Why don’t lawyers who help people get out of debt know about student loans?
When he filed for bankruptcy, private student loans could be wiped out without a hitch.
This was in the old days, you understand – before the bankruptcy laws were overhauled in 2005. All his lawyer needed to do was list the private student loan and it would be discharged along with most other debts.
But his bankruptcy lawyer didn’t understand the difference between a private student loan and a federal one. So rather than walk away from the debt, he kept sending payments.
Thousands of dollars spent over the years. All for nothing.
Enter The Voice Of Reason
Years after the bankruptcy, he called me to ask about getting out of default. Though I knew his options were limited – this is a private student loan, so those federal repayment and rehabilitation programs don’t apply – I spent some time looking at the bankruptcy papers.
A few phone calls, a sternly-worded letter and a review of the credit reports ended the matter once and for all.
There was no means of getting out of default because there was no default to cure.
The private student loan had been wiped out in the bankruptcy case.
Bankruptcy Doesn’t Live In A Box
If you’re thinking about getting out of debt, bankruptcy may or may not be the right idea for you. You need to examine all of your debts and map out all of your options. For example, using bankruptcy to deal with a federal student loan may not be the most effective tactic. So, too, a Chapter 13 bankruptcy may end up being the perfect solution to private student loan collections.
For bankruptcy lawyers, it’s critical to realize that your role is to help people get their debts under control. If one solution doesn’t work, you need to know about the others.
Even if you end up bringing in a student loan lawyer to handle the heavy lifting, issue-spotting is of paramount importance.
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