Bankruptcy of Your Student Loans

Bankruptcy of Your Student Loans

Sunday, February 25, 2018

DOES NO ONE CARE ABOUT STUDENT LOAN CRISIS?

Department of Education Asked For Input

And No One (almost no one) Cared!


Last time, I wrote and shared the Department of Education's Feb 22nd, 2018 Request for Information (RFI) entitled: 

Request for Information on Evaluating Undue Hardship Claims in Adversary Actions Seeking Student Loan Discharge Bankruptcy Proceedings.


Thanks to fellow Student Loan and Debt advisor Steve Rhode "The Get Out of Debt Guy",  https://getoutofdebt.org/ , for emailing me and informing me of this RFI.

To be honest I was actually shocked to learn that the Department of Education (DOE) was actually seeking public input on the subject of Undue Hardship!  After all, up until this RFI appeared, I had thought the DOE and it's new Secretary Betsy DeVos were either reverting back to business as usual - which means to me they could care less - or they were going about "pretending they cared, but doing nothing to show it"!

Actions I Undertook Regarding This Request

When I read the RFI, I took immediate action to reply!  As some of you know who follow my blog, I am passionate about Student Debt and what I perceive as abuses against student loan holders.  If you think for a second that the DOE is looking out for the welfare of students when they loan money for college well... you are still asleep at your desk!

While I could go on for days talking about the abuses and corruption perpetrated on, not only aspiring college students but parents alike by the DOE and their partners in crime, the banks and loan serving agencies, I will avoid that discussion for now only because it still makes my blood boil to think about.  (By the way - yes, I have written about it in the past).

OK back to what I proceeded to do having gotten this information.  In reading the DOE's RFI I saw that they were looking for "public comment" regarding the subject I base my Blog Posts on and that is "Undue Hardship Exception" and the use of an "Adversary Proceeding".

Here's the crux of the RFI:

Summary
The U.S. Department of Education (Department) seeks to ensure that the congressional mandate to except student loans from bankruptcy discharge except in cases of undue hardship is appropriately implemented while also ensuring that borrowers for whom repayment of their student loans would be an undue hardship are not inadvertently discouraged from filing an adversary proceeding in their bankruptcy case. Accordingly, the Department is requesting public comment on factors to be considered in evaluating undue hardship claims asserted by student loan borrowers in adversary proceedings filed in bankruptcy cases, the weight to be given to such factors, whether the existence of two tests for evaluation of undue hardship claims results in inequities among borrowers seeking undue hardship discharge, and how all of these, and potentially additional, considerations should weigh into whether an undue hardship claim should be conceded by the loan holder.

Dates

Responses must be received by February 22, 2018.

Time? Please!

I would like to point out that the DOE's RFI was posted on Feb 21st and ALL replies must be submitted by the very next day Feb 22nd by 11:59 pm.  ONE DAY? Seriously?
One day to send in "input" about "factors to be considered in evaluating undue hardship claims asserted by student loan borrowers in adversary proceedings filed in bankruptcy cases...."  Does that seem fair?
Well, that did not stop me!  I got busy and wrote out my comment and in addition to my several paragraphs of sharing what I had gone through with my own student loan discharge via Bankruptcy, but I also attached 16 separate file uploads of what I felt were pertinent documents to underscore the need for the DOE to take a hard look at what they have done (or should I say failed to do) in regards to student loan holders who suffer all types of hardships and are being unduly penalized by the DOE and the predatory lending agents and servicers that the DOE uses.  I also emailed several of my friends, followers and others - and shared the link to the RFI, and asked them to also submit input to the DOE.  I was pleased that some of them did in fact complete the process and send in input to the DOE.

DISAPPOINTING TOTAL

Just a little while ago I went back to the DOE website where the RFI was posted.  I was looking to see if by chance any new information was listed there.  I was also interested to see if by chance they had extended the deadline for sending in the input.  Well...  neither of those things was different.  The deadline had not been extended and no notable new information was there... EXCEPT FOR the posting of the number of replies sent in!

66

Seriously! ??

What a disappointment!  Only 66 responses for input? How sad!  Could this low number of replies have been due in part to the DOE only providing a mere 24-hour window of opportunity for parties to comply?
I also wonder what the reach was?  I mean how many organizations, attorneys, educators, students, parents, and individuals in the public sector actually got to even see this RFI?

