The Complete Book on Bankruptcy

By respected consumer bankruptcy attorney

Peter Francis Geraci J.D.

Chapter 1
How to have a Stress-Free Bankruptcy

Chapter 2
What is Bankruptcy

Chapter 3
What causes people to need Banruptcy Relief

Chapter 4
What is the procedure?

Chapter 5
When you should consider Chapter 7 or Chapter 13 plans?

Chapter 6
What can Bankruptcy do for you?

Chapter 7
Common Misunderstandings about Bankruptcy

Chapter 8
Is Bankruptcy Bad?

Chapter 9
What does Bankruptcy cost?

Chapter 10
Can I file without my spouse?

Chapter 11
Does my Employer know if I file Bankruptcy?

Chapter 12
Do I lose anything?

Chapter 13
Does Bankruptcy "Ruin my Credit"

Chapter 14
Can I keep bills off my bankruptcy

Chapter 15
Bills or property in somone else's name or posession

Chapter 16
What about the Credit Union?

Chapter 17
Co-Signors

Chapter 18
What about my car?

Chapter 19
What about my House?

Chapter 20
When do creditors stop bothering me?

Chapter 21
What are Cross-collateralization Agreements?

Chapter 22
Joint Accounts with Parents

Chapter 23
When do I stop paying creditors?

Chapter 24
Gas, Electric & Phone Bills

Chapter 25
Bankruptcy & Divorce, Alimony & Child Support

Chapter 26
What Bankruptcy won't solve

Chapter 27
Chapter 13 Debt repyament Plans

Chapter 28
Will I be able to get credit again?

Chapter 29
Bill Consolidation Loans

Chapter 30
Bill Consolidation

Chapter 31
Wage Assignments, Deductions and Levies

Chapter 32
Student Loans

Chapter 33
Can I get rid of Taxes

Chapter 34
NSF Checks, Traffic & Parking Tickets

Chapter 35
Surrendering Real Estate & Time Shares

Chapter 36
Business Bankruptcy

Chapter 37
Professional Persons

Chapter 38
Do you ever "Not Get" a Discharge?

Chapter 39
About Geraci Law LLC and Peter Francis Geraci

Chapter 40
Who is the best Bankruptcy lawyer near me?

Chapter 41
What if I need a Bankruptcy lawyer near me?

CHAPTER #32 STUDENT LOANS

Short story: Can't use bankruptcy to get out of student loans in most cases.

Why? Bankruptcy discharge of government insured "educational benefits/student loans" requires a lawsuit within the bankruptcy called an "adversary complaint" and you have to provide "undue hardship". Even if you are 80 in a wheelchair, this is a lot of work. It can be done, but it is much easier to ask for administrative discharge of a government insured loan or benefit. Look it up on Department of Education's website.

Non-government student loans, or tuition or other benefits, require the same kind of complicated "adversary procedure".

Chapter 13 is useful for working people who are behind on their student loans because your professional license can be suspended if you are behind. Chapter 13 keeps that from happening, so if you are a medical professional, or other license holder with that problem, try to arrange an income-based repayment. Chapter 13 is a last resort.

It is commonplace for people to make loans to finance their education. Major banks like Citicorp are making them for everything from legitimate 4 year colleges, to bartending and truck driving schools. Government insured student loans and educational benefits of almost any kind are NOT DISCHARGEABLE in bankruptcy. You have to pay them. Period. The reason student loans are so easily available is that federal and local government insures many of them. Government insured loans often have acronyms such as NDSL, GSL, HEAF, and HEAL. These loans live forever. I have been seeing a lot of podiatrists, psychologists, social workers, dentists, and foreign medical graduates who cannot repay their loans, and we cannot ever discharge them. So they must attempt to pay them.

We can only deal with their other bills, or sometimes, if they have enough cash flow, compromise the student loan payment by filing a Chapter 13. This stops collection activity, and during the time the Chapter 13 plan is pending, up to 60 months, part of the Chapter 13 payment goes to the student loan principal. At the end of the Chapter 13, there is still a balance due on the student loan, but the balance is a lot less, and the person has had a chance to get established, and often can then start paying a higher payment. So, while student loans cannot be discharged, it is possible to get a lower payment and protection from collection efforts, by doing a Chapter 13 plan.

If you are not current in your student loan, you usually cannot borrow or consolidate, so do that before you file if you can. Sometimes we can get court permission if you are in a Chapter 13 and need to consolidate or get another student loan.

This is important for health professionals, and also for anyone licensed by a state agency, such as an attorney, or for anyone who works for state agencies. Since many student loans are guaranteed by state, rather than Federal agencies, many states have laws which allow the state to suspend a professional license if the person's student loan is not in good standing. A Chapter 13 plan will prevent this. Some states have laws which permit the state to deduct from a state employee's paycheck without a lawsuit, if the employee is not in good standing on a student loan. So, if you have a student loan, even if it is recent, I may be able to formulate a Chapter 13 plan which will help, even if I cannot discharge the student loan.

Problem: Jackie had a car loan, where the payment was $252 per month, and a balance of about $4500 on it. She owed almost $12000 to a student loan where the first payment was due only 2 years ago, and about $6000 to other bills. She could only afford to make the car payment, and the student loan agency had filed a lawsuit and was about to deduct 25% of her gross wages each paycheck.

The Peter Francis Geraci Chapter 7 or 13 Solution: I formulated a Chapter 13 plan which proposed to pay the car in full, which would take the first 20 payments of $250 per month. After the car is paid, the plan proposed to pay 10% of the unsecured debt, and next to give all the money for the remaining 36 payments or so to the student loan agency. So, for a payment which was about the same as her car payment, Jackie got to pay off her car first, get rid of 90% of her other debt, and make a reduced payment with no interest to the student loan, and at the end of 60 months she would only owe the student loan agency about $5000, which she could easily pay over another 20 months.

So, if you have a student loan, grant or stipend, it must be listed on your bankruptcy petition, and you must make a careful analysis must be made as to whether or not a Chapter 7 or a Chapter 13 would be less expensive or appropriate for you