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STOP STUDENT LOAN COLLECTION

Restructure Student Loans on Your Terms

WITH NEARLY $1 TRILLION IN STUDENT LOAN DEBT IN THE UNITED STATES, STUDENT LOAN BORROWERS HAVE A HUGE (AND INCREASING) NEED FOR LEGAL ASSISTANCE.

Most consumers facing bankruptcy also have student loans. Under the current law, there are very few instances in which a debtor can use bankruptcy to discharge their student loans.

Under the Bankruptcy Code, Congress created certain exceptions to discharge of debt.  Student loans are specifically excepted from discharge under Sections 523(a)(8)(A)(ii) and 523(a)(8)(B):

“(a) A discharge under section727,1141,1228(a),1228(b), or1328(b)of this title does not discharge an individual debtor from any debt—

(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;

Most consumers in bankruptcy attempt to discharge their student loans under the “undue hardship” doctrine.  The seminal undue hardship case is the 1987 case of Brunner v. New York State Higher Education Services Corp.,  831 F.2d 395,  Bankr. L. Rep. P 72,025 (2d Cir. 1987).  The Northern District of Georgia (which is part of the 11th circuit) follows this case.

The Brunner court requires a three-part showing that:

(1) the debtor cannot maintain a minimal standard of living if forced to repay the loans

(2) the debtor’s disability is likely to persist for a significant period, and

(3) that the debtor has made good faith efforts to repay the loan.

Currently, at least here in the Northern District of Georgia, the problem facing debtors trying to discharge their student loans are proving:

What is a minimal standard of living? 
How can a debtor prove that she has made a good faith effort to repay the loans? Does she need to apply to every program to reduce or repay loans? How many options does she need to research?

Chapter 7 and Student Loans

When you file Chapter 7, even though you are required to list your student loans on your petition this does not mean they will be discharged.  If you want to attempt to discharge these loans then you will need to file a Complaint to Determine Dischargeability of Student Loan Debt.  Filing this complaint is extremely expensive to file and pursue in court and in the majority of cases, the court will deny these motions. Until the bankruptcy code is updated, this will most likely continue. If you are filing Chapter 7 just to discharge student loans then you should think twice.

Chapter 13 and Student Loans

If you file for Chapter 13 bankruptcy then you have the choice to either pay the student loans back through your case or allow the loan to be deferred while you are in your case.  Of course the interest will still accrue on the loans if you decide to defer the loans.  For most of our clients, it would make their trustee payment too high if they tried to cram in their student loan repayment over the 5 year plan.  Most clients opt to defer the loan with the bankruptcy filing but then work out a repayment plan directly with the student loan creditor on their own terms during their case.

Schedule a free consultation with an attorney!

Saedi Law Group, located in Atlanta, Georgia, serves the cities of Atlanta, Newnan, Gainesville, Rome, Marietta, Duluth, Jonesboro, Decatur, Buckhead, Sandy Springs, Tucker, Stone Mountain, Lawrenceville, Roswell, Norcross, Alpharetta, Dunwoody, Conyers, Lithonia, Stockbridge, Douglasville, Peachtree City, Smyrna, Kennesaw, and Forest Park, as well as Fulton County, DeKalb County, Cobb County, Gwinnett County, Henry County, Clayton County, Fayette County, Forsyth County, Cherokee County, Douglas County, Newton County, Rockdale County, Hall County, and Floyd County, GA.

We invite you to contact us either online or by phone at 404-889-8663 to schedule a free confidential consultation to review your personal financial situation and what options we can provide to protect you from creditors. For additional information about bankruptcy please also check out our YouTube Channel which has up to date vlogs on issues related to personal bankruptcy.