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I'm probably going to get alot of flak for this but I"m gonna ask the question anyway.

As my understanding goes, student loans can be included in a bankruptcy under extreme circumstances. Does anyone know what is considered extreme? or can point me in the direction of a legal precedent of said happening?

I've been tossing around the idea in the back of my head, as I'm working on starting my own business. Increasing my income will increase my ICR payments, which should not theoretically interfere with my quality of life, but... I don't want it to hold me down like an anchor either.

The likelyhood of my income reaching a point where I would be able to pay off the loan(s) is nill to null. or naught to aught? Anyway...

Just wondered, if anyone had any suggestions.

Lady I, getting really tired of carrying around the monkey on her back.
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Lady I

I don't remember the specifics of your situation precisely; a little more description (total debt estimate, current income/current expenses).

Not having been through bankruptcy myself, I'd try to avoid it. However, if you do you might want to move quick, because I think federal law is changing soon with how your debts are handled.

Danbobtx
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http://studentaid.ed.gov/PORTALSWebApp/students/english/discharges.jsp?tab=repaying

It's possible to have your student loan debt discharged (canceled) or reduced, but only under certain specific circumstances:
- You die or become totally and permanently disabled.
- Your school closed before you could complete your program.
- For FFEL and Direct Stafford Loans only: Your school owes your lender a refund, forged your signature on a promissory note, or certified your loan even though you didn't have the ability to benefit from the coursework.
- You work in certain designated public school service professions (including teaching in a low-income school).
- You file for bankruptcy. (This cancellation is rare and occurs only if a bankruptcy court rules that repayment would cause undue hardship.)


http://www.moranlaw.net/studentloans.htm

Hardship discharge
Student loans are no longer dischargeable in bankruptcy just because they have been in pay status for a given period of time. The only way the loan can be discharged is by proving that repayment of the loan will create an undue hardship on the debtor/borrower and his family.

This standard is generally interpreted to mean that the debtor cannot maintain a minimally adequate standard of living and repay the loan. It usually requires a showing that the conditions that make repayment a hardship are unlikely to improve substantially over time. Many courts use the test for undue hardship found in the Brunner case.

Courts in some circuits will permit the judge to find that the debtor can repay a portion of the loan without hardship, and to discharge the balance of the loan.

To discharge a student loan in bankruptcy, the debtor must bring an adversary proceeding in the bankruptcy case. The debtor must prove at trial that repayment constitutes undue hardship.


This is an interesting article:
http://touchngo.com/lglcntr/usdc/bnkrptcy/briefs/bnk49.html


Assume for the purpose of this article that Alaska and Pennsylvania would apply the three-part Brunner test for a bankruptcy discharge of a student loan used by the bankruptcy court. First, the debtor must establish that she cannot maintain, based on current income and expenses, a "minimal" standard of living for herself and her dependents if forced to repay the loans. Second, the debtor must show "that additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period of the student loans." The third prong requires "that the debtor has made good faith efforts to repay the loans" [In re Pena, 155 F3d 1108,1111 (9th Cir. 1998)]

An appeal in the Brunner case:
http://www.moranlaw.net/student_loan_brunner.htm

Sounds like you might benefit from the advice of an attorney who's familiar with the details of your financial circumstances.

-A
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One more reference:
http://www.bklaw.com/pena.html

Suggest you look at "Applying Brunner".

Good luck getting this sorted, Lady.
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Yeah, that high hurdle is so political.

The A-holes of our society politicked student loan defaults to such an extent, that now the government doesn't even attempt to provide appropriate relief. (8% loans ticking away to create even higher interest, if you aren't paying the accrued amount).

The critics were right to point out that the loans were government money. BUT, they fail to treat the liquidation of those debts similar to what the government does with ordinary tax delinquencies and liens!

(Furthermore, the same critics have never acknowledged the clear connection between tax money paid in by student borrowers, and the benefits they receive. As a New Jersey resident, I am compelled to pay over high taxes on my income so the South can live high on the hog. But then, I'm not supposed to seek any benefits from the federal government.)

LadyI, I remember your original difficulty, a couple years back, was Sallie Mae dunning you for money, screwing around with your requests for deferment and forbearance, and in general making your life miserable.

I recommended that you go with Direct Loans. And now it sounds like they let you keep your money, but still hit you with the letters telling you that your loan balances are going up.

Why keep worrying about it? A creditor that is coming after you for ZERO dollars every month? For most people, that's a dream.

Bankruptcy is not the solution, when there are so many other ways to deal with a debt.

If you think making money is going to cause a problem with the loans, take online classes at a community college.

Our bankruptcy culture is a big, big problem. And I am one of the people out there, who is more liberal about the plight of debtors.
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Not having been through bankruptcy myself, I'd try to avoid it. However, if you do you might want to move quick, because I think federal law is changing soon with how your debts are handled.

Danbob's right... See
http://credit.about.com/cs/legal/a/040601.htm

for details about coming changes in bankruptcy law.

