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socrateaser
socrateaser, Attorney
Category: Bankruptcy Law
Satisfied Customers: 34816
Experience:  Attorney and Real Estate Broker -- Retired (mostly)
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I filed for Chapter 7 in 1991 and it was granted in Jan. 1992.

Customer Question

I filed for Chapter 7 in 1991 and it was granted in Jan. 1992. Included amongst the debtors was a third party student loan provider, AFSA DATA CORP. (now Acs Education Services in Long Beach). Here is what the discharge of debtor order from the United States Bankruptcy Court in the Central District of California -- Los Angeles said:

It appearing that the petition...

IT IS ORDERED that:

1. The above-named debtor is released from all dischargeable debts.

2. Any judgment heretofore or hereafter obtained in any court other than this court is null and void as a determination of the personal liability of the debtor with respect to any of the following:

a. debts dischargeable under 11 U.S.C. § 523;

b. unless heretofore or hereafter determined by order of this court to be nondischargeable, debts alleged to be excepted from discharge under clauses (2), (4) and (6) 11 U.S.C. sec 523(a);

c. debts determined by this court to be discharged.

All creditors whose debts are discharged by this order and all creditors whose judgments are declared null and void by paragraph 2 above are enjoined from instituting or continuing any action or employing any process or engaging in any act to collect such debts as personal liabilities of the above-named debtor.



In 2009, my former employer received an Order of Withholding from Earnings from Educational Credit Management Corporation. Embarrassed, I immediately made payment arrangements with ECMC because it was made clear to me that garnishment of my check would be a major hassle to our CFO. The original loan of $1300 in 1992 had ballooned into a debt of $4600, for which I have been paying on since 2009.

I just now found my original 1992 bankruptcy papers, and started reading up on the law and I am a bit confused.

Should this debt not have been discharged in 1992 under the Discharge of Debtor from the Bankruptcy Court?
Submitted: 3 years ago.
Category: Bankruptcy Law
Expert:  socrateaser replied 3 years ago.
Hello,

Under current law a student loan is nondischargeable, except under extreme hardship and after a full trial proving said hardship. Bankr. Code 523(a)(8).

However, the 1990 version of Section 523(a)(8) permitted a discharge of an educational loan if it "first became due more than 7 years" prior to the filing of the bankruptcy petition.

So, the answer depends on when your loan first became due.

Hope this helps.


And, if you need to contact me again, please put my user id on the title line of your question (“ToCustomerrdquo;), and the system will send me an alert. Thanks!

Customer: replied 3 years ago.

Thank you, XXXXX XXXXX found that info. online. But still not clear. My loan was taken out in 1991 and due the same year. My bankruptcy was approved under the conditions described above.

 

Still unclear how the bankruptcy could rule in 1992 "unless heretofore or hereafter determined by order of this court to be nondischargeable, debts alleged to be excepted from discharge under clauses (2), (4) and (6) 11 U.S.C. sec 523(a);"

 

-- no mention of (8), BTW.

 

Did the ruling in 1992, enacting the 1990 version of section 523, retroactively affect determinations of the bankruptcy courts for filings in 1991?

Expert:  socrateaser replied 3 years ago.
Paragraph 2 of the order refers to "any" of the following....

Subparagraph (a). refers to any debt dischargeable under Section 523, which would include a loan under 523(a)(8), only if the loan was first due more than seven years from the date of filing of the bankruptcy petition. Subparagraph (b) refers to debts which must generally be adjudicated by the court in an adversary proceeding as dischargeable. Subparagraph (c) refers to any other debts determined by the court to be dischargeable.

Thus, your student loan is not discharged because it apparently came due within one year of your filing the bankruptcy petition.

Hope this helps.


And, if you need to contact me again, please put my user id on the title line of your question (“ToCustomerrdquo;), and the system will send me an alert. Thanks!

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Attorney and Real Estate Broker -- Retired (mostly)