Bankruptcy of Your Student Loans

Bankruptcy of Your Student Loans

Friday, March 30, 2018

BANKRUPTCY OF YOUR STUDENT LOAN -- IS IT POSSIBLE?

BANKRUPTCY 101


My previous post here dealt with providing answers to some questions I had received from a fellow in California who was in the process of deciding if he should file Bankruptcy and if he could include his student loans.  His questions and the answers I gave were useful in some ways, but I admit it was just the tip of the iceberg and may not have provided the uninformed student loan debtor enough to make that decision for themselves. You can read post here: www.unduehardship-povertyrequired.com/2018/03/q-on-bankruptcy-of-student-loans.html

"ANSWER THIS, SHOULD I FILE BANKRUPTCY?"

This is the number one question you MUST ask yourself if you are in financial trouble. On the other hand it is also the most difficult question for someone else to answer for you!  The factors involved in the decision to file Bankruptcy are nearly too vast to even go into in this type of format - and for me to try, would be an exercise in futility!  However, let me offer you the best advice I can muster -- Do your research and learn everything you can about it 1st.

"HOW DO I FIND THAT INFORMATION?"

When trying to answer the question whether or not Bankruptcy is the answer to your financial situation, you need to only know one thing -- the internet has the answers! 
This can be proven very quickly, and you already have the tool in front of you - Your PC.
In example, just a minute ago, I highlighted and copied the heading in the previous paragraph "Answer this, Should I file Bankruptcy?" Then I pasted into the search bar, and Viola!  I got a whole list of places to look at. 

Granted, many of those links will be a website for Bankruptcy Lawyers, but at least some of them provide you with a series of questions to help guide your decision whether or not you need to consider filing a Bankruptcy.  Just to show you what I mean, here is a link to the first page I clicked on after I performed my web search using the search engine on my PC.

Another quick and easy web search on "What is Bankruptcy" provided this link: 

By my listing just these two links which literally took me a mere few seconds to find, you can see how easy it is to find basic information on the topic of Bankruptcy! Just try a search!

GLAD YOU ARE HERE!

If you are here reading this, it is probably because you found this site looking for help with your debts which most probably include loans to finance your education or the education of a child?  My blog is written to try and provide some limited help and information on the topic of dealing with student loan debts, based on my success in being able to have my loans fully discharged in a Federal Bankruptcy Court.  My own PERSONAL Bankruptcy was the culmination of years of struggle and seeing no end to the ever increasing amount demanded by the Department of Education and the collection agents they use to demand your money.

TYPES OF (PERSONAL) BANKRUPTCY

In my own Personal Bankruptcy (BR), I filed a Chapter 7 Bankruptcy.  Chapter 7 is what I would recommend based on the facts that Chapter 7 bankruptcy protection allows debtors to get rid of most of their debts and start over with a clean slate, or as the law implies a "Fresh Start".  

A Chapter 7 is an major decision, especially for those who have property and other holdings as you may be forced to sell those in order to pay the debtors if they get involved. A Chapter 7, is also called "liquidation" or "straight bankruptcy," and in the BR process, your debtor's assets are sold, those creditors receive payment, and only then are you free from your debts. Again ... Make sure you read all the details on a Chapter 7, again there's lots of good help here:   http://bankruptcy.findlaw.com/chapter-7.html

What is the other PERSONAL type of Bankruptcy?

There is also a Chapter 13 Bankruptcy for Individuals. Do not confuse this with a Chapter 11 Bankruptcy which is for Commercial or Business Bankruptcy filing.

A Chapter 13 BR is used by debtors whose income exceeds the limits of a Chapter 7, and is known as a reorganization bankruptcy. Filers of a Chapter 13 choose to hold onto certain property instead of selling off all relevant assets to pay creditors.  Under a Chapter 13, filers are required to agree to set up a re-payment plan using their income to gradually pay-off the debts, typically under a three or five year plan. The Bankruptcy Court 'monitors' the re-payment of the debts -- and if you fall behind, you may endure more court proceedings.
Make sure you read all about a Chapter 13 -- and learn the uses of a Chapter 7 vs Chapter 13. Again there is some great information here: http://bankruptcy.findlaw.com/chapter-13/chapter-13-reorganization-bankruptcy.html

"CAN I GET RID OF MY STUDENT LOANS?"