Also see:

http://credit.about.com/od/legalaid/a/050405.htm
for legal resources that may help.
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W505a -

It's not so much that they are bugging me for the money, as the fact that it is already at 90K and increasing due to capitalized interest every year. Yes, I may be able to write it off in 25 years of $1.00 payments, but.... I can't even imagine what the write off amount would be. 

A while ago, I talked to my bank about a mortgage loan, and the guy had no concept of the fact that I was not paying anything on it. IE my payments were $0 per month. He insisted that I would have to start paying it back eventually. Currently I do have another debt problem, but I'm hoping to start getting that resolved in the next month or so. The only debt I would add to any bankruptcy would be the student loan. 

I worry about the fact that if my income increases they will start requesting payments from me. Although, the likelyhood of it increasing that much is pretty much nil, unless the rental property that I was considering buying off my brother turns out to be a gold mine. (Literally)

Currently my income is so low that the one medication that I have to take daily is provided to me free by the manufacturer. I don't particularly like living hand to mouth, but that's just the way it is. I may be able to increase my income with some luck and some hard work, but with a 100K studen't loan hanging over my head, is it really worth it. 

Here's some numbers to think upon:

Payoff amount as of 9/30/05: $ 97,767.19

Repayment Plan:	Income Contingent
Principal Balance: $89,525.03
Fixed Payment: $0.00

Due Date: 06/07/2003

Original Balance: $78,536.29 
Capitalized Interest: $11,036.12  	
Refunds: $47.38  
Rebate: $0.00
Interest Paid: $188.33  	
Principal Paid: $0.00
Interest Outstanding: $7,881.24  	
Principal Balance: $89,525.03

Interest Rate: 7.750%*
* Fixed 

I dunno...what do you think? (maybe I should just enter the Guinness book of world records for the most accued interest on a student loan.)


Lady I.
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Bleh - sorry I meant to unclick the fixed table data option.

Although the due date say /03, I have been making $1.00 a month payments on this loan for almost 2 years now.

LI
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Lady I

Have you looked at the various "non-profit" (smile when you say that :) consumer credit counseling services? I think they are still a "black mark" on the credit report, but i think for a shorter period of time than Bankruptcy. Again, I don't have experience in this area, but for creidt cards, they can generally work out a lower interest payment or partial repayment plan.

Anyone else have more experience in this area, and is this applicable to student loans?

Danbobtx
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It just sounds like a big risk.

You file, then it turns out the judge says, "sorry it's not a burden because you pay $0 a month." I would be afraid, that you screw yourself worse by filing and not getting a discharge.

I would wait out the 23 years until they discharge it.
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Plus, the rule is: only interest up to 10% of the loan balance is capitalized. The rest accrues, but does not capitalize.

Meaning the only part of the loan that generates interest is the first 100% (principal balance) plus another 10%.

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Danbobtx -

I went to credit counseling once a very long time ago. You know what they told me? "You don't make enough money." (and that's a quote.)

I looked at the lady like..."No shit!" I realized at that point that I knew more than she did, and that was _before_ I found the Fool.

Besides, they can't do anything about my student loans.

Anyway, the whole thing was just a passing though, and W505a has reminded me about the 10% rule.

Of course that still doesn't solve my problem in ever trying to get a mortgage. (Yes sir, my payments are $0 per month on this loan, no sir, It will never go up to a regular payment. *they look at me like I'm sitting in their office smoking crack naked and painted green with magenta paisleys.*)

Anywho...I've got other problems to deal with first.

Lady I, living the peasant life.
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You can always get a letter from Direct Loans, explaining that the payment would never be more than 15% of income.
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pardon my language...but how the *@%! did you amass that loan? if you dont expect your income to go up by studying (are studying to be a brain surgeon?) what was the point of the loan?
sell the pc on ebay and cancel your internet and start putting that towards your debt!


r
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Robert,


Welcome to the fool. Obviously you are interested in student loans or paying them off. LadyI has been here a long time. Some of us have been critical of her choices, but the basic fact remains she's got student loans that are a tremendous burden to her.

At this point, how it got to be a burden is not so important as steps she can take to continue moving forward in a credit driven society and repay the debt to the US government in the best possible manner. From what I know about her, she's being a good mom, and helping an elderly family member. Frankly, her continuing those roles, as well as participation as a consumer are probably more important than the government getting one more cent from her.

Some of us here think student loan amounts should be more closely tied to earning potential, others would suggest cost of living, etc. In any event, if you want to discuss that, I'd be happy to in a different thread. Additionally, how the student loan system is tilted toward lenders would also be a welcome topic of conversation.

Topics on this board change a bit more slowly than others. Soon it will be tax time again, and we will discuss methods for getting the biggest tax break.

Welcome aboard

Danbobtx
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As a New Jersey resident, I am compelled to pay over high taxes on my income so the South can live high on the hog. But then, I'm not supposed to seek any benefits from the federal government.)

Huh?

ARR
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As a New Jersey resident, I am compelled to pay over high taxes on my income so the South can live high on the hog. But then, I'm not supposed to seek any benefits from the federal government.)
===========
Huh?

