Should We File Bankruptcy on Our Student Loan Judgment?

“Dear Steve,

We have three student loans right now worth a significant amount of money. One of those creditors took legal action against us last year and won their judgement against us. We are waiting for wage garnishment against us to appeal that as we aren’t even in the state where the court awarded the judgement any longer.

How long does the creditor with the judgement against us have to collect the debt from us? There is no way we can pay.

Would it be better to attempt to file bankruptcy and take that 10 year penalty, or fight with the creditor until the judgement collection term ends?



Dear Mindy,

I asked attorney Greg Fitzgerald from California to answer your question so you could hear from an attorney on this situation. Greg can be found at Here is what he had to say.

As most everyone knows, student loans are a huge problem. This is complicated by lots of bad information, unscrupulous “consumer advocates”, and even bad lawyering. Please understand that the information I provide here is limited to California law. In addition, because you state the “court awarded the judgment”, I am assuming that these are private student loans. This is because Federal loans do not, generally speaking, require court assistance.

As to any state court judgment, you should know it is only valid in the state it was entered in. For example, a judgment entered in Maryland cannot be enforced in California. Depending on what state you are in, they can apply for a sister state judgment. Nor do I suggest waiting for a wage garnishment to appeal any judgment. I am not aware of any timelines to appeal a judgment that are based upon the initiation of a wage assignment or any other judgment enforcement mechanism such as a bank levy. If you wish to appeal a judgment, act now.

In California, judgments are good for 10 years and can be “renewed” for another 10 years by simply filing a form with the court. Fact is, there are only 3 ways to get rid of a judgment: pay it (they can be settled for less than 100%), discharge it in bankruptcy (see below), or have it set aside on the basis that it was improperly entered (i.e. you were not properly served). This last option requires a court order, usually after a hearing.

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As to your bankruptcy question, most folks know that student loans are generally not dischargeable in bankruptcy. There are exceptions and this site provides a lot of good information on those exceptions. I would not file bankruptcy with the goal of discharging student loan debt without talking to an attorney about that specific issue. Having seen many clients who were told it would be discharged when they hired the attorney, only to discover the student loans were not discharged, be advised that blindly following what a bankruptcy lawyer tells you may not be enough. I know, it should not be that way, but it is. I have also had clients that were told the student loan was not discharged when in fact they were. It’s a scary world out there folks and at the end of the day, if some lawyer says he/she can when they really can’t, you’re stuck with the debt. Buyer beware does apply to legal services.

My general advice to those with unbearable private student loans is very simple: don’t pay them. Other than the non-discharge ability factor, they are no different than any other unsecured debt. All they can do is call/write asking for the money, put it on your credit report, and file suit against you. Not all loans get sued on and if the statute of limitations runs (typically 4 years in CA), they will no longer be able to force the money from you. Frankly, if they do sue you, it’s not all that bad. We are finding the courts are a good vehicle to resolve these debts. We have found opposing counsel is open to common sense settlements that are practical and affordable. These include principal reductions and interest free payment arrangements.

Again, a judgment is a different matter. These too can be settled and a lawyer experienced in judgments is usually required.

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My suggestion is that you have a lawyer determine if the loans can be discharged in bankruptcy. This is not always a simple or cost free analysis. If they are not dischargeable, hire a lawyer who knows about student loans and litigates them. Have him or her investigate them and try to settle them. If that does not happen, wait for the statute to run. If it does, great. If they file suit before it does, have the right lawyer defend you and resolve it using the court system. There really is no substitute for a good lawyer when it comes to student loans.

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


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Steve Rhode

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