My husband was unaware that, for one semester, the school withdrew his financial aid. They failed to notify him until the semester was over. He was unable to pay out of pocket for the tuition and the debt was sent to collections. The collector is now suing him. We were thinking to file bankruptcy because we can't afford to pay, but can a bankruptcy wipe out this debt? It wasn't a student loan, it was just a debt to the school.
2006-10-23 12:37:43 · 5 answers · asked by concerned 1 in Business & Finance ➔ Personal Finance
If you live in the USA, bankruptcy will wipe out anything except a government guaranteed student loan. Have you considered letting the school go to hell and wait? I don't know your circumstances, but it's pointless to sue somebody who doesn't have any money or assets to grab. You need to sign your assets over to somebody else more than 30 days before they file suit against you, or it's considered a false transfer.
2006-10-23 12:45:13 · answer #1 · answered by Anonymous · 0⤊ 0⤋
It is nearly impossible to discharge a student loan in Chapter 7 bankruptcy. After you filed the bankruptcy, you would need to an action called an adversary proceeding. The only way the loan can be discharged is by proving that repayment of the loan will create an undue hardship on the debtor/borrower and his family.
This standard is generally interpreted to mean that the debtor cannot maintain a minimally adequate standard of living and repay the loan. It usually requires a showing that the conditions that make repayment a hardship are unlikely to improve substantially over time. Many courts use the test for undue hardship found in the Brunner case.
Courts in some circuits will permit the judge to find that the debtor can repay a portion of the loan without hardship, and to discharge the balance of the loan.
To discharge a student loan in bankruptcy, the debtor must bring an adversary proceeding in the bankruptcy case. The debtor must prove at trial that repayment constitutes undue hardship.
2006-10-27 01:16:43 · answer #2 · answered by Carl 7 · 0⤊ 0⤋
Talk to the school directly and be prepared to work something out. Most debt collectors will attempt to attain a 28-28% debt retention. If you talk to the school and not the debt collector and begin making payments and sticking to them they will probably take the debt back in-house. Never be afraid to talk to a creditor about a repayment. DOn't file BK unless you really need it. Chp 7 stays on your credit report for 10, not seven years, unless you can get the credit reporting agency to remove it. Chapter 13 will stay on your credit 7 years past your confirmation date. The rules governing who is eligible for a chp 7 have gone thru a strict means test, which is just a fancy way of saying exactly what can you afford to pay back.
2006-10-23 20:06:58 · answer #3 · answered by Paul R 2 · 0⤊ 0⤋
Bankruptcy treats all creaditors the same except foe gov`t supported student loan programs. In Canada there have been some changes to that as well. I suggets you see a financial counsellor as there are other measures less drastic, bankruptcy stays on your record for 7 long years and repair of your rating is harder than you think.Good luck.
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2006-10-23 19:45:15 · answer #5 · answered by Anonymous · 0⤊ 1⤋