VERY GOOD QUESTION!  THE ANSWER IS NO! AND THEN THE ANSWER IS YES!

If I had a thousand dollars for every time I heard a lawyer tell me that I could NOT get my loans discharged in a Bankruptcy, I could have a great vacation! Hmm.. an Island VACA?

Seriously, if you asked a lawyer - and even a so-called Bankruptcy Lawyer - you would most likely be told that you can't get rid of your student loan debt by filing a personal bankruptcy! The fact is, that most attorneys say that for one of two reasons - Number One reason is -because that is what they were told -- And Number Two -- (in my opinion here), is that they just don't want to do the massive amount of work it takes to file the required legal case!

"FACTS"

The FACTS are that YES student loans can and are dischargeable in Bankruptcy!

As in everything in life there are "EXCEPTIONS"! The law does have provisions for the debt incurred to get an education to be discharged in both a Chapter 7 and a Chapter 13 BR.  This provision is known as the "Undue Hardship Clause" (or Undue Hardship Exception).

In brief, here is the "statute" that allows for student loans to be discharged by a Bankruptcy proceeding: https://www.law.cornell.edu/uscode/text/11/523

OK I know... it looks too much like "LEGALEEZE" ...  But let me help you out! In regards to what this all means, let me explain it as best I can.  Under the United States Bankruptcy Code (e.g. the law), the statute falls under USC (United States Code). In this case it is found in Title 11 (think of the word Title as a chapter in a big book).  Under Title 11 we find the listing for Bankruptcy which is sub-titled 523 (in laymen's terms it is a paragraph number). In fact this symbol § is the symbol for paragraph!  [NOTE: You can recreate this symbol on your keyboard by holding down the ALT Key and typing 0167]. §

Under this title and paragraph there are many subordinate sections and  sub-paragraphs. Drill down until you come to sub-section (a).  Then look under (a) for sub-para (8).

This is where you will find the "EXCEPTION TO DISCHARGE" for Education Loans

So then the full indexing of the code for the student loan "EXCEPTION" would be like this: 11 USC §523(a)(8).

Based on the above here is what "(a)" says: (a) A discharge under section 72711411228(a)1228(b), or 1328(b) of this title does not discharge an individual debtor from any debt—

Note the wording in (a) it says: "under .... this title DOES NOT DISCHARGE"  (However... there is more below!)

Scrolling down and finding sub-para (8), is where the "exception" is described.  Here is what it says: And I quote: 

"(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..."

Let me help clarify what you are reading... 

First off, this reads like it is written backwards!  And I agree!   The way to understand this is the code is stating that many things cannot be included in a Bankruptcy (things like taxes and stuff that are illegal -- you get the idea). The list is long about all the debts that can't be discharged -- but within this long list we get down to where Student Loan Debt is listed as NOT ALLOWED to be discharged! 

WAIT!  But I thought you said Student Loans CAN BE DISCHARGED?

As I wrote above... THE ANSWER IS NO! AND THEN THE ANSWER IS YES!

And as I also said above... "As in everything in life there are "EXCEPTIONS"! "
Take a closer look at the code.  Re-read what it says at (8)
(8) unless excepting such debt from discharge under this paragraph would impose an undue hardship on the debtor and the debtor’s dependents,

Did you notice anything...?  I left off the small three letter word after the comma ??  That word is "for"  So follow on down what is the "for" for?

Looking down --- Under big letter (A) we see two more sub-scripts: (i) and (ii)  Here we have definitions of what that "for" is for!  Check it out... "for"...
(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;



There!  You see it?  It is saying it like this... "We can't let you discharge an education debt, "unless"  (and the unless is "an exception" which is defined as one in which) "such debt would impose an undue hardship on the debtor and the debtor's dependants".