Who were they targeting if anyone? Is it just me or does this sound a bit too disingenuous? One day to ask for input?  My question is WHO?  Who were they asking?  Or were they even trying to get input?

Betsy Devos = Year 1 = Failure 1

I was hoping when this new Administration came into power in Washington that we would see an appointment of a Secretary of Education who would do something to help resolve the massive student loan crisis we have in the country.  With close to $1.5 Trillion dollars in outstanding loans (billions which are in default - and not being paid on), that we would hear or see something said about this scourge on the backs of students and parents.  Instead, there has been a deafening silence from Madame Secretary, Betsy DeVos, the President and or anyone in Congress!

While the RFI discusses the July 7th, 2015 Department of Education's Policy Directive on the Undue Hardship it once again fails to make a clear statement as to how it should be interpreted and applied in a Bankruptcy.  It fails to provide clarification when a court should rule in favor of the plaintiff when they are claiming "undue hardship"
"The Department's current guidance to guarantors and educational institutions in defending bankruptcy proceedings is summarized in a July 7, 2015, Dear Colleague Letter (GEN-15-13 https://ifap.ed.gov/dpcletters/GEN1513.html) and provides for a two-step analysis when evaluating whether or not to object to a borrower's claim of undue hardship. The Department follows the same two-step analysis when defending bankruptcy proceedings for Direct loans. After receiving input from this notice, we will consider whether that analysis is still appropriate." (emphasis is mine)

Still Appropriate?

OK can anyone help me here?  Am I reading this correctly?  Is the DOE actually going to take this input and make a determination if the "analysis" of the so-called two-step evaluation laid out in the ambiguous (in my opinion) July 7th directive "is still appropriate"?
Again I ask... 'seriously'?

Am I wrong to conclude that the DOE is looking for a way to "UNDUE" the July 7th, 2015 policy --- thus going back to the time when there was even less chance for a discharge based on the Undue Hardship Exception?  Are they moving to go back to when Predatory Attorneys and Scrupulous Lenders prevailed in court and racked up thousands of dollars in legal fees to fight poverty stricken debtors many of whom are underemployed, disabled, aged, or having social security checks garnished to pay against accruing interest with "zero decrease" in the total loan amount?

That is where I was at!  My social security was being garnished at over $300.00 a month and that $300 did not even cover the interest charge each time!  I was lucky enough to win my case using that very July 7th, 2015 DOE Policy Directive!  But the DOE did not want anyone to know that I used their own policy as a motion to help win my case!  (read my article: http://www.unduehardship-povertyrequired.com/2016/08/right-wing-left-wing-chicken-wing.html ) 

So praytell what is the DOE up to here?  I "pray" that my feelings are dead wrong about the DOE and Betsy DeVos moving forward to rescind the July 7th, 2015 policy.  After all... in my opinion, it was a start in the right direction!  I also felt at the time it would open up the door for more favorable decisions by the courts, and allow many suffering under the weight of undue hardship to be free and enjoy the "fresh start" that bankruptcy is intended to provide! But sadly my win did not get published for others to use as precedent thus, the courts and plaintiffs barely know this policy exists. 

Meanwhile....

Meanwhile, we wait!  We wait and see if ANYTHING comes of our efforts to provide our own "input" to the DOE.  I want to personally thank those who did send in their comments to the DOE.  And again I thank Steve Rhode for posting his article about this RFI.



If you have any comments or questions, feel free to post them, I will be happy to address them. Please subscribe to this blog by providing your email in the box in the upper right of this page. Until next time, God Bless YOU and America, regards, Richard Allan Precht


Tuesday, February 20, 2018

D.O.E. ASKS FOR YOUR INPUT ABOUT UNDUE HARDSHIP DISCHARGES

SERIOUSLY? DEPARTMENT OF ED. WANTS MY OPINION ON UNDUE HARDSHIP?


