I have a Sallie Mae Tuition Answer Loan that is considered private. Can this be discharged under chapter 7 or 13 of the US Bankruptcy Code?
State/Country relating to question: Florida
Researching the new Bankruptcy Codes myself, I see that unsecured debt can be washed away and private loans can be washed away. I know federal student loans can't be but this loan is private and doesn't even qualify for the new Income Based Repayment program.
All educational debts are not dischargeable unless you bring an adversary proceeding during the case. you must show that any repayment is an undue hardship, which is very hard to show. if you are working, you will not succeed. Therefore, set up a payment plan for the student loans.
in a chapter 13, you are paying back debt, and can include the loans in that case. the unpaid balance, including running interest will survive the case. So, unless you are paying back 100% of all unsecured, you'll owe the balance left after the ch13 case.
When you mentioned the "Undue Hardship" test, you mentioned that it was very hard to show. I am an attorney in FL and there is no work, no jobs, no budge, no hiring, no ANYTHING. I've lived off credit cards and family loans and still can't make anything. My last year Adjusted Gross Income was barely over 9K. I own no property. Do you think I could qualify for the undue hardship?
What is your opinion on the current trend of caselaw regarding this test? Moreover, do you know how Florida District Courts are applying this test? Additionally, have you ever successfully argued and won such a hearing on this type of motion?
Look up In Re Brunner - the Brunner Test 831 F.2d 395
Need to prove the following:
1. no current ability to pay
2. no future ability to pay
3. paid them in the past when you could.
the hardest to prove is #2...The only cases I've seen is when the debtor has had a debilitating injury that prevents them from earning a living. Also, if the income is so low, and they have no likelihood of making more...that the income is below the poverty line and the basic necessary expenses are far greater than income. It would have to be extreme case to get that adversary granted to discharge educational debt.
Better Business Bur 15yrs bankruptcy experience. Chicago Bar
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