Then the code lists the type of Educational Debts that CAN BE DISCHARGED IF THERE IS UNDUE HARDSHIP PROVEN (this is where most lawyers will draw the line to help you!)
There is one more related sub-para listed in this section, and that is big letter (B).  At the end of the sub-para (ii), I intentionally again left off the final two letter word "Or" Did you catch that?  (Just seeing if you are detail person -- LOL)

After the word stipend, there is a semi colon and then the word "or" which is intended to lead you to big letter (B) the next sub-para in this section under (a) (8)  Here is what it says:
"(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..."

Rather than take the time to go into what all (B) is referring to, let me just say that it is pointing out that there are definitions of educational loans in the IRS codes, and for the purposes of explaining what "is a qualified education loan", for this article we are going to assume that your loan falls into the qualified category (perhaps I can talk about this in a later article - to define what is - and what is not  - a qualified education loan?)

SUMMARY OF TODAY'S ARTICLE

My goal today was to offer a primer on the topic of Bankruptcy.  I admit it did not nor was it intended to cover every aspect of bankruptcy.  I felt moved to expand the article into talking about the issue of student loan debt and bankruptcy - as that is what I used bankruptcy for. 

But first, I want to provide the following disclaimer to the readers: Let me be clear, I cannot provide anyone legal advice, I am not an attorney, I cannot give you legal advice.  All of the information I provided here is readily available via the internet for anyone to discover. 

You may be well served to contact an attorney for legal counsel if you are able to.  Some law firms do offer a free initial council service.  My experience has been that few if any attorney firms will offer free legal services to take your student loan case all the way through the court and few attorneys have experience in the Adversary Proceeding process regarding proving Undue Hardship.  Most are reluctant to do this kind of litigation and for most debtors they cannot afford the costs of hiring an attorney if they're already at the point of insolvency

My limited help should be seen as the impetus for those who are unable to continue financially to pay student loans to dig deeper into finding solutions. To that end, I present these articles hoping to encourage readers based on my own success in winning a full discharge of my Federal Student Loan Debt in 2016.  I acted as my own attorney Pro Se!

In regards to further research on the topic of Bankruptcy, and student loan indebtedness and to further understand what all is within your right to use the "exception clause" provided within the BR Code §523 - with the need to prove you and your dependents are indeed suffering "Undue Hardship", I suggest you look at this link here: http://www.finaid.org/questions/bankruptcylimitations.pdf Again the internet is your best way to find the information! Use it! 

I hope this helps.  My goal is writing these articles is to provide some small helps to those who have looked for answers on how to deal with the relentless attack by ruthless and predatory lenders backed by the Department of Education who are continuing to make it their goal not to allow information about the legal use of Bankruptcy to discharge student debts even when the debtor is suffering "UNDUE HARDSHIP" with poverty disabilities, and life threatening illness!

You can do it!  I am proof!  If I did it -- anyone can!


If you like my articles, please let me know.  If I can answer any questions, I will.  Please follow me by adding your email address to the box in the upper right of this page or in the link box at the very bottom of this page below.  

Thank you, and God Bless You, and God Bless America! Richard Allan Precht, MSA







Sunday, March 25, 2018

Q & A on Bankruptcy of Student Loans

ANSWERS TO QUESTIONS ON FILING BANKRUPTCY 

I recently was asked several questions by someone who contacted me after reading my blog articles about dealing with student loan debt and who is considering filing a personal bankruptcy followed by an Adversary Proceeding (or as we also call it, a complaint) to prove the legal standard of Undue Hardship under Bankruptcy Code 11 USC §523(a)(8).

These questions and answers were part of my email exchanges with this individual and due to some of the content, are partially edited to be used here in this format.  Should you wish to have your own Bankruptcy questions answered, you can leave a comment below and I will reply in kind.  I am not an attorney, I cannot give you legal advice.  All of the information I provide here is readily available via the internet for anyone to discover. 

You may be well served to contact an attorney for legal counsel if you are able to.  Some law firms do offer a free initial council service.  My experience has been that few if any attorney firms will offer free legal services to take your student loan case all the way through the court and few have experience in the Adversary Proceeding process regarding proving Undue Hardship.  