I just read this article posted today by Steve Rhode, the "GET OUT OF DEBT GUY" SM

Steve titled his blog article..."Department of Education Seeks Input Regarding Student Loan Bankruptcy Discharge:"

"It sure feels ironic that the Department of Education is seeking feedback and input regarding their current policy of allowing for the elimination of student loan debt in bankruptcy. It’s not a process they even really adhere to now.
Since their infamous letter laying out how they would approve student loans for bankruptcy, they have fought discharges every step of the way. For example, there is the story of Kristin Price.
The Department of Education is under the misimpression those entities holding federal student loans actually agree to discharges, they regularly fight back." [re: Steve Rhode, Feb. 20, 2018]
“Department regulations currently require holders to evaluate each undue hardship claim to determine whether requiring repayment would constitute an undue hardship. If a holder determines that requiring repayment would impose an undue hardship, the holder must concede an undue hardship claim by the borrower in an adversary proceeding.
The Department’s current guidance to guarantors and educational institutions in defending bankruptcy proceedings is summarized in a July 7, 2015, Dear Colleague Letter (GEN-15-13
https://ifap.ed.gov/dpcletters/GEN1513.html) and provides for a two-step analysis when evaluating whether or not to object to a borrower’s claim of undue hardship. The Department follows the same two-step analysis when defending bankruptcy proceedings for Direct loans. After receiving input from this notice, we will consider whether that analysis is still appropriate.”News Alert: It’s not appropriate. Far too many debtors are being pushed into income-driven repayment programs at $0 per month only to leave them indebted rather than receive a discharge.
The Department of Education would like to hear from you. Here is the feedback they are requesting:
“The undue hardship standard established under either test requires a variety of factors to be evaluated when determining whether repaying a debt will cause a debtor and his or her dependents an undue hardship, such as, but not limited to, the debtor’s: medical, work, or family history; history of mental illness; level of educational attainment; future employment prospects; payment history, including a borrower’s willingness to avail himself or herself of all available repayment plans, including income-driven repayment plans; and necessary expenses in excess of ordinary unique to the debtor.
The Assistant Secretary for Postsecondary Education invites the public, including individuals, advocacy groups, and professional organizations, as well as other State or Federal agencies or components, to provide comment on, and offer information regarding: (1) factors to be considered in evaluating undue hardship claims; (2) weight to be given to any such factors; (3) whether the use of two tests results in inequities among borrowers; (4) circumstances under which loan holders should concede an undue hardship claim by the borrower; and (5) whether and how the 2015 Dear Colleague Letter should be amended. The Department will review the data collected to determine whether there is any need to modify how undue hardship claims by student loan borrowers in bankruptcy are evaluated.
You may provide comments in any convenient format (i.e., bullet points, charts, graphs, paragraphs, etc.) and may also provide relevant information that is not responsive to a particular question but may nevertheless be helpful.”
To submit comments and feedback go to Regulations.gov and search for [Docket ID ED-2017-OPE-0085] Request for Information on Evaluating Undue Hardship Claims in Adversary Actions Seeking Student Loan Discharge in Bankruptcy Proceedings.
Feedback should be allowed for submission after 2-21-2018."

THANK YOU STEVE FOR THIS GREAT ARTICLE!

TO ALL MY BLOG READERS

I wholeheartedly plan to send in my input!  I encourage all of my followers to do the same!

Any of my followers who have read my posts know that I was successful under the "Undue Hardship Clause" and won without a trial in Federal Bankruptcy Court and that I believe I won because I "cited" the July 7th, 2015 Department of Education Policy Letter as one of the key factors - asking the court "to prove how Plaintiff’s facts presented in this Adversary Proceeding DO NOT MEET the U.S. Department of Education policy directive, DCL ID: GEN15-13, dated July 7, 2015.   

THE JUDGE ASKED THE U.S. ATTORNEY FOR D.O.E. THIS QUESTION:
"Well, Mr. Coulter, what are you going to do about this letter?"

Coulter, the defending lawyer for the Dept. of Ed. stated: "Well your honor, we don't know!"

To this Judge Mayer stated: Mr. Coulter, you have until Friday to answer Mr. Precht's complaint!"

Now this was on a Tuesday morning.  On Friday afternoon at about 4PM I got a call from Mr. Coulter the U.S. Attorney for the Eastern District of Virginia, and he stated: "Mr. Precht, the Department has discharged your student loan debts!"

As I had written back on August 28, 2016: 

"My case was settled without a trial and to me that has only further exasperated the student loan crisis and continues the suffering for tens of thousands of student loan debtors!  Not having my trial resulted in no formal decision being recorded for others to cite as case law precedent!

