11-03-2010 09:47 AM
At the suggestion of another member, I am cross posting this from the bankruptcy boards to see if I can get some more insight:
We did our research on attorneys and went with the firm most recommended in our area. We had CC debt, a car loan we could no longer afford, but most importantly we had over $160K in private student loans. I had researched the student loans as best I could before going to see the attorney, but once I mentioned them he simply told me "they should not be a problem". After we filed, he changed that statement to "they are probably not dis-chargeable, but wait and see what happens". On our 341 day, he wasn't even there and another lady from the firm took several of us over to the trustee together. She seemed surprised that I expected they might possibly go away in the BK, but didn't offer any information. I contacted our lawyer asking specifically about it, and he then told me there was a 99% chance it would NOT be discharged, but to wait and see. Our discharge was in August 2010, and after receiving new bills from my loan servicer (and again researching online) I now know that even private loans such as these cannot possibly be discharged without an adversary proceeding.
In July of 2009, our family business went under. We went from making over $60K to absolutely nothing because we didn't qualify for unemployment. It took my husband 6 months to find a job, and it pays just above minimum wage. I work part time, at $10 an hour. We have 2 very young children, so childcare is an issue. We are both still looking for better jobs, but we currently make so little that we are on food stamps and medicaid. We struggle to pay our basic bills. We cannot even begin to make monthly payments on these private student loans. My federal ones are in forbearance (automatically approved because we are on government assistance), but the monthly payments on the private loans total more than $1600 a month...which is more than we make combined at this point. AES (the servicer) won't work with us at all. We are out of forbearance time. If we just ignore them, we will be haunted forever by collections/garnishments/etc.
I need advice on how to proceed. We have to at least try, and my husband has a small PERF account ($3200) that we can cash in to pay filing fees, etc. Do we suck it up and hire a lawyer? How do I make sure to find one that will really work with us? I did my research last time...SO many people recommended the lawyer we chose, including a relative who is a lawyer in another area. We can't afford any more mistakes. Could I file it all myself? I feel like if I do it, I will do EVERYTHING I can to plea my case...but I have lost trust in lawyers. Any guidance would be greatly appreciated.
Before anyone asks, I'm not a doctor or a lawyer or in some other highly paid profession. I was simply a financially naive college student who thought when I graduated that it would be no problem to pay back the loans. I never figured on the interest more than doubling the original balance by the time I graduated. I also never counted on being a stay at home mom. My husbands previous business and salary allowed me to do so, and now I am stuck with the stigma of being out of the workforce for over 5 years. I am overqualified for minimum wage jobs (I've applied...to more than I can even begin to count), and not qualified for those I have the education for. Please don't judge me for my past mistakes...I can't change them, and I am just trying to move on.
11-04-2010 11:00 PM
Unfortunately back in 2005 legislation passed which lumped privately funded student loans in with traditional student loans and made them non-dischargeable. Virtually the only exception is if repayment will create "undue hardship."
The major issue is what constitutes undue hardship. First, it needs to be clarified that bankruptcy courts in each state -- indeed, each district within a state -- can operate differently and define undue hardship in a slightly different manner. It is, therefore, important to find an attorney who has experience in a certain federal judicial district and has ample experience in adversarial proceedings. In order to show undue hardship, you must file a motion upon which the court will hold a hearing and, in all likelihood, the creditor will appear and object to your motion.
To show undue hardship, there are three elements which you must prove:
1. In your current situation, you cannot maintain a minimum standard of living and repay your loans;
2. Your distressed financial situation is likely to continue; and
3. You made honest efforts to pay off the loans.
Most people make the mistake of liberally reading the requirements as applicable to their particular circumstances when, in fact, bankruptcy courts are generally extremely conservative in applying the definition of undue hardship. Generally, at least in bankruptcy court, undue hardship is considered synonymous with extreme circumstances with virtually no hope for future improvement. Unless one is physically unable to work because of a long-lasting or permanent disability, bankruptcy courts have been extremely reluctant to grant a discharge.
Again, each district may be slightly different and it can't hurt to make an attempt. Bankruptcy courts have been known to grant partial discharges under exceptional circumstances that somehow fall slightly short of the mark. I would not, however, under any circumstances, attempt to do this without assistance of counsel. If the creditor appears for the hearing and you are not representated by experienced counsel who is very well prepared, you can get eaten alive.