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Cancellation of Student Loans and Restoring Your Credit Score
I am going to summarize the different ways that student loans may be reduced or cancelled, ending in what I propose is the best thing to do for some, but far from all, persons saddled with student loans or student-loan guarantees.
As things stand today, student loans generally cannot be scheduled (and therefore cancelled) in bankruptcy, because of a law known as The Bankruptcy Amendments and Federal Judgeship Act of 1984. An exception to the no-bankruptcy rule is that some private student loans from for-profit lenders can be cancelled in bankruptcy. The Fifth Circuit Court of Appeals determined that the definition of the term "educational benefit" is limited to "conditional payments with similarities to scholarships and stipends" and that private student loans by a for-profit lender did not meet the test and were therefore able to be cancelled in bankruptcy. Caution: this ruling was limited to one of 3 types of student loans that can't be cancelled in bankruptcy. It is very complicated, I agree. Certain Unconditional Student Loans by for-Profit Lenders Can be Cancelled in Bankruptcy
The main exception is that bankruptcy judges can cancel student loans if the student or parent proves "undue hardship". It's not easy to prove and could possibly wind up with a lower interest rate rather than loan cancellation. But the real problem is far more difficult to overcome, because it requires the filing of a complaint with the bankruptcy proceeding (which suit is called an adversary proceeding) and bankruptcy lawyers are reluctant to file an adversary proceeding because they can't get paid without a court order and the courts want the bankruptcy attorney for most individuals to wait until the bankruptcy is concluded before getting paid; and there probably will be no fund created in the adversary proceeding even if you win, so that the bankrupty attorney may worry for good reason about ever getting paid for the time-consuming lawsuit known as an adversary proceeding. One further caveat: if an adversary proceeding challenging the student loans on undue hardship grounds is not filed within 90 days of the filing for bankruptcy the bankrupt loses his/her right to contest the validity of the student loans.
Another type of cancellation is for a school closing while you were in attendance or within 120 days after you withdrew. Your school must have closed while you were enrolled, and you failed to complete your program because of the closure, or the school closed within 120 days after you withdrew. This closed-school exception might become quite active during the next year or two. See Closed-School Loan Cancellation Program.
There are several federal programs for nurses and teachers and other public servants that allow some or all of the student loans to be forgiven based on years of work. Very few persons (only 1% under a recent program) have received any benefits. See Service-Loan Forgiveness.
The federal government has a program of cancelling loans if you can prove that you were defrauded, but there is no opportunity to develop your case through discovery, or argue your case and answer any questions, so you have less likelihood of prevailing, at least it seems to me. See Borrower-Defense Cancellation.
Finally, there is what I think is the most suitable way to get rid of student loans but my method applies only if you have a meritorius case of fraud, to induce you to sue the school in question, the note owner and others to get the relief you seek.
It is easier to find a local lawyer to file your complaint in the state court than it is to get a bankruptcy lawyer to file and prosecute an adversary proceeding. You don't have to allege or prove undue hardship. You don't have to be a public servant. You would have the opportunity of getting discovery to prove your case, whereas in the federal fraud program you make an application and wait for them to tell you (more than likely) that you haven't proven the fraud. But in a private lawsuit in state court, you would have a better chance of having the school and note owner decide to release you from the student loan notes (i.e., cancel the debt) to stop the litigation costs, especially if you have no money to pay the loans anyway.
I would think that the credit agencies would remove any negative notation if you show that the loans were procured by fraud and have been cancelled by court order. I doubt if cancellation by undue hardship or public-servant program or by 5th Circuit for-profit unconditional loan exception would result in credit repair. The only possible way would be to have your application for a fraud-based cancellation be granted (which is not likely because you have no discovery or argument rights). Credit repair could probably be obtained if you cancelled your student loans under the closed-school exception.
My Way to Cancel Student Loans and Repair Credit - for Borrowers Only
What I will do is obtain from you whatever information you can supply, and then do research to learn what I can about the school's practices and their required reports, and then prepare a highly specific complaint on how you were defrauded, if in fact the evidence supports that fundamental allegation. You probably aren't aware of what constitutes fraud and may only see the fraud after I do my research. On the other hand, my research may show that you have no case of fraud, and I would stop working on your case at that point and refund the unused portion of my fee as would be spelled out in my retainer agreement.
Please give me a call to discuss your case (and no cost to you or obligation), and particularly these aspects:
- Whether I believe you have a case of fraud
- Whether I would be interested in taking your matter
- What would be the cost
- Whether one of the other types of relief would be more appropriate for you
- How would local counsel be obtained
- How would I assist your local counsel
There would be no charge for this discusssion or any other discussion before a retainer agreement is signed. My telephone numbers are office 212-307-4444 and cell 917-453-9376, or send me an email to firstname.lastname@example.org If I don't respond within 24 hours, don't hesitate to try again. I do want to speak with you about your specific situation and sometimes I can't get back right away.
One last point. My legal rate is a bargain, because of the years of relevant experience I have, enabling me to do more in less time. The complaint is the most important document in a lawsuit, and I alone do the research and drafting of the complaint, using the decades of relevant experience I have, incuding:
- I borrowed under a NYS student loan program and paid off my student loans, which were small in comparison to now;
- I'm a high school drop out without a high school diploma, but I have a BA degree and I am a Harvard lawyer (with 50+ years of experience);
- My main legal field is commercial litigation (which includes loan-validity litigation);
- I created, owned, managed and taught various courses in a school for 18 years (36,000 hours of school experience; with a teaching staff of lawyers only) which for years required a 4-year college degree for admission;
- My school received the student loan proceeds from the lenders, and my school also was a guarantor of validity of the student loans;
- For years I prepared the required types of student-loan paper work which could prove that you were defrauded;
- I sued the loan guaranty agency and obtained a cancellation of the school's student-loan obligations; and
- I made various YouTube videos on cancelling student loan obligations and authored an ebook explaining how you can eliminate unwanted debt of 4 types.
Carl E. Person, attorney
Carl E. Person
225 E. 36th Street - Suite 3A
New York NY 10016-3664
Lasr Rev. 6/27/20 9:18 pm