Bankruptcy of Your Student Loans

Bankruptcy of Your Student Loans

Saturday, April 2, 2016

FIRST 5 STEPS TO DISCHARGING YOUR STUDENT LOAN

LET ME GIVE YOU SOME STEPS REQUIRED TO DISCHARGE YOUR STUDENT LOANS!

On February 5th 2016, the U.S. Attorney representing the Department of Education called me at 4:00 PM Eastern Standard Time, and said: "Congratulations Mr. Precht, I have good news for you, the Department of Education has decided to discharge your Federal Student Loans".  That phone call took place 3 days after I met that same attorney in the courtroom, where he had filed a "Motion to Strike" my complaint filed (using an Adversary Proceeding) in Bankruptcy Court under the Undue Hardship Provision within 11 U.S.C.A. §523(a)(8).

All the work I had done over the previous year paid off... I am now debt free! Free from a $130,000.00 student loan which was never going to be paid off in my lifetime.  To those who may not be familiar with my story, the facts are that I borrowed about $55,000.00 over 27 years ago at the age of 40 to 48 to earn a Bachelor's and a Master's degree in the effort to enter the health administration field with designs on getting into a more stable and higher earning career.

The events of my life before returning to college at the age of 40, and the events that followed my successful college endeavors, can only be described as undue hardship!  The things that I endured are not anything I would wish on anyone.  My only hope is that I can in some way help someone else who has found themselves at a point of desperation and in need of advice as to how to get free from the burden of a student loan debt that is out of control!

So today I would like to present a simple format on how I was able to successfully win against the U.S. Department of Education without a lawyer, without a trial, and within a matter of a few weeks.  I want to make it clear - it is possible - with the right attitude!

THE FIRST THING YOU NEED

The 1st thing I did was to decide that I needed to do something!  My financial situation was desperate.  I was living on $1,205.00 per month.  Each month my social security and a small Federal Retirement annuity incomes were both being garnished.  Nearly $300.00 every month to pay "towards" the interest on my consolidated and also defaulted 27-year old loan.

The so-called offsets that the U.S. Treasury withheld and was applying towards my loan were NOT even making a dent in the interest!  In fact, that $300.00 fell way short of the amount required to pay the accumulating and accruing interest!  As I checked periodically, I learned that the total balance of that loan was growing rather than decreasing!

#1) Are you in a similar situation?  You need to take stock of what is happening with your student loan debt.  One of the most important places to look for your loan data is here:
https://www.nslds.ed.gov/nslds/nslds_SA/  On this web site, you will find all of your loans.  (I just now went there, logged in, and found that my balance is NOW $0.00 - "Zero owed").

SECONDLY, LEARN EVERYTHING YOU CAN

When I made the decision that something had to be done to end the craziness, I started to research all of my options.  With all the advertisements and news about so-called "loan-forgiveness", I looked into those programs with the hope that somehow I could just have my loan forgiven, after all it was never going to get paid off - especially with me being 67 years old, retired and unable to work or find a job that would pay enough to live on and make loan payments for a $130K and growing debt.

In the quest of loan forgiveness, the things I discovered need to be known.  Yes, there are programs available where student loans are forgiven.  But beware, not everyone or every loan qualifies!  

#2) True loan forgiveness programs are limited!  The best place to learn about the Federal Government's Loan Forgiveness plans that actually deal with student loan forgiveness is here: https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation/public-service
There is similar information on this web site: http://www2.ed.gov/fund/grants-college.html?src=pn.  There may be others, but begin with these two - because they are sites published by the Department of Education (DOE), and provide the criteria for loan forgiveness or discharge approved and validated by the DOE.

AVOID THE TEMPTATION TO USE A LOAN FORGIVENESS AGENCY!

The TV Radio and Internet has for years now advertised Loan Forgiveness and even included the wording "Obama" in those ads. As if the current President of the United States (POTUS) has pulled out his magic wand and will make your student loans disappear! While there has been some changes by our POTUS to try and have the DOE offer some relief to students, the truth is there is no magic solution.  As in #2) above there are only certain situations where true loan forgiveness takes place and the criteria is VERY LIMITING! Read those linked pages thoroughly!  Unless you meet some of the stringent factors required, and there is a lot of fine print ... you may not be eligible for the plans described!  I know I was NOT!

