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  1. #1

    Default Can you Discharge a Private Student Loan in Bankruptcy

    My question involves bankruptcy in the state of: Ohio. Are private, non-government guaranteed student loans dischargable when filing Chapter 7? Co-signed on a student loan 5 years ago that the borrower defaulted on. Someone told me that I since it was a private loan I should be able to discharge my obligation due to filing Charter 7 in October 2005. I just got off the phone with the lender and they confirmed it was a private loan.

    I understand that Private student loans became non-dischargeable in 2005.

    "The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, which opens a new era in the history of bankruptcy law and practice, was passed by Congress and signed into law by President Bush on April 20, 2005... The U.S. Trustee Program has begun its planning and implementation efforts in preparation for assuming its new responsibilities on October 17, 2005, when most provisions of the Act take effect."

    I knew of the October 17th deadline. Therefore I signed my paperwork and had my attorney file before October 17th. Do I have a case?

  2. #2

    Talking Update

    Found the answer to my question myself. Double checked my Chapter 7 documents and the loan was included. I spoke with my attorney today and he confirmed that if the loan was private it should have been discharged in 2005. He did not make the distinction clear at that time. I contacted my bank and put a stop payment on the auto-withdrawal. I faxed a letter stating my dischargeable status / request to cancel our payment agreement along with a copy of the loan and the relevent portions of the Chapter 7 documents to the law firm seeking collections. I'll be curious if they continue to badger the co-signer rather than pursue the borrower of the loan.

  3. #3

    Default Re: Can you Discharge a Private Student Loan in Bankruptcy

    I would suspect that they'd do just that. Unless the co-signer has a bankrupcty discharge of their own, the lender has a secondary target who is just as legally responsible for the debt.

  4. #4

    Default Update

    Yesterday I get an alert that the stop payment for the withdrawal went through on August 2nd. I contact the bank, they explain the stop payment was not prcessed correctly [on their end] and will refund me. But also said that they would not be able to do that in the future because the [shady] collectors could simply change the check number / amount and the withdrawal would go through. They advised me to close the account tomorrow. Fine.

    I anticipate a call from them once my bank reverses it and they discover I've closed my account. Is there anything I can do to stop them from harrassing me? I've already provided them with the current contact info for the co-borrower. TIA.

    * I confirmed this with the underwriters of the loan and my attorney that processed the Chapter 7.

  5. #5
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    Default Re: Can you Discharge a Private Student Loan in Bankruptcy

    If the loan was included in the bankruptcy, it was up to the holder of the loan to object at that time in court and there would have been a hearing to determine if there was some reason the loan could not be discharged.

    They are totally and completely out of luck at this point.

    Trying to collect the loan now is abuse of process, a civil tort, and is also a violation of federal law. I do not deal with that area of law so don't have details. Bottom line, they can't collect on it. You can sue them for trying if you like.

    The statute would have helped them if you delayed in filing for bankruptcy until after the date it took effect, but as you filed before the effective date of the law, that law does not apply. No law can apply retroactively.

    One of the things people try is getting out of judgments by filing bankruptcy. If the holder of the judgment objects, generally speaking, there is no way that the judgment will be included in the discharge. Can't get out of judgments that easy.

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