"Why did they not take this case to trial? Well I have a theory as to why, and I wrote about those thoughts.  You can read my thoughts on this here": http://www.unduehardship-povertyrequired.com/2016/06/the-discharge-of-130000-was-settled.html  Here is part of that article:

"Consider this --- Had the DOE persisted on going to trial, and with the fact that I was challenging the DOE with their own July 7th policy directive, is it possible that the DOE and Coulter were reluctant to go to trial BECAUSE they were afraid that Judge Mayer would rule in my favor and write a decision brief that would be the key to opening a Pandora's Box for other courts to rule with?
By NOT writing an official public trial decision, there is not that much publicity or factual case information that gets posted to the legal networks.  Therefore the DOE continued to cover over the  results of my case, and in the process continued to avoid a landslide from taking place?
My case is not out there like (a mutual debtor who won his case - and wants to remain anonymous) or any of the others who's student loan cases went to trial and were decided upon, is there something to my theory?"

AGENTS OF CHANGE

At the end of the above article I concluded by saying: "There is a change coming!  I pray I have become one of the agents of change?  But there are thousands of people in crisis just like I was who need a "fresh start", please help me and others like me, get the word out that the current laws that prevent bankruptcy or forgiveness of inflated and corrupted student loan debt need to be changed."

Please join me in becoming AGENTS OF CHANGE! Let the Department of Education hear from you!

Here is your opportunity to tell them your situation and request that "something" be done to help the millions of student loan debtors who like I once did, had no way to ever pay off the ever increasing loan due to predatory interest and penalties adding to the balance each month.  Not to mention that my social security was being "garnished" every month by over $300.00 which did not even cover that interest!

YOUR INPUT CAN MAKE A DIFFERENCE!

Everyone who reads this can be a part of needed changes!  One more time here is the link for your input: To submit comments and feedback go to Regulations.gov and search for [Docket ID ED-2017-OPE-0085] Request for Information on Evaluating Undue Hardship Claims in Adversary Actions Seeking Student Loan Discharge in Bankruptcy Proceedings.
Feedback should be allowed for submission after 2-21-2018.

Thank you!
If you enjoy my posts here, please let me know.  And if you have any questions I will be happy to answer them. You can receive email notice of my latest posts by inserting your email information in the box on the upper right of this page. 

Sincerely, Richard Allan Precht



Tuesday, February 13, 2018

TPD Recipient Got a Second Miracle - IRS won't be Taxing Discharge of Student Debt

CONGRATULATIONS "AGAIN"


Last week my blog was giving congratulations to my friend Pam for the complete discharge of her Student Loans! My friend Pam in her mid 50's has three adult children, is divorced, and because of a stroke a few years ago, is unable to work and is living on SSDI on a monthly income of under $700.00! 


Pam's discharge of over $26,000.00 was nothing short of  "A MIRACLE". Pam was granted a Total and Permanent Disability (TPD) discharge of  her student loans and interest by the Department of Education on January 19, 2108.

Pam showed me her letter from nelnet (Nelnet assists the Department in administering the TPD discharge process). To summarize the letter: "Effective 01/19/2018, the Department has approved your application for discharge of the federal student loan or TEACH Grant service obligation identified below on the basis of your total and permanent disability.  We will notify you again when we have discharged your loan and/or TEACH Grant service obligation."

"SECOND MIRACLE"

In the post of last week, I talked about the 3-year monitoring period nelnet required by each person awarded a TPD discharge to comply with; I went on to discuss what I called "the caveat I disliked" about the TPD discharge --  The fact that after the 3-year monitoring period the IRS would potentially require a tax payment on the amount of discharged student loans and interest was what I disliked.  In other words my friend Pam would have to file a 1099-C and be subject to income tax on her $26,000.00 discharge!

Within a few days of writing last week's blog article, I received an email from a site I subscribe to, which provides great information about Student Loan Rights and Responsibilities for Borrowers and Advocates.  This organization is called: "The Student Loan Borrower Assistance Project (SLBA) and is a program of the National Consumer Law Center (NCLC).  I recommend my readers subscribe to this great source of news about student loan issues, and can provide great help to students.  

