I’ve Heard I Can Discharge My Private Student Loans in Bankruptcy. Is That Rue? – Jennifer

“Dear Steve,

I have about $13,000 in credit card debt (minimum payments of $150 total), $17,000 left of my car loan (which I’m current on my monthly pmts – $465/month), and a total of $180,000 in student loans, of which $72,000 is federal (which I’m currently on Income Based Plan of $30/month – they at least work with you) and $108,000 is private loans (not backed by federal govt – one through Sallie Mae, other thru AES/Chase), with minimum payments of $870/month (on repayment plans at high interests).

If it weren’t for my student loans, I probably wouldn’t have any debt since I’ve mostly used my credit cards for food and gas purchases. My income is only $20,000, working 7 days/week at times. I don’t have any extra expenses other than food, gas, utilities, rent (the necessities), but would like to live a life and not be so stressed about finances. Until recently, I was never educated on how money works. I feel if I could start over I would be fine the rest of my life!

I live in the state of Texas and have been informed that there are ways to file bankruptcy including student loans.

For example, there’s only a SOL of 4 years once I graduated and as long as my private student loans are in collections/discharged to a 3rd party, I can include them in a chapter 7 since they are not “student” loans at that time…I even have a friend who was able to file and they were discharged, however, I cannot find an attorney who knows anything about it and I’m having trouble finding a bankruptcy lawyer who’s willing to help me. I know you can if you have undue hardship and if this isn’t it, how much more do I need to be in debt?! I keep getting told to make more money, but it’s not like I’m not trying. Any suggestions on what I can do? Is there a way for me to find the legal research myself to file bankruptcy on my loans (using bankruptcy codes, etc)? Anything you can recommend would be highly recommended!!

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Jennifer”

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Dear Jennifer,

You are correct. Private student loans that have not had any activity or payments on them that are now outside the statute of limitations may be discharged in bankruptcy.

Determining the time period for the statute of limitations can be tricky.

Rules for Installment Contracts

When an installment contract is involved, the statute of limitations normally applies separately to each installment. For example, assume you loan Larry $5,000 and he agrees in writing to pay back the loan in five installments of $1,000 each beginning on January 1, 2012, and continuing on January 1 of each following year through 2016. If Larry fails to make his first payment, then you can’t sue him in small claims court until January 1, 2016. (Note that you can sue him for only the $1,000 payment he missed, not for the entire $5,000.)

From Larry’s point of view, if you don’t sue by January 1, 2016, then you cannot sue him for the first missed $1,000 payment because the lawsuit is barred by the statute of limitations.

Because Larry’s second installment payment isn’t due until January 1, 2013, you have until January 1, 2017 to sue him if he misses that payment, and so on.

There is, however, one important exception to this rule: If the written contract contains an “acceleration clause” stating that if one installment payment is missed, all immediately become due, the statute of limitations expires for a lawsuit to collect all installments on January 2, 2013. – Source

For help determining the specific statute of limitations applicability for your specific debts, you would need to consult with a lawyer licensed in your state.

And according to this link the statute of limitations in Texas is four years for:

Sec.A16.004.AA FOUR-YEAR LIMITATIONS PERIOD. (a) A person must bring suit on the following actions not later than four years after the day the cause of action accrues:

(1) specific performance of a contract for the conveyance of real property;

(2) penalty or damages on the penal clause of a bond to convey real property;
(3) debt;
(4) fraud; or
(5) breach of fiduciary duty.

If you want to find a bankruptcy attorneyyou can click here to find a local bankruptcy attorney and talk to them for free about your specific situation. Get the facts and then you can make an informed and educated decision if bankruptcy is right for you.

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

Sincerly,
Steve

You are not alone. I'm here to help. There is no need to suffer in silence. We can get through this. Tomorrow can be better than today. Don't give up.

Damon Day - Pro Debt Coach

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