BANKRUPTCY STUDENT LOANS OVER 20 YEARS OLD

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Latest post 02-21-2012 11:19 PM by Kivi. 8 replies.
  • 01-19-2012 5:58 PM

    • HopeD
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    BANKRUPTCY STUDENT LOANS OVER 20 YEARS OLD

    Hi.

     

    I am interested in discussing my options for bankruptcy over federal law school loans that I incurred over 20 years ago. I only practiced for a few years in the mid 90s and have a spotty work history. I have no desire or real aptitude for the practice of law and am aware that my prospects of every making it in that field are slim to none. I am currently working as a receptionist (for the past 14 months) and make about $43,000 per annum. I have borrowed money from my mother (who is 78) and have basically lived off her for years, so now I am supporting us both (she is on a limited/fixed income). My student loan debt is over $100,000. In the past I have defaulted but then cured that situation. In tax year 2010, I only made $5,000, so I was not required to pay on my loans but they will reassess this year and then I will have to make monthly payments. I am fearful that I cannot and never will be able to meet my obligations. 

    Do I have any hope of bankruptcy?

     

     

  • 01-19-2012 6:34 PM In reply to

    • Kivi
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    Re: BANKRUPTCY STUDENT LOANS OVER 20 YEARS OLD

    Discharging student loans in bankruptcy is a long shot as it will require bringing an adversary proceeding. I would not do that without talking to a BK attorney with experience getting these loans discharged. Don't go to one of those BK mills.

    Because your loans do appear to be in "good standing" at the moment (even if you have a hardship forebearance), I would make a diligent effort to first study the student loan website to determine what options do exist. For example, maybe you would be required to pay, like 10% of your income (hopefully, after taxes) for ten or fifteen years and then the rest of the loan is forgiven. It is my understanding that 25 years is the max payoff time for any student loan and you definitely would not pay off a 100k student loan within 25 years on an income of 43k a year after the interest assesstments, if you are only sending $4300 a year towards it.(If the percentage of income that you can be required to pay is net after required deductions from paychecks, then you would be paying even less.)  It would take over 23 years to just pay down on the principal only with a $4300 a year repayment plan.

    Bear in mind that you also have to include all debts when filing for BK.

    Also, I am assuming that you already have some of those 25 years under your belt, so to speak. (It might pay to figure out just exactly how many years you can count.) Then weigh that option against filing BK, including the costs and the uncertainity of getting that discharge given the kind of debt involved.

     

  • 01-19-2012 8:45 PM In reply to

    • Drew
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    Re: BANKRUPTCY STUDENT LOANS OVER 20 YEARS OLD

    Laymans view:

    Essentially you cannot escape Federally insured student loans via bankrupcy , its a statury exception along with child support. It can be escaped in bankruptcy upon proof of compelling inability to pay--but I don't know how that plays out..I suspect by muddling along your fact pattern is not bad enough....

    For what I think are political reasons to avoid addressing segments of college graduates which seem relectant to pay,  the Feds sort of wipe the slate clean after about 20 years--and I think the president is lowering it to 15 years--but yours may not be dead long enough.

    For all practical purposes if your life is quite "judgement proof" the lender simply will never get paid. And were I in your shoes I'd act to protect my mother ahead of some commercial lender.



  • 01-20-2012 4:05 PM In reply to

    • Kivi
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    Re: BANKRUPTCY STUDENT LOANS OVER 20 YEARS OLD

    Drew,

    The poster indicated that she is currently employed. She could be subject to a wage garnishment if she defaulted on her loans; i.e., they are no longer in good standing. Moreover, as I understand it, the lender does not need to go to court to get a judgment.

    Right now she appears to have a forebearance, so she has "good standing", even though she is not paying. However, she is not going to be able to conceal that fact that she is working the next time the forfearance comes up for renewal. It looks like it has to be renewed annually and she probably won't continue to qualify. 

    It is much easier to arrange something while a student loan is in good standing then when it is not. If she defaults, she would have to make on time payments for a year for the full monthly amounts owed before her student loan would be considered rehabilitated. Once rehabbed,  she then would be able to discuss other options, such as a possible hardship forgiveness of a certain amount, etc. Right now, she appears to have "good standing" so there is no loan to rehabilitate. It might be best in her situation to seize the opportunity to do something while she has good standing then default, suffer thru a wage garnishmennt and have to wait a year before being able to apply for other options.

    I am not saying the poster should not explore the BK option, but it is difficult to get student loans discharged and not every BK attorney would or should handle it. Definitely not a DIY legal project, even for someone who went to law school. All that I am suggesting is that she gather info about all possible options and then make a decision about what might be the best approach rather than procrastinate and then discover that the best option for her situation is no longer avaiable because she defaulted.

  • 01-20-2012 7:34 PM In reply to

    • HopeD
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    Re: BANKRUPTCY STUDENT LOANS OVER 20 YEARS OLD

    thank you all for replying. i have found two attorneys willing to meet with me for a consult.

    this student loan debt is nothing i am proud of. i was 20 years old when i signed for my loans and my father asked me to use a different address (i was still living at home during law school) and didn't want to co-sign. he also promised to pay them for me (law school was not my idea). i don't mean to come across as a scumbag who doesn't pay her bills and who has pretty much wasted her life, as my initial post might suggest.

     

    but i would LOVE to be able to caution people who are considering taking out student loans to be more careful than i was. i really wasn't thinking about my future and unfortunately the past is making my present pretty miserable.

     

    here's to us all being debt free one day!!

  • 01-22-2012 12:14 PM In reply to

    • Drew
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    Re: BANKRUPTCY STUDENT LOANS OVER 20 YEARS OLD

    Were I in your shoes I would scramble to repay my own elderly mother before some legal reason arises which would inhibit same or allow folks to undo same.

    You may never be able to shed the debt cloud created by your student loans --but you might be able to abate having Mom suffer as well.

    I do not know there the precise legal lines in the sand may be or who is watching them --but under some fact patterns you may be able to repay debts to Mom with every penny you can muster  but in other fact patterns if you favor her ahead of other creditors you might run afoul of fraudulent conversion laws.

    If you were to teach in any Title 1 school that probably wipes out student debt 20% a year 100% in 5 years and a JD around me puts you on a top salary rung as its a Doctor of law --but I have no clue if the 20% wipe out applies to interest and penalty.  ( I think even the lowest paid teacher at a charter school that operates under Title 1 can use this feature of the law --and this particular way to forgive debt is tax free w/o imputed income))



  • 02-13-2012 1:13 AM In reply to

    Re: BANKRUPTCY STUDENT LOANS OVER 20 YEARS OLD

    I had read an article entitled Student loans becoming a major contributing factor to bankruptcy. It says that the typical student loan debt of a university graduate has now topped $25,000. Not surprisingly, many bankruptcy attorneys have reported that student loans are turning into an ever more notable factor in bankruptcy filings.

  • 02-21-2012 11:19 PM In reply to

    • Kivi
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    Re: BANKRUPTCY STUDENT LOANS OVER 20 YEARS OLD

    I personally think private student loans should be "lender beware".  Their protection from BK does not seem like good public policy.

    Of course, the market for private student loans probably would be much tighter, if such loans could be discharged in bankruptcy. But, it might encourage young borrowers to make more rational decisions about educational costs as many lenders probably would not lend the thousands of dollars that some student loan debtors seem to have as principal only balances.

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