"Tax on Death and Disability Discharges Is Gone … For Now"

The 2nd Miracle jumped off the page of this February 8th publication from SLBA! Here is a part of the article that outlines the key information: 

  • "We here at NCLC have been arguing for years and years (and years!) that taxing disability and death discharges is grossly unfair to some of the most vulnerable student loan borrowers. 
  • Finally, after many years of advocacy, this tax has come to an end… for now (more on that later).  The tax bill passed at the end of 2017 does away with the tax on student loan discharges for death and disability." *SEE BELOW
What this means for Pam, my friend -- she has been given a second miracle bonus for her January 19th, 2018 Total and Permanent Disability discharge! She will NOT be subject to IRS Tax on her discharged loan and interest.

Let me just say, Pam is very blessed as she falls into a tiny window of eligibility to get this tax relief exception! NOT EVERYONE IS ELIGIBLE!  Please continue reading.

Consequences/Ramifications/Caveats

*WARNING: Very much like the caveats and rules contained within the parameters of being awarded a full discharge via the TPD, there are specific parameters, rules and qualifications which govern this TAX RELIEF.
  • NOT EVERYONE QUALIFIES! -- YOU MUST READ THE FULL DOCUMENT!
Leave it to the Government to want to make an attempt to help those who are disabled and stuck with student loans they cannot afford --- only to make it restricted and not for everyone! 

Rather than try and explain it all here, I will just post the article for you all to look at. The article describes who is eligible for this NO TAX "gift" and those who are not.  (Summation: Primarily it is based on when the TPD was awarded) 

Here is the link to the full article at the SLBA website. 


In Conclusion

When I learned of this article, I called my friend Pam and shared the good news.  I had to do that because I had previously told her she would probably have to pay the Tax to the IRS after the 3-year monitoring period based on what I had known about the consequences of the TPD discharge. As you may imagine, she was quite relieved.

She falls right in the exact window of qualifications set out in this recently passed law or Department of Education policy.  My heartbreak is that not ALL who have been awarded a TPD prior to 2018 will qualify and will most likely still owe the IRS.  

Here is what is said in the above mentioned article: "borrowers who received these cancellations in 2017, unfortunately, still have to deal with the tax consequences"

To me that seems so unfair!  The other thing that seems unfair to me, is that according to the article... "It is important to note that this change in the tax code will expire on December 31, 2025. This means that because of the three-year monitoring period, borrowers who have their initial discharge approved after December 31, 2022 and complete the three years of monitoring could be subject to the tax. The hope is, of course, that this law will be extended or become permanent before then."

Indeed... It is my hope also that the Department of Education (DOE) makes this a permanent ruling and gives ALL disabled student loan debtors this relief.  In fact, I pray that the DOE gets a "conscience" and begins to not only make the TPD award process simpler, but that they take serious steps toward removing the "undue hardship clause" within the U.S. Bankruptcy Code and take it back to the time when student loans were dischargeable just like any other form of personal debt!

 END


I would like to ask you to please comment on this post.  I would also like to say that if you are in need of help with your student loan debt I am willing to try and offer you some assistance.  I am not an attorney, I cannot give legal advice, but perhaps I can in some way offer you "keys" to dealing with your situation?  I have done so for others and as time permits I will offer the same to anyone who finds this blog insightful.

Thanks for reading -- be sure to add comments and I will reply as time permits.  Please subscribe with your email address and you will be notified of my blog posts.  Thank you again, God Bless, Richard P.






Wednesday, February 7, 2018

TPD (Total and Permanent Disability Discharge) "Awarded" to a personal friend of mine!

CONGRATULATIONS!

Congratulations to my friend Pam for the complete discharge of her Student Loans! My friend Pam in her mid 50's has three adult children, is divorced, and because of a stroke a few years ago, is unable to work and is living on SSDI on a monthly income of under $700.00!

Pam attended a now defunct college in an attempt to earn an associates degree in home health care. Her loan with Loan Servicer NAVIENT (formerly Sallie-Mae) showed an unpaid principal amount of $19,390.98 with unpaid interest owing at $6,642.12.  The loans were over 10 years old, and as her records indicated, she had never made a single payment.

Based on the fact Pam was disabled (under Social Security Disability Insurance) SSDI, she was not required to make payments towards these student loans. However, there is what I call a "maturity death trap" with SSDI deferments!

Let me explain --- One day Pam and I were talking and she happened to mention that she had attended "school" to get a home health care aid certificate (or degree).  I asked her if she owed any loans to anyone for this - because I knew of her financial situation.

