Student loans are difficult to discharge in bankruptcy, but contrary to popular belief, they are not entirely impossible. To have a student loan discharged, you must show that payment of the debt will impose an undue hardship on you and your dependents. Courts use different tests to evaluate whether a particular borrower has shown an undue hardship, but if you can successfully prove undue hardship under the court’s criteria, your student loans may be completely canceled.
Whether a student loan is discharged based on hardship is not automatically determined in the bankruptcy process, so you must file a petition called an adversary proceeding to get a determination. The very act of filing for bankruptcy has an immediate effect on your student loans. Filing automatically protects you from collection actions on all of your debts, including student loans, at least until the bankruptcy case is resolved or until the creditor gets permission from the court to start collecting again.
What happens when you can’t pay your student loans? When an institution who made the student loan feels like it can no longer collect a student loan, it can contract the collection work to an outside collection agency. The collection agency promises to collect, usually on a commission basis.
Most of the time, collection agencies have the power of attorney to collect their debts. That means whoever owns the debt can hire a law firm and sue you for collection.
A collection agency may demand payment in full, but to collect in full, they would have to have a court judgment. That means they would have to make a lawsuit against you in court. If and when they get a judgment by winning the lawsuit, their options, depending on the state in which the debtor lives, can include garnishment of wages, liens on personal property, and in some cases, seizure of some assets.
Before collectors would be able to pursue remedy of a judgment, they would have to know how many and where your assets are to make any difference, but even finding the assets does not guarantee collection. Any secured assets cannot be seized because they will already have existing liens.
Having your wages garnished is usually the most successful action of judgment. Debtors cannot hide their employment, an employer, by law, is legally obligated to obey a court-order to garnish the debtor’s wages if the state in which the debtor lives allows it.
Student Loans are some of the most difficult loans to deal with if you are bankrupt. Due to powerful lobbying groups, private student loans enjoy the same protection as federal loans. Student loans are usually not discharged when you file for bankruptcy, and it is very difficult to prove undue hardship. Trying to get a student loan discharged is something I would not recommend doing without the advice of a bankruptcy lawyer.
Bankruptcy laws can be complicated. If you need relief from the stress of debt and you live in or around the metropolitan areas of Richmond or Petersburg, Virginia, contact us at www.betterbankruptcy.com .We will help you find a bankruptcy attorney in your area who will answer your bankruptcy questions.
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