My limited help should be seen as the impetus for those who are unable to continue financially to pay student loans to dig deeper into finding solutions. To that end, I present these articles hoping to encourage readers based on my own success in winning a full discharge of my Federal Student Loan Debt in 2016.


Q & A on Bankruptcy Procedures

Questions:


As far as my BK Chapter 7 filing:  I understand that the actual filing, and court proceedings, will be done by me, but if there are resources available at no charge/free legal aid, or classes to help file the BK portion, should I take advantage of those resources? 

OK I will attempt to answer your Bankruptcy Questions. I don't have a magic wand... but The internet is
the next best thing!  


This web site is the one I refer to when trying to get informed on Bankruptcy questions and to get the needed forms: http://www.uscourts.gov/services-forms/bankruptcy/filing-without-attorney


The above site is for those wishing to file without an attorney.  Go here and learn as much as you can.  The official government bankruptcy forms are also linked there on the right hand side (click on "forms"). You should plan on filing a Chapter 7 and you should be filing as "An Individual".

Notice that one of the forms listed is: "Chapter 7 FEE WAIVER - Procedures & Resources"  (as a side note: I filed my Chapter 7 and requested a fee waiver and was granted a fee waiver)  The fees can be expensive depending on the court.  I think mine would have been over $300.00? Read over the "FEES" section.

The fee waiver form is B3B

You can't go wrong using this web site.....  Just begin to fill out the forms and the fill out the information based on what information you have.  These forms will also become part of your "exhibits" in your AP. 

As far as taking classes??  I was required (I think?) to take a Bankruptcy Class by the court.  The class was "OK" but I already knew all the stuff because I had filed BR's before for myself and helped another friend in Michigan file a Chapter 7 right before I moved to Virginia - so I went to the class in Virginia mainly to get their info on student loan discharges based on the hardship Clause. 

Note: What I was told by this lawyer holding this class about student loan discharges was that student loans cannot be discharged in Bankruptcy.  I knew she was wrong.  When I challenged her, she made a slight correction saying that it can be done, but it is not easy and she did not know of anyone who had been successful in doing it.  She is ill informed!

  • Question-Can you add anything to the list below?
In regards to your list here -----The smart thing to do is have as much documentation on hand with you when you go to file --- They may or may not need it, but it will save you time if you are over-prepared rather than under-prepared!


Social Security Card – Original? I am pretty sure - But you will need proof of who you are-
I am pretty sure I had to show my Social Security card.

Award letter-social security that show the amount you are receiving? Yes, most likely-- as proof of income (but for sure you will include this as one of your Adversary Proceeding Exhibits)

California Driver's License – or other photo ID? (Ditto of above) 

Pay stubs or unemployment statements – from the past six months? Probably?

Three months' financial statements for checking, savings? Yes, for sure

Utility bills/expenses for the past month? Probably?

Recent mortgage/vehicle payment statement? Probably?

Past two years' tax returns – These can also be requested from the IRS? Yes, for sure 

Tax debt documentation? Pretty Sure - yes?

Lawsuits, foreclosures, collections and/or repossession documents? Probably?

Lease or rental agreements? Yes, most likely

Any job termination paperwork? Unsure for BR -- but as an AP exhibit for sure!

Question- What is the timeline of events from this point forward? What is the process?
     - Bankruptcy (BR) Chapter 7?


 - BR Chapter 7 You will need to do the Chapter 7 Bankruptcy 1st!  Using the forms

(Note: Review all the Federal BR forms for a Chapter 7.  You may have other forms to complete - it depends on your own situation?) Read all of the instructions provided, ask questions if confused.

NOTE: If you are in financial trouble, I suggest you apply for the BR "FEE WAIVER". 
Using form: B103B (or you can agree to pay the fee in installments using form B103A)

 - Undue Hardship Adversary Proceeding?

Question-Should I get the BR Chapter started and Filed ASAP, and once it is filed begin with preparing my Adversary Proceeding (AP)? Should the AP be completed before I file for the undue hardship case? 

WHEN DO I BEGIN MY ADVERSARY PROCEEDING? 