ARR


That's what I thought to. I don't think people realize how low the hog can be in the South...
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Robert -

Suffice to say it was not an intentional thing. I am no longer studying in the "Formal" sense. Haven't been for a good 15 (?) years. I have however learned alot in that time. One of these days I will have to write the saga of The Dragon and Lady Ianna. (usually when I try to write a long post, my computer crashes and it just get incredibly angry, so I don't try to do that anymore.

My PC is at least 15 years old, and is made up of scavanged parts so would not be of worth to anyone but myself. My internet is the cheapest I can get in the area. ($48 for 3 months) My debt is accumulating faster than I can make money even if I was a brain surgeon. Sometimes, a thing grows a life of it's own and will eventually devour you. Such is my student loan at this point.

In addition it was not just one loan, but a combination thereof. Ranging in interest rates from 7% to 10+%. Not all of us have had the fortune to be born in the right "economic" time period. Not all of us were born with a silver spoon in our mouths or were taught the proper way to handle debt. Not all of us were able to achieve our goals, or sometimes even knew what those goals were. Not all of us have had emotional, material, or psychical family support. Some of us have had to raise our "parents" and not have them raise us. Some of us, make mistakes and learn the hard way.

But don't let me give you the impression I feel sorry for myself or want you to feel that way for me. I am content to have a roof over my head and a few "extras" every once in a while. I know people who have much less.

I will write myself a sticky note to remind me to write my story one day when I have time to spare. Hopefully in doing so, someone else will learn from my mistakes, and will be able to avoid being trapped by the "Dragon."

Lady Ianna, thinks her knight in shining armour got caught in the rain without his oil can and must have gotten rusty. (Not expecting to be rescued.)

**Dan -

Thanks. You are a true knight in shining armour to come to this lady's defence. (I don't however, btw, have any children. Would like to adopt, but couldn't afford them if I did. But that's a whole 'nother chapter...)

**
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Well, this thread has been a bit more active than I thought, so I thought I'd make some additional comments. First, I really was trying to welcome Robert to the board. I know I've been on the wrong side of a discussion on more than one occasion, and I do hope that Robert will participate here with us regarding his and others interest in paying back student loans.

On that note, I just mailed in another payment and hopefully will eventually get out from under my 38,000 in undergrad loans (consolidated, 4% overall interest or there abouts). I'm about to finish an advanced degree, but have been fortunate to work as a research associate over much of the time. In any event, having that advanced degree will help me pay off that burden much quicker than If I'd only been able to do my undergrad. There are so many other situations which would make that amount burdensome, ranging from partial disability, to what part of the country one lives in, to chosing a degree in a dying field.

But those are mostly just exceptions, and the real problems in the system are more typical; I paid for Scuba Classes using student loans (P.E. credit), I never recieved entrance counseling prior to any of my loans, loans often exceeded my true needs, and financial aid was not flexible enough to let me take time out from school when I got burned out.

With that said, I do strongly disagree with the folks here who would attempt to never pay back student loans, as I got something out of my education (neutral bouyancy!), and I've got an obligation to make my best effort to repay the future taxpayers of the U.S. as well as keep the student loan system from being legislated out of existence due to low repayment rates. Yeah, I know repayment rates are pretty good right now, but every time they drop, folks talk about doing away with loans.

And then we get to cases like that of LadyI who for whatever reason (living high off the hog in the south???? :) truly can't pay the loans off. And for those folks, I support any legal method to give them some relief, especially if it holds them responsible in some way for the loan. Declaring bankruptcy, an extreme case, still holds folks responsible for those loans, if nothing else, as a big negative mark on the credit report.

Anyway, that's my $.04 (I've gone on a lot longer than normal)

Danbobtx
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http://boards.fool.com/Message.asp?mid=15467145&sort=recommendations


I wish I could find that Taubman/Harvard study online still. Each page had the information for one state: how much the residents paid into the federal government, and how much that state got in federal benefits.

It turns out, that states in the Northeast pay in wayyy more in federal taxes, then they ever get back in benefits.

Although some Southerners don't feel they have very much, they would have even less if not for the forced generosity of the North.

And that doesn't include the actual generosity of donation checks, every time a hurricane comes through and blows out a misplaced community down there!!

I'd just like to see a Southern Republican congressman propose some benefit for his (and it's always a his not a her) region---and insist that it be a LOAN "that must be paid back!" and not a GRANT!
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I wish I could find that Taubman/Harvard study online still

Check the link below. There are annual reports for up to 1999 available, it looks like. I think the State Profiles are what you're interested in. There's a pretty cool chart on each of the profiles showing how the states all compare in Federal Taxes and Federal Spending as compared to the national average.

http://www.ksg.harvard.edu/taubmancenter/publications/fisc/

- KG, delurking and wondering if she should tell her dad that Indiana really doesn't pay so much more in taxes and get so much less from the Feds than California does
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I'd like to see the difference between NY city and the rest of the state, but that's my own pet peeve.

Lady I, will be in jail if her brother doesn't pay her what he owes her.
(how short a sentance can I get for justifiable brother-cide?)
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