She told me in fact she did owe a lot of money for school loans, and had no way to pay them off - and that since she was on "disability" she was not required to make payments.  Well I can relate to that from my own story (see my other articles - regarding my disability and loan discharge of $130,000.00).

I proceeded to share a bit of my story about my student loan debts and how I was able to win my case in Federal Bankruptcy Court in Virginia in 2016.  I told Pam how that while I was on SSDI I did not have to make any payments but that the interest still accrues and is added to the total debt.

I also told Pam that once I reached full retirement age (of 65), the Social Security Agency "switched" me off of SSDI and began to pay "straight" social security annuity. That meant I was no longer on SSDI and no longer under a "deferred" loan status for my student loans!  Suddenly I was receiving monthly billing statements for payments on those loans.  

Initially the statement was in the neighborhood of $80,000.00 and change!  But in the proceeding years that balance continued to climb -- while all the while, my small retirement annuities were being "GARNISHED" to the tune of over $300.00 a month!

What was striking was that the interest was accruing each month adding to the loan balance -- of which the $300.00 being 'garnished' from my retirement checks DID NOT even cover the interest due each payment!  Talk about a "DEATH TRAP"!

As I explained this conundrum to Pam, she was shocked.  She had no idea she would be taken off of SSDI when she reached the Social Security Age requirement, and she had no idea she would then have her meager annuity check 'garnished' for some amount --- Most likely the maximum currently allowed which is set at 15% of your gross social security payment!

I then proceeded to tell Pam about her options.  I gave her keys to websites with information about seeking "loan forgiveness" (which I do not believe is a real or viable possibility for most debtors! -- more on that in my other blog articles).  I pointed out that since she is 100% disabled she may want to try and apply for a TPD.

As I recall, this conversation I had with Pam was sometime late last summer or early fall. The other week when I was at her place to do some repair work on her home, she showed me a letter from nelnet  (The loan administrative branch of the Department of Education, D.O.E.) Education Planning and Finance Administration, D.O.E.

Note: If you need to see what you owe on your loans you can go online to nelnet here: https://www.nelnet.com/welcome

OK back to the story --- Pam showed me a letter dated January 19, 2018 from nelnet.
The letter states "The U.S. Department of Education (the Department) has completed review of your Total and Permanent Disability (TPD) discharge application requesting discharge of your William D. Ford Federal Direct Loan (Direct Loan) Program loan, Federal Family Education Loan (FFEL) Program loan, Federal Perkins Loan (Perkins Loan) Program loan, and/or your teacher Education Assistance for College and Higher Education (TEACH) Grant Program service obligation...."

"Nelnet assists the Department in administering the TPD discharge process, and we will communicate with you on behalf of the Department concerning your discharge request." 

"Effective 01/19/2018, the Department has approved your application for discharge of the federal student loan or TEACH Grant service obligation identified below on the basis of your total and permanent disability.  We will notify you again when we have discharged your loan and/or TEACH Grant service obligation."

There it is!  Pam has been granted a discharge of her debts under the TPD!

The nelnet letter goes on with information regarding return of any payments made or received after the "disability date" (SSDI notice of award date), and if should you question the loan amounts etc. you will need to inform the Department, or if you continue to receive bills from loan holders (and I assume loan servicers).

IMPORTANT NOTE REGARDING A TPD DISCHARGE! 
The 3-year post discharge monitoring period!

The letter goes on to state: "As stated above, the Department has approved your application for discharge on the basis of your total and permanent disability and your loan .... will be transferred to us to be discharged. You will be subject to a monitoring period that will end three years from 01/19/2018.  We will reinstate your obligation to repay your discharged loan ... if at any time during this monitoring period:
  • You have annual employment earnings that exceed the poverty Guideline amount for a family of two in your state, regardless of your actual family size (see www.disabilitydischarge.com for additional information);
  • You receive a new Direct Loan, Perkins Loan or TEACH Grant;
  • You are disbursed a Direct Loan, Perkins Loan, or TEACH Grant received before the discharge is made, and you do not return the full amount within 120 days of the disbursement date or;
  • You receive a notice from the SSA stating that you are no longer totally and permanently disabled, or that your disability review will no longer be the 5-year or 7-year review period indicated in your SSA notice of award for SSDI or SSI benefits. 
The disclaimers continue.... But you get the idea!  You have to follow and comply with ALL of the requirements and obligations laid out in this letter or you can end up OWING the full amount with the interest (however, they do state that while you will be required to pay the loan amount with the interest, any additional interest that could have accumulated during that period will not be owing).