OK!  I recommend that you have a good start on your Adversary Proceeding in conjunction with the BR preparations.  In my case I had my AP 95% completed by the time I filed my BR Chapter 7 Note: there may be a deadline to file an AP as I explain in the following paragraphs: (Always Check with the Court Clerk assigned to you).

SECONDLY: Regarding should I begin the AP now?

RE: Undue Hardship Adversary Proceeding:  You need to ask the Court Clerk how soon you can file your AP. The thing to do is, get your Bankruptcy all ready to file, go into the court (find your court: http://www.uscourts.gov/court-locatorthen INFORM the Court clerk you PLAN ON filing an Adversary Proceeding to attempt to have your Student Loan Debt 
Discharged. 

The clerk will probably tell you that you must wait until your Bankruptcy is granted (finalized). The clerk should tell you that once the BR is finalized,you will have "X" amount of days or weeks to file your AP.  Keep that deadline in mind.... If you miss it you MAY have to pay $ --- otherwise I am pretty sure there is no fee to file an AP, but you can ask if there is a fee for filing an AP before the deadline. 

Besides, there is a lot that you will use for both filings - from the data you assemble to prepare to file for the Bankruptcy filing most will also be part of the Adversary Proceeding!

At this time --- read and reread all you can about Bankruptcy and Undue Hardship. Take what others have done as a template for your own case development.

There is really no real hurry?  You have time.  One thing to do now, is to write to your lenders ask them to send you the latest details about your student loans -- and in that letter you can tell them you are asking for information because you are planning on filing Bankruptcy to discharge your student loans. That is giving them "NOTICE" and they then should acknowledge that you gave them such notice --- and you can use a copy of these letters as "exhibits" to show the court you had told your lenders were not able to pay them and were planning on filing for Bankruptcy to discharge your student loans.

Question-I see how getting the court clerk to accept the AP documents on a flash drive when filing the undue hardship case saves time and money due to the printing costs, do you have any suggestions on how to “plant that seed” with the court clerk during my BR case, so when I file my AP the court will take the documents on a flash drive?

Perhaps what you can do is ask the court BR clerk if you will be "ASSIGNED" a clerk for your BR?  Most courts assign your "CASE FILE" to a "CASE MANAGER" (or CASE CLERK) That is the gal or guy who takes your case and is your point of contact.  If  they give you a Case Clerk, get their business card (or name and phone number at a minimum).  Your clerk of courts is someone you will want to "be friendly to" (in a professional sense that is).  

As for the Thumb Drive of your AP and exhibits, it will depend on the permission of the Judge/Court/Clerks/Defendants ---  In my case, they would have allowed it for the AP filing but because I listed my SOCIAL SECURITY NUMBER on some documents, I had to "go back and "scrub" that personal ID info out of the filings.  

So I had to build 3 copies of the Exhibits in 3-ring binders(which was a lot of printing cost). I later learned the 3 copies (one original & two copies) were ONLY for the court's use. The defendant's you serve when filing the AP are also supposed to be "served" a copy of all exhibits and documents!

In my situation, I was supposed to send a full BOUND set to the defendant (The Dept of Ed. lawyer -- who was the U.S. Attorney - in my case).  But when I asked him if he would accept a thumb drive of my exhibits he said “OK” -- So I did not have to go and print another full set and do the 4th 3-ring binder for that. Saving me time and printing costs.

So to say it again, do not include a social security number on anything filed.  Mine was listed on my loan payments to the loan servicers and on other docs so I just used a black marker before I re-scanned them into the computer files to remove the S.S. numbers. Took a lot of time and paper - no fun! Perhaps if I had known this the court would have taken the drives?

NOTE:  Ask your court if they prefer ALL filings to be in PDF FORMAT!

By the way... what I did was used a PDF creator (converter) and as I scanned all of my documents they became PDF file documents.  FYI: (There are many free converters for downloading -- try a couple to see what works best? Simple scanning can be done using Microsoft Window Fax and Scan which then can capture photos as .jpeg files which can be then converted to PDF's using free software like www.jpegtopdf.com  (there are many similar ways but I'm sure you know already?)

The KEY is confidence!  And you will gain that by doing this work and thinking of
this as a project like a college thesis or term paper project.  Not a big deal actually!

