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Old Bankruptcy and Student Loans

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Anonymous
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Old Bankruptcy and Student Loans

I filed for bankruptcy in December 2014, and it was discharged in April 2015.

 

At the time, I had co-signed about $100k of private student loans with my partner. She has been and is still under-employed, and we decided to consult a lawyer in 2017. There's a lot of issues around that which it's pointless to discuss now.

 

Anyways, we haven't made any payments since 2017, and the loans have been charged-off since 2018. I took out a home equity loan of $50k due to a rebound in value of the foreclosure home I owned that I was able to keep and reaffirm through the bankruptcy. All my credit is solid now (no lates or balances on CCs) except my partner's loans.

 

I read today about the ruling that private loans can now be discharged in bankruptcy, and I reached out to the attorney handling the student loans. I thought you all might have insight. Can the bankruptcy be re-opened to discharge the loans? And would that affect the timer on my credit score?

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2 REPLIES 2
FireMedic1
Community Leader
Mega Contributor

Re: Old Bankruptcy and Student Loans

You'd have to file an adversary proceeding even if your already DC'ed. Then comes the Brunner Test.

The Brunner test is a test that many bankruptcy judges use to decide if you can discharge student loans in bankruptcy.

The test asks three questions:

  1. Based on your current income, can you maintain a minimal standard of living for you and your dependents while repaying your student loan debt?
  2. Is your financial situation likely to stay the same for a significant portion of the repayment period of the student loans?
  3. Have you made a good faith effort to repay your student loans?

You fail the Brunner Test if a judge decides:

  • you can maintain a minimal standard of living while repaying your student loans;
  • your financial situation will improve during the repayment period; or
  • if you failed to make a good faith effort to repay your student loans (ask for a deferment, or forbearance, apply for loan consolidation, make your monthly payments, etc.).

Basically, if you fail any one of the questions, you'll fail the Brunner Test. Private student loans, on the other hand, typically don't offer affordable monthly payments based on income. Because of that, you may find it easier to get an undue hardship discharge of your private student loan debt (or maybe a partial discharge).

I'm no lawyer but this is out there to research. Check out the test and other ways to get the SL's DC'ed. Isnt easy or cheap from what I looked at. Main thing that kept popping up was undue hardship. Good Luck!

Didnt want to see your thread go unaswered.


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despritfreya
Frequent Contributor

Re: Old Bankruptcy and Student Loans


@Anonymous wrote:

I filed for bankruptcy in December 2014, and it was discharged in April 2015.

 

At the time, I had co-signed about $100k of private student loans with my partner. . . Anyways, we haven't made any payments since 2017, and the loans have been charged-off since 2018. . . I read today about the ruling that private loans can now be discharged in bankruptcy, and I reached out to the attorney handling the student loans. I thought you all might have insight. Can the bankruptcy be re-opened to discharge the loans?


I don't know what your read but here is a portion of a post I did on another site:

 

The 2nd Circuit sitting in New York just ruled that private student loans are dischargeable. Here is a link to an article. The article contains a link to the decision. https://www.reuters.com/legal/transa...es-2021-07-15/

 

Can you reopen your case?  Yes.  The real question is "should I reopen the case"?  The answer depends upon what Circuit you are in and/or whether or not the creditor has violated the discharge and/or whether or not you need other relief. 

 

A 523(a)(8) complaint is one to determine if the debt should be discharged due to a hardship.  I do not believe that is the proper question in your situation.  The question is whether or not the private student loan is within the scope of 11 USC 523(a)(8).  If it is, within the scope of 523(a)(8) then it was not discharged.  If it is not within the scope of 523(a)(8) then it was discharged.  In my opinion, you would be looking at a declaratory action to determine if the loan does or does not qualify as an educational loan, benefit or stipend under 523(a)(8).

 

Des.

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