The United States Supreme Court recently decided for a litigant whose student loan interest was included as discharged in his chapter 13 bankruptcy plan.  Federal bankruptcy law, 11 USC 523(a)(8), prohibits discharge of student loans absent a finding of ‘undue hardship’ by the bankruptcy judge.  In this case though, the bankruptcy judge confirmed the chapter 13 plan without requiring the debtor to prove ‘undue hardship.’  The student loan lender did not object to the plan prior to the confirmation of the plan and thus, according to the Supreme Court, the confirmed plan was binding even as to the student loans.

At the Supreme Court oral arguments, Justice Clarence Thomas said that even though the bankruptcy judge made a serious error by confirming a plan that included non-dischargeable student loan interest debt without a finding of ‘undue hardship’ by the bankruptcy judge, that error was not so serious as to void the confirmed chapter 13 bankruptcy payment plan.  The Court also found that the student loan lender could not justify using Rule 60(b)(4) to to void the confirmed plan because the lender failed to participate in the plan objection process in bankruptcy court.

This is a very limited issue and will probably have little impact in your potential chapter 13 bankruptcy.  What I expect is that student loan lenders will be more proactive in monitoring cases where the student loan lenders are listed as creditors.  In other words, they will not ‘fail to object’ as this lender did as to avoid this problem in the future.  BUT if the student loan lender fails to object to a plan that calls for even your complete student loan, principle and interest, to be discharged, if the Bankruptcy judge makes the mistake of confirming the plan (improbable now after this decision) then your loans could be discharged under this decision.

What does this mean for you?

This means that ONLY if the lender does not object to the plan, and your bankruptcy judge makes the mistake of confirming a chapter 13 plan that calls for discharge of student loan debt without an ‘undue hardship’ hearing, will you be able to discharge your student loan debt absent a finding of ‘undue hardship.’

The opinion is available here under ‘United Student Aid Funds v. Espinosa’

To determine if your student loans are eligible for discharge, please contact the Bankruptcy Defender for a free consultation.

Image by Getty Images via Daylife

A short sale is when your lender or mortgage company agrees to allow the sale of your home at a price that is lower than the balance owed on the loan.  The Bankruptcy Defender can help homeowners by negotiating with your lender that it is in their best interest to accept a sale for less than owed on the loan.  This avoids a lengthy foreclosure process by the lender.

Often real estate agents may tell you that you don’t need an attorney during the short sale process.  You should be cautious of a real estate agent that tells you this.  Without an attorney watching out for your interests, you may end up signing an agreement that makes you liable for the full deficiency remaining after the short-sale.  In other words, you have just helped the bank sell the home in less time and with less trouble, but you are STILL liable for the full loan balance.

Enter into a short-sale with confidence that an attorney is looking out for your best interests during the short-sale process.  Contact the Bankruptcy Defender to have an attorney on your side during the short-sale.  Don’t short-sell your home only to have to file bankruptcy because of a deficiency judgment!

Contact Us Today to get started with short-sale legal representation or for a free consultation for other available options.

Related articles:

• Lost your house? You still have to pay (cnn.com)
• In Short Sales What is a Deficiency Judgment versus the 1099? (activerain.com)
• What Happens When Short Sales Fail? (realestateradiousa.com)

This special includes:

• Intake consultation with the Bankruptcy Defender – Attorney William Devine II.
• Comprehensive tri-merge credit report from all three credit reporting agencies.
• Preparing your Bankruptcy petition.
• Providing notice to all of your creditors to stop those harassing phone calls, foreclosures, and lawsuits.
• Direct access to Attorney William Devine II to answer any of your questions regarding your case.
• Representing you at the 341 Meeting of Creditors hearing.
• Continued representation through the discharge and final closing of your case.

For a FREE bankruptcy case evaluation, call your Bankruptcy Defender, Attorney William Devine II at the Rainey Legal Group at (702) 425-5100 today!

*There is a court filing fee of $299.00 plus the cost of court required credit counseling of $30 that are not included in this special price.  If your creditors object to your bankruptcy petition because of very recent debts (<90 days ago) there may be additional costs to defend such objections.

Although I try to avoid emergency filings, if you have an urgent need to stop a Lawsuit, a Foreclosure, or a Wage Garnishment, I may be able to help you file an emergency bankruptcy petition.  If you are being harassed by Creditors, the Bankruptcy Defender can stop these calls immediately.

Imagine not having to avoid phone calls and knowing that when your phone rings it is not a collections company threatening you.  Oddly enough, after filing Bankruptcy you should be happy to receive phone calls from creditors or collectors.  Why you ask?  If a creditor or collector still calls you after filing bankruptcy,  I may be able to get the Bankruptcy Court to punish them for each and every phone call or letter they send to you.  The punishment may include making them pay YOU money for your trouble for having to answer their call or read their letter.

For more information about Chapter 7 bankruptcy and Chapter 13 bankruptcy, please click on one of the navigation links above.

If you want me to contact you to discuss your options, please call your Bankruptcy Defender at the Rainey Legal Group at (702) 425-5100.