My Student Loans Were Discharged in Bankruptcy But They Are Trying to Collect

“Dear Steve,

My chapter 7 was discharged in 2002 wherein I listed all student loans and creditors. No one showed up. No one filed an adversarial proceeding. Then 3-1/2 months later I received a call wherein there told me I had to repay these loans and had me sign a FFELP Fed Consolidation Loan and Prom Note application. I now am to understand I should have never had to sign anything and they just made a new loan on something that was discharged. 34 CFR 685.212(c) states if loans are discharged in bk, the secretary does not require borrower to make any future payments on loan. And yes this was AES/ACS back and forth, they’ve garnished my wages over the years, I call back and yell at them and they give my money back. They have offset my tax returns for 4 years now though and not returned any money back. When I call them they always say, “Student-loans aren’t dischargeable” or “Well, you re-signed to pay this debt. Why did you do that?” They say I should have filed a hardship determination…..I filed In Pro Per and was not aware of any such requirement then. I was going thru a really bad divorce at the time I re-signed up to pay this, lost my job two months later, became homeless and have never quite gotten on my feet again, I never did graduate and am currently on disablity from my $8/hr job.

Is there anything I can do that you know of? What do you know about this 34 CFR 685.212(c) rule? Was this illegal? Do I have to reopen this and do an adversarial proceeding on something that didn’t exist until AFTER my discharge? Thanks”

While the student loans might have been included in the bankruptcy, it does not mean they were discharged if they were ineligible for a discharge. If these were government backed loans they would have been ineligible for a discharge at the time and if they were private loans they would have had to have been in repayment for seven years before being eligible for discharge.

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You’ve cited some issues that do exist but to me don’t seem relevant to your situation. The hardship discharge for student loans is extremely difficult to get and typically requires a significant amount of legal wrangling by an experienced attorney and a life altering hardship. That doesn’t see to apply here.

The code section you’ve cited, 34 CFR 685.212(c), says:

If a borrower’s obligation to repay a loan is discharged in bankruptcy, the Secretary does not require the borrower to make any further payments on the loan. – Source

But I don’t think your loan was discharged in your bankruptcy, since it was most likely not eligible for a discharge even though it was listed.

If you disagree with any of this you should please feel free to contact the Department of Education Student Loan Ombudsman Group for review and intervention. You might also want to contact you local Legal Aid office to see if you can get some specific legal advice about this for free.

And while you are here, you might want to explore the public benefits finder to see if you might be eligible for any additional income from benefits. You may qualify.

If the loans stand, you should talk to the servicer about the Income Based Repayment program for your consolidated loans. Under that program your payment should be $0 given what you’ve shared about your income.

Please post your responses and follow-up messages to me on this in the comments section below.


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Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
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