Take a look at the three links I am listing here.  I did a quick web browser search under Obama Loan Forgiveness, and here are three that came up: 
http://www.studentdebtrelief.us/forgiveness/obama-student-loan-forgiveness/  http://studentdebtcenter.org/student-loan-forgiveness/  and www.washingtonpost.com/news/grade-point/wp/2015/12/18/what-you-need-to-know-about-obamas-latest-student-loan-plan-before-enrolling/

Did you notice something? The first link is to a site called "Student Debt Relief" and at first glance you would think it is there to help you!  But take a look next to the name, it says "A Private Company Not Associated With The Department Of Education"....  That should be a warning! But also I suggest that you read the information on this link and any similar links. Because, they have a lot of good information, the only drawback is, they are private firms and do not give this information for FREE!  They offer to "assist you"  and in actuality these firms, offer to help you assess your situation and then help you fill out the forms.  The same forms the DOE has on their websites.  You don't need these firms.... and in some cases they are no more than profiteers and loan sharks offering to "refinance your student loans"!

In my humble opinion, these so-called loan forgiveness firms are DANGEROUS! There are several current news stories about the deception and the corruption of these companies. Here are two examples I just pulled up: https://www.washingtonpost.com/news/get-there/wp/2015/06/01/student-debt-relief-scams-are-on-the-rise-heres-how-this-government-official-plans-to-stop-it/  and http://gallerlaw.com/2016/02/18/scam-alert-student-loan-debt-forgiveness-could-leave-you-owing-more-see-more-at-httpclarksvillenow-comlocalscam-alert-student-loan-debt-forgiveness-could-leave-you-owing/   I can't make this stuff up!


THE 3RD THING

After I graduated with my Master's degree in Health Administration I was never interviewed for that field even though I had sent out hundreds of Resumes. It was not that I was not qualified, I had earned a 3.8 GPA as an undergrad and a 3.6 as a Graduate Student.  It was the economy!  There were just no jobs.  I ended up doing some teaching at community colleges and also went back to my previous occupation in construction management for a time.  I never made a career in the Health Administration scene!

Several personal tragedies occurred and within a few years of graduation, I was diagnosed with disabilities and applied for and was granted SSDI (Social Security Disability Income).  I was on SSDI for a period of about seven years, until I became what Social Security described as "full retirement age" and they switched me from SSDI to straight Social Security annuity payments.  Once I was on straight Social Security, my student loan was no longer in deferred status.  That is when the DOE began to garnish my monthly income.

And when this happened I learned that my loan was now nearly two times what I had originally borrowed, even though I had paid off some of my loans before becoming disabled! Now with the DOE saying I owed nearly $80,000.00, it prompted me to investigate and pursue a Total Disability Provision discharge which the DOE has in place.  I filled out the forms, waited, and was eventually advised I did not qualify.  I re-applied a year later, but the DOE never replied to my second application.   The DOE's Total Disability Provision is managed by one of their many sub-divisions.  I pulled up the form and information located on this web page:  https://financialaid.duke.edu/sites/default/files/disability_discharge.pdf

And... of course the "Private Companies" are offering their help as well here: http://www.studentdebtrelief.us/forgiveness/total-and-permanent-disability-discharge/

There is "law" that was written to describe what constitutes total and permanent disability discharge, and I am including that here: https://www.law.cornell.edu/cfr/text/34/685.213

The subject is a hot topic and many news reports have also discussed the subject, here is just one written in July 2015 and published in U.S. News in the Education Section: http://www.usnews.com/education/blogs/student-loan-ranger/2015/07/01/ways-to-qualify-for-a-total-and-permanent-disability-student-loan-discharge

#3) Again, let me emphasis that even if you are not now disabled, the information is valuable to know so that you understand what is behind these types of discharges and get a perspective on the way the DOE operates.  So learn it all - and use it to your advantage in preparing to discharge your student loan debt!

FOREMOST

If there was any "step" I could show you to help you finding a way to discharge your student loan debt, it would be this one!

#4) Get to know what is meant by undue hardship!  

If you are serious about getting out from under your student loan debt, the answer may come down to determining you are struggling so badly - that you find no way out!

When I came to that conclusion, I reached out to the DOE for help, and when they seemed to care less, I became very despondent!  It took some time, but I re-booted and started over. I began to research again and began seeing articles about "undue hardship discharges". Then I began to read the statutes and law about bankruptcy and student loan debts.  That led me to begin reading cases where people went through bankruptcy to dissolve their debts which included their student loans.

In fact, I began to read and re-read cases.  Many of them revolved around situations that were similar to mine.  People who found themselves unable to pay off their student loans and in dire financial shape.  Many of these bankruptcies went into long drawn out trials and took months and in some cases years to be decided.  And many of those cases ended with the student debtor denied a discharge and no better off than before.  However, there also were many cases where the debtor prevailed and "proved undue hardship" thus being granted relief of their indebtedness to the DOE or private lenders.

This was the beginning of my hope!  I saw that many cases were winnable - however in order for me to win, I needed to see how cases were lost as well!  Both sides of the coin need to be thoroughly examined!

