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I Thought My Art Institute Student Loans Were Eliminated in My Bankruptcy? – Stephanie

By on January 6, 2016

Question:

Dear Steve,

I went to the Art Institute of California for video production. I graduated in December of 2009. Due to life I had not been able to pay my loans. The went from being 54,000 when I graduated to over a 120,000 last year. Most of the loans were private and I got them discharged in bankruptcy at the end of the 2015. But the two federal ones were not discharged leaving me owing about 17,000.

So I have two questions:

On a credit monitoring site the Trans Union says that everything has been discharged due to the bankruptcy. But the Equifax says that there are two department of education loans that are about 17,000 and just recently they added some accounts that say USA Funds but there is no info and a couple of other loans that are open but charge off/collection. Which one is right?

The second question is can I get the federal ones discharged considering that I went to the Art Institute and they have been in trouble a lot lately. Also Navient has the loans and I know they have been in trouble a lot too. Plus this morning I tried to log in into my federal loans and they said that my info doesn’t match any of their records. So I am totally confused because I got a letter from Navient saying that federal loans can’t be discharged. And they have started calling me several times a day again. What’s right? What do I do?

Stephanie

Answer:

Dear Stephanie,

Well it looks like you are the victim of a lot of half information.

While the bankruptcy gave you a fresh start, it is unlikely it automatically discharged any of your student loans unless the school was not accredited or the private loans were past the statute of limitations. But because you had federal loans from the same school, the odds are the school was accredited.

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Federal loans can be discharged in bankruptcy but you need to prove they were an undue burden and hardship. That typically involves a process in addition to just filing bankruptcy. Your bankruptcy attorney would have had to file an adversary proceeding to challenge the dismissal of the private and federal student loans.

At this time, dealing with student loans in bankruptcy is a fluid topic. Just look at these articles to see what I’m talking about.

I hear from quite a few people who think just because they went to the Art Institute their loans can be easily forgiven. While it is true, some can, the devil is in the details. Please read “People Are Telling Me My Art Institute Student Loans Can Be Forgiven.” Reality is much different than what people whisper about the Art Institute loans.

Navient services both private and federal student loans. While they may say your student loans can’t be eliminated in bankruptcy, some private student loans can actually be easily eliminated in bankruptcy. See “These Private Student Loans Can Be Easily Discharged in Bankruptcy.” Your obvious argument would be if part of your private student loans was used for expenses other than qualified educational expenses. That article will help you to understand those issues.

Just based on the information you provided to me I would assume that none of your loans were discharged in bankruptcy, you continue to be on the hook for them, and your balances are exploding.

Dealing with your student loans when you are so far behind is a frightening mess. The loan servicers are not known for giving people the proper information, attorneys are not well versed about what they can do to help people, and the individual has no experience to best address their situation.

At this point the logical solution would be to talk to a professional student loan debt coach to try and get to the bottom of your current loan status. Then you can come up with a plan on how to best address the overall situation.

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About 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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