, real estate transactions and other legal services.
Please call or text me at 618-246-0993, email me at michael.curry.law@gmail.com or send
me a letter: 123 South 10th Street, Suite 507, PO Box
93, Mount Vernon, IL 62864
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