Are My TERI Private Student Loans Dischargeable in Bankruptcy?

Question:

Dear Steve,

I had debt discharged back in 2017 in bankruptcya for TERI loan.

This year they tried to garnish me after the fact. I won my motion for sanctions and now they are appealing the decision. Any recourse?

Aren’t they private-educational loans?

Any advice?

Tiffanie

Answer:

Dear Tiffanie,

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The issue you describe is a highly fluid area of the law. You might want to look at these past posts on the TERI issue.

For specific legal advice, you need to talk to an attorney with private student loan experience licensed to practice law in your state.

You have a very good argument the loan is eligible for discharge in bankruptcy, but the folks holding or servicing the loan have a host of attorneys to push their point of view.

Several reasons private student loans may be eligible for discharge in bankruptcy. One issue is if the loan was for a Title IV school, not for qualified educational expenses, or is no longer protected like TERI loans.

In this post, this quote was published, “Even if the Bankruptcy Court’s statutory construction were sound, the evidence below shows there is a genuine issue of material fact as to whether TERI guaranteed the loans that form the basis of Mata’s debts and whether TERI was a legitimate nonprofit. As to whether TERI guaranteed the loans at issue, the Bankruptcy Court failed to recognize that the TERI guaranties were voided in TERI’s bankruptcy prior to Mata defaulting on the loans and filing bankruptcy. Despite implicitly relying on Mata’s bankruptcy petition date for the purposes of its conclusion that TERI “funded,” the loans, the Bankruptcy Court applied the loans’ origination date to conclude the loans were guaranteed by TERI. The evidence also indicates TERI did not actually guarantee the loans. As to TERI’s status as a nonprofit, the Bankruptcy Court failed to inquire whether it was operated for charitable or commercial purposes, and financial records suggest TERI was a commercial mechanism for the profitability of The First Marblehead Corporation (“FMC”).”

Right now, you are at the bleeding edge of this issue.