Hi, thanks for your question. You should hire a lawyer for specific legal advice. No attorney client relationship is created here.
Bankruptcy can discharge consumer debts.
Educational debts are normally not dischargeable under bankruptcy though.
There is an exception though.
The caselaw is set out in IN RE BRUNNER.
Basically, the debtor needs to file an adversary proceeding in the bankruptcy case.
She'll need to prove:
1. Paid the debts in the past
2. Has no current ability to pay
3. Has no future ability to pay.
So, #3 is the hardest.
Permanent disability is helpful to prove #3.
But, if the court determines she can work and make some income (albeit not in the same field) then she could lose.
The US Dept Ed will likely object, and then the court will have to decide if she meets all 3 prongs to have the debt discharged in the bankruptcy case.
Do you have any questions?
As to if they can take disability:
The government can take some federal benefit payments (including Social Security retirement benefits and Social Security disability benefits, but not Supplemental Security Income) as reimbursement for student loans.
The government cannot take any amount that would leave you with benefits less than $9,000 per year or $750 per month. And, it cannot take more than 15% of your total benefit.
She has no income now & no persoal assets. She is one of the older patients with her congenital heart defect and the future is uncertain. She is under active treatment for a complication now, but if that is cleared she may have some ability with addtional job training under disability provisions to have an income at some point. Is there a precident for suspending the loan with no accural of additional interest until she come off of disability?
that is something she'll need to discuss with the student loan companies. However, I find that unlikely. They may defer payments though
She has been paying them out of her unemployment benefits leaving her with pretty much nothing each month, but the benefit have now run out and their last attempt to draft funds has failed. She has been in and out of deferments over the years. If one of her loans is not a Sallie Mae backed instrument do the rules change?
the rule is for "all educational debt" so it doesn't matter who the provider was
Best for her to talk to a local bankruptcy attorney to review the potential liklihood of sucess
Does anyone have any success reducing the student loan down to principal or a smaller settlement?
Bankruptcy does not reduce student loans, unless they are paid down in a chapter 13 consolidation
Would it be a good idea to ask for a full breakdown of the components of the current $22K debt as to who is the backing financial instituiton, how much is principal & how much is interest or other fees? The go to a local firm?
you can, but that usually will not be necessary
most of it will be on the credit report
Any other closing thoughts before I go?
It's pretty set in stone as to the caselaw for discharging student loans. They keep making it harder and harder each time the bankruptcy code gets updated.
I wish you and your daughter the best of luck, she might have a shot!
good luck and thanks for your question.
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