What really shook me while I read case after case was the fact that there was no consistency!  None!  I found that no two courts decided cases the same.  At least that is how it looked. The problem boiled down to the fact that undue hardship was and remains a very difficult term to describe.  Courts were left to interpret the term and with hundreds of bankruptcy courts and thousands of bankruptcy judges, the problem became - and in many ways remains monumental! 

While I have hundreds of articles on undue hardship, I chose to just do a quick search on the topic using the key phrase "COURTS STRUGGLE WITH UNDUE HARDSHIP CLAUSE"
Here is what came up and I think it is a pretty summation of what I would like you to know right now: https://lawyerist.com/43123/undo-undue-hardship/


Also... please read my past blog articles about undue hardship to get a better understanding of the difficulty the courts have had in ruling on undue hardship and what they have tried to do to standardize those rulings. Again, learn everything you can - you will need it to win!


FIVE GOOD THINGS TO KEEP

If you are serious about getting rid of the student loan in your life, you can... but it will require your time and effort.  No one is going to do it for you.  If you are in deep financial trouble, a lawyer is not the answer!  And from what I discovered, very few lawyers will help you take on the DOE in court to discharge your student loans.  In my case I sought help, only to be told "we cannot help you" or we do not do student loan bankruptcy.

In my research, I found that most of the cases that resulted in a discharge were those filed by the debtor who acted as their own attorney, e.g. Pro Se. I won without any representation! Besides I had no money to pay for a lawyer - they charge close to $600.00 per hour! Preparing my case took months of work - I can not imagine what I would have paid a lawyer to prepare my case?

#5) Learn to be your own attorney!  It is not difficult - I did it and you can too!  The courts even allow you to represent yourself - and in some cases are more apt to rule for you if the defending attorney is seen as the aggressor. 

The secret is to read and re-read those cases!  Learn the details of the case - see how they are laid out - go on the internet and find out if there are cases that have been ruled on in your area.  One source for help in bankrupting your student loans is a book published a few years ago by Chuck Stewart

For cases to read there are several web sites. One I pulled up and have used in the past is one published by the ABI (American Bankruptcy Institute).  They publish the "opinions" post trial or hearings, these opinions are the written case summaries that the Judge writes to describe his ruling in a bankruptcy discharge.  When I want to read cases about student loan discharges I type in: "bankruptcy 11 USC 523(a)(8).  The ABI was listed when I did this under "opinion summaries for cases citing 11 U.S.C.§523(a)(8)" and the ABI Opinions link is: http://opinions.abi.org/11-usc/523-a-8

Hint: to type the symbol § (which means paragraph or section or subtitle), hold down the Alt Key and type 0167 on the number pad.  You will need this symbol later when you prepare your case.

Now when I began to read case opinions I looked for cases within 11 U.S.C. §523(a)(8), both the winning and the losing outcomes.  You need to know why cases were won or lost!

I mentioned Chuck Stewart.  Stewart has written a book about bankrupting student loans plus he maintains a web site here: http://www.bankruptyourstudentloans.com/  I purchased his book and found it very useful although it is a bit dated now.

As you begin to learn the ins-and-outs of student loan bankruptcy, I cannot stress how important it is to begin immediately to create a separate file on your PC to keep all of the things you are going to need and use later. Several sub categories should be made with folders within a main file.  Keep a file just for internet links as you will want to refer back to them from time to time.

Buy a good sized thumb drive and keep that just for the bankruptcy information.  And keep the information on more than one drive so you do not lose anything over time.

OK it is late, Panera Bread is closing and my little internet office place is going to ask me to leave soon... So I will close for now!  But I will pick this up next week with some more steps to help you prepare to discharge your student loans!

Meanwhile, if you enjoy these articles, let me hear from you.  All comments are welcome, any questions will be answered.  If you have included a comment it is monitored and I will review it before posting.  If you do not want it posted just say so.  If you include a request for an email answer I will respond direct by return email and not post your email address here It will remain private.  Thanks!

God Bless!  Richard Allan Precht




2 comments:

  1. Thank you for taking the time to write these articles. You really give a lot of useful information. I like the tip you gave about creating a separate file just for student loan bankruptcy. Something I had not really thought of before but it makes sense. I also want to express my appreciation for all the hyperlinks you give us. I want you to know that this information is not falling on deaf ears or blind eyes for that matter. I am receiving a wealth of great knowledge from you. Thank you so much!

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  2. Thank you Tiffany! I appreciate hearing that what I am trying to relay is being read, and that you are following my blogs. I just published Step #6 which goes a little more into the repayment aspects of student loans. Step #7 which I am thinking about will provide some of my experience with Chapter 7 bankruptcies. The record keeping is so very crucial in the process of dealing with your student loans. Do not throw anything away and if they call you, keep a log of those calls... Get names of the caller who they work for and some key details of the conversations. All of this is good to keep and can be included in your future dealings with lenders and or the DOE! Best regards, Richard

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