Note: the full details of what is required post discharge of your loan and interest can be found here: https://www.disabilitydischarge.com/TPD-101

HERE IS THE ONE CAVEAT I DISLIKE ABOUT A TPD DISCHARGE!

While the TPD discharge removes the debt of the student loan and the accumulated interest on those loans, the one serious drawback is this --- At the end of the THREE YEAR MONITORING PERIOD -- You will be responsible for the INCOME TAX on the AMOUNT DISCHARGED! Yep!  The IRS will want the TAXES for the loan and interest amount that you received as a loan discharge!

Here is what is stated regarding the:
 TAX IMPLICATIONS AFTER APPROVAL & DISCHARGE OF YOUR LOAN BALANCES!

"The Department reports the discharge of any loan debt totaling $600.00 or more to the Internal Revenue Service (IRS) for the year that the loan was discharged. If your loans are discharged, we will send you an IRS Form 1099-C that will identify the total amount of your discharged debt. The amount of the discharged debt will be considered income for federal tax purposes and possibly for state tax purposes. You may want to consult with a tax professional to determine how this may affect your personal taxes."

So... what are my final thoughts on the TPD?

My final thoughts on the TPD are that it should be considered as one of the many options you as the debtor look long and hard at.  Bearing in mind it is based on your proving that you are permanently and totally disabled according to the criteria laid out in the application.  The TPD is based on legitimate documentation and verification in most cases from your assessment and award by the Social Security Administration (SSA) of what is known as SSI, SSDI (Social Security Disability Insurance).  Meaning you would first have to have been "awarded a claim" from SSA.

From the TPD webpage here is what is considered qualifying criteria for a TPD:


You can show that you are totally and permanently disabled in one of the following three ways:
1 – If you are a veteran, you can submit documentation from the U.S. Department of Veterans Affairs (VA) showing that the VA has determined that you are unemployable due to a service-connected disability;
2 – If you are receiving Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI) benefits, you can submit a Social Security Administration (SSA) notice of award for SSDI or SSI benefits stating that your next scheduled disability review will be within 5 to 7 years from the date of your most recent SSA disability determination; or
3 – You can submit certification from a physician that you are totally and permanently disabled. Your physician must certify that you are unable to engage in any substantial gainful activity by reason of a medically determinable physical or mental impairment that:
  • Can be expected to result in death;
  • Has lasted for a continuous period of not less than 60 months; or
  • Can be expected to last for a continuous period of not less than 60 months.

The requirements are quite extensive and in my case prior to going to the route of Bankruptcy with an Adversary Proceeding to prove Undue Hardship, I had applied for a TPD twice and was denied twice.  

My approach from that point forward was to investigate other means of discharge which included the so-called LOAN FORGIVENESS PLANS, INCOME BASED PAYMENT PLANS, the so-called ZERO DOLLAR 25-year PLAN and others!

What I soon discovered was that my one and only REAL DISCHARGE REMEDY was filing for Chapter 7 Bankruptcy followed immediately by the filing a what is called an ADVERSARY PROCEEDING (basically a lawsuit challenge to the "non-discharge" of student loans as part of a normal bankruptcy proceeding).  

The fact is that, yes, student loan debts can be discharged as part of a personal debt bankruptcy when you take the extra steps necessary using a "Complaint" by way of the Federal Law under USC 11 §523(a)(8) Undue Hardship Clause, "Exception to Discharge" ---  You see there is always an exception to the rules!

FINAL COMMENT

Student loan debts are not easy to deal with even when you are employed!  Being disabled and living on poverty level income and dealing with student debt is nothing short of a continuous nightmare!  For Pam the discharge of over $26,000.00 was nothing short of a dream come true. 

I would like to ask you to please comment on this post.  I would also like to say that if you are in need of help with your student loan debt I am willing to try and offer you some assistance.  I am not an attorney, I cannot give legal advice, but perhaps I can in some way offer you "keys" to dealing with your situation?  I have done so for others and as time permits I will offer the same to anyone who finds this blog insightful.

Thanks for reading -- be sure to add comments and I will reply as time permits.
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