Student Loans in Bankruptcy

[masscredit]

My sister has about $20k in student loans. She barely makes enough to cover her monthly expenses and keeps getting hounded about her SLs.  I believe she sends them something like $30.00 per month just to show that she is making an effort.  I suggested that she file for BK a couple of years ago but she really doesn't want to go that route. I found that it's hard to get SLs included in BKs. The attorney that she talked to said that it couldn't be done. 

I'm pretty good with credit but don't know what to tell her about this one. She'll never be able to pay that $20k off unless she sees a major increase in her income. That won't be happening anytime in the near future.

Do SLs have a negative impact on scores if a person is behind? Do they show as late payments or something else? I've never had one so no experience here.

[SCF]

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@masscredit wrote:

My sister has about $20k in student loans. She barely makes enough to cover her monthly expenses and keeps getting hounded about her SLs.  I believe she sends them something like $30.00 per month just to show that she is making an effort.  I suggested that she file for BK a couple of years ago but she really doesn't want to go that route. I found that it's hard to get SLs included in BKs. The attorney that she talked to said that it couldn't be done. 

I'm pretty good with credit but don't know what to tell her about this one. She'll never be able to pay that $20k off unless she sees a major increase in her income. That won't be happening anytime in the near future.

Do SLs have a negative impact on scores if a person is behind? Do they show as late payments or something else? I've never had one so no experience here.

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Yes, student loans are included in your credit report, and if you pay late, you will see negative marks, and eventually they will default, be sent to collections, and she could possibly be garnished directly (for federal loans) or sued and garnished (for private loans), which could result in a judgment on her report.  She needs to tackle this issue head on rather than letting the loans report late every month - and paying $30 won't do her any good unless that is her minimum payment.

Are they federal or private loans?  Federal loans can be put onto income-driven payment plans like IBR and PAYE to make payments more manageable, and both private and federal loans have temporary options to delay payments (although they may be very limited for private loans).  She should contact her lender and see what they can do to help her make the payments more managable, and then focus on increasing her income.

[fishbjc]

I do know of a person who was successful, however, his loans were almost 200k.  He was 'almost' a full fledged surgeon and was diagnosed with a rare type of MS.  He was hit VERY hard and will NEVER be a surgeon.  He is on full disability at this time.

I don't know your circumstances, but it's a very difficult process.  I hope this all works out well for you and it's not a major health issue you're facing.

[StartinOver]

I'm on a cell and can't type much. Could someone search for this article and post the link here, please?

Huffpost 1/7/13

Study done by Jason Iuliano from Harvard

I apologize if the information I had obtained from two places was incorrect. Can't remember where other was obtained. I didn't know his study facts were incorrect, if they were indeed.

[StartinOver]

I haven't been able to login for a couple years, and am usually on a phone. Today I am around a computer so I looked up this article.

https://getoutofdebt.org/48336/how-to-really-discharge-your-student-loans-in-bankruptcy

I can't see the name of the person above who said they worked in the field and doubted this guy's statistics. You might not be understanding what I am saying.

Many people file bankruptcy and list their student loans, but few even know the proper way to ask for them to be discharged is to file the "adversary proceedings". If they do not file that extra paperwork, then the discharge of student loans is not even considered, but the person filing bankruptcy usually does not know that because many attorneys never mention it, don't want to bother, or have no experience in this area. Or, they don't really believe the filer can obtain discharge of the debts.

The percentage of those who are successful is not a percentage of all people filing bankruptcy that have student loans. It is a percentage of those who actually file the "adversary proceedings". Please understand, I am no legal expert, I just study a lot.

Just to update after all the posts (thanks, everyone), I have not filed anything yet. When I file I will be doing so in one of the states that does not use the Bruenner test, even though I should have no problem passing it if need be because I am disabled, and meet all 3. 

I am 60, and not yet on disability. If I were, then I wouldn't need to try to discharge them, because now (since 4/16) those on disability need only provide that proof and it can be taken care of easily without bankruptcy.

[StartinOver]

Forgiveness for those who prove disabled.

http://www.usnews.com/education/blogs/student-loan-ranger/2016/04/20/new-help-available-for-disabled...

[silkysean]

Honestly next to Impossible and they make it that way.Evwn with extra paperwork if you are going to work at some point later in Life or now they won't include.Only way is to have a long term disability and must prove it and jump they hoops.I know because my wife is on dialysis with kidney failure and couldn't work to be able to pay bills on her end.Ven tried to get my income involved just so they wouldn't include loans n Bk or hardship.So it's doable but if no disability they won't let it fly.