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Why Do I Have to Pay for Forgiven Student Loans in My Bankruptcy?

Written by Steve Rhode

Question:

Dear Steve,

I have approximately, $144,000 in student loan debt and in 2011, had to file bankruptcy in Ala. My debt were about $34,000 and would be paid off on a 3 yr. plan. However, my attorney said that even though my student loans were not in default they must be included. Therefore, we went from a 3 yr plan to a 5 yr plan.

So, after coming up on my 6 mos. repayment, I contacted my lender and explained exactly how much income was expected. I was asked if I had a disability and I said yes. I was told that I might be able to get TPD and was told how to do it.

After, several weeks my determination came back and my loans were forgiven. Mean while in 2011, I settled with my employer after an injury in 1988. These funds were to be given to my attorney $34,000 and about another $1,000 plus my payments up until last week or so.

The Dept. of EDU. stated that they would accept what was paid as PAID IN FULL. So, I have 3 yrs. or 2 yrs. now where I can’t work and if I do get employment my loans status resumes as before. I’m 57 yrs of age and want to work in my chosen field M.S.C.J. and Higher EDU. College Teaching and Learning at the Junior College level. This would probably be a adjunct position and thereby, making me lose my S.S.D.I. However, at least 2 classes would be a good trade off.

My Question is can you tell me why maybe my attorney couldn’t see from initial visit that we had low-income and he didn’t try an fight for my wife and myself she has heart failure and we both are on S.S.D.I now. But, I would rather work and support us and that’s why I stayed until I got my masters and 3 concentrations.

After, reading that above post I am wondering if I should contact my Trustee and the Judge and see if we can claim a hardship, but it really seems that my attorney should have at least attempted that.

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Clifton

Answer:

Dear Clifton,

It’s difficult to answer your question since the information you provided appears to conflict. On one hand you said you did pursue a Total and Permanent Disability discharge and your loans were determined to be forgiven. On the other hand you say you still need to make payments towards the loans in your ongoing Chapter 13 bankruptcy.

If the loans were forgiven under the TPD program then you should talk to your attorney about changing your Chapter 13 bankruptcy to a Chapter 7 bankruptcy and just discharge the rest of your debt now.

The issue regarding SSDI continuation is not really a bankruptcy or student loan issue if your student loans were forgiven under the TPD program. Only you could decide if working provided you greater benefit, emotionally and financially, than relying on SSDI.

I think what you need most at this point is some clarity on your situation. Please confirm that all of the student loans were forgiven under the TPD program. Let’s take it from there.

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About the author

Steve Rhode

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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