Student loans

Letter to “Ask Leon”

I have a lot of debt, my biggest debt is my school loans. My ex-husband refused to pay any of the debts in my name. And after the divorce my child support payments took 80% of my income, so I was unable to pay anything on these debts. I have had a rough work history and am now looking at a lay-off in the next 3 months. I have 1 vehicle that is in mine and my husband’s name bluebook is about $500.00, other than household goods and clothes I have nothing of any value. We currently live with my sister and we have rented before this. What type of bankruptcy would be best for this situation? My husband is considering this also. Should we file separate or together?

Leon Says…

To answer a question about whether or not to file bankruptcy, an attorney needs much more detailed information, and a face to face meeting is the best way to proceed. Among other things, it is helpful to have a complete list of all debts, copies of recent pay stubs, and information about your current living expenses for necessities such as rent, food, utilities, etc. From what you are saying, it sounds like you should further explore the possibility of filing bankruptcy. Assuming that it makes sense for you and your husband to file, you are probably better off filing together, since you would only have to pay one set of fees, instead of two. However, please get further advice about filing from a qualified local bankruptcy attorney. What I can tell you is that student loans are generally not discharged in bankruptcy. See below, which is an excerpt from my Guide located at: http://www.debt-relief-bankruptcy.com/faq-browse11-15/bankruptcy-guide.asp

Discharging Student loans. Student loans that were made under the auspices of, or guarantied by, or at least partly funded by a governmental entity or nonprofit institution are normally nondischargeable, as are any student loan that carries payments which are qualified under the IRS Code for income tax deductibility. However, such loans can be discharged but only upon a showing that not discharging the loan would be an undue hardship upon the debtor and any dependents of the debtor. Unfortunately, the process of seeking the undue hardship exception is extremely difficult for most debtors. The process entails filing a lawsuit against the creditor, and the debtor has the burden of proof. Such suits are very complicated and time consuming to pursue, and the assistance of legal counsel can be very necessary but very expensive.

Undue hardship student loan discharge. Court decisions that find undue hardship for the debtor have been extremely rare in the reported case decisions. A review of the reported court decisions in this area will disclose that most undue hardship discharges that have been granted typically go to individuals that suffer from some type of very severe permanent and total disability or some sort of permanent disability that drastically restricts the ability of the debtor to more than a subsistence level of income. The courts require a finding that the debtor has proven each of the following three elements:

1. That the debtor cannot maintain, based upon current income and expenses, a “minimal” standard of living for himself and his dependents if compelled to repay the student loans; and

2. That additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period of the student loans; and

3. That the debtor has made good faith efforts to repay the student loans.