SPEAKING OF FORMATS?


Question-Do I need that 28 line court document paper to file these proceedings?

Note: Regarding the format the court will "accept" your written documents especially your court motions and AP Complaint.

Most Federal Bankruptcy Courts require special formatting of any filings.  In the case of filing your Adversary Proceeding as the Plaintiff -- who in essence is filing "a Motion" which here is "an action of Complaint" against the Defendant(s) (Lenders/Loan Holders/the Department of Education/The U.S. Government).  The court will most likely want to see the complaint filed on an 8-1/2 by 11 inch white paper with a 28-line formatting.

The 28-line page template is readily available and can be downloaded free at several sites on the internet.  

YES!  here is a link to download the template: https://www.legalpleadingtemplate.com/ 

Note: The 28-line template is the 5th one ---  second row down - the first form on the right on this web site page. (You can choose what word processor you are using.)

Note: There is ALSO a 28-line template for the "first pleading page" I call the "Cover Sheet"  which is used in the AP or the start of any motion.  This template is the 2nd sheet on the first row and labeled "Legal Pleading Template for Plaintiff vs Defendant in a Civil Lawsuit"

WHAT ELSE SHOULD I KNOW NOW?


One thing to do is search on line for a recent case that was settled in your court district?  Use the search terms: 523 (a) (8) with the court district you are in.  Perhaps a case will pop up that can be used in your AP to boast your position?  I listed many cases to support ALL of the points and to prove the 3 parts of Brunner Test with facts that I met and or exceeded the requirements of the (outdated) Brunner Test as well as met or exceeded requirements of the Johnson Test and the Totality of Circumstances Test used in the other districts. Learn these “TESTS” they are key to winning your AP!

NOTE:  If you do not know what court district you are located in here is the link: http://www.uscourts.gov/court-locator  For "Bankruptcy Courts" use the drop down provided listed as court type and include your own zip code.  It is that easy!  Love the WEB!

You can do it!  I am proof!  If I did it -- anyone can!


I hope this helps.  My goal is writing these articles is to provide some small helps to those who have looked for answers on how to deal with the relentless attack by ruthless and predatory lenders backed by the Department of Education who are continuing to make it their goal not to allow information about the legal use of Bankruptcy to discharge student debts even when the debtor is suffering "UNDUE HARDSHIP" with poverty disabilities, and life threatening illness!


If you like my articles, please let me know.  If I can answer any questions, I will.  Please follow me by adding your email address to the box in the upper right of this page or in the link box below.  Thank you and God Bless You and God Bless America!


















Thursday, March 22, 2018

DEADLINE TO COMMENT ABOUT UNDUE HARDSHIP & STUDENT LOAN DEBTS!



Today is the last day to comment

Today is the last day to submit any comments to the Department of Education 

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


Go here (link below) to provide your input and tell the Department of Education what you would like to see changed regarding the discharge of your student loan debts via bankruptcy using an Adversary Proceeding under the current law 11 USC §523(a)(8) Undue Hardship Exception!

https://www.regulations.gov/searchResults?rpp=25&po=0&s=Docket%2BID%2BED-2017-OPE-0085&fp=true&ns=true

It may be your one and only last chance to provide your input and tell the Department of Education how they have caused your pain and suffering!

With the recent article by the new York Times calling Secretary Betsy DeVos  a "shill" for the student loan industry... we can be very leary of any positive help forthcoming from her!  

While I voted for and supported Donald Trump for President, I for one, do not like the choice he has made in making Devos the head of Education!  I am not sure he is aware of her plans for the Department, but from what I gather reading Richard Fossey's recent blog article -

Betsy DeVos is shilling for debt-collectors and for-profit colleges: The destruction of America's middle class


posted here: http://www.condemnedtodebt.org/ -- I wonder!

Please go to the Department of Education's request for input and make them aware of how you feel about the way you are being hurt by the current bankruptcy laws and the way that lenders are treating you as a loan holder!

Thanks!

Be sure to follow me for more articles about student loan debts, undue hardship and other news on student loans.