No one with heavy student loan debt should feel alone in their struggle. Currently, federal student loan debt in the U.S. totals at about $1 trillion, and many people who are having difficulty paying back those loans also have other debts, such as medical and credit card bills.
However, unlike medical debt and credit card debt, student loans generally cannot be discharged in bankruptcy. To discharge student loan debt, the bankruptcy filer has to prove that the debt poses an "undue hardship," and over the years Congress has taken steps to make it difficult to prove undue hardship. With that in mind, New Hampshire residents may be interested in the increased scrutiny being paid to the main agency the Department of Education has hired to monitor consumer bankruptcies involving student loans.
The Department of Education uses a nonprofit agency, Educational Credit Management Corporation, to monitor bankruptcy petitions filed by people trying to discharge their student loan debt. But after a woman endured hounding by the agency over student loans she had already paid off, a judge in New Hampshire sanctioned Educational Credit. The judge said that the agency's lawyers had violated the Bankruptcy Code's discharge injunction.
The woman filed bankruptcy back in 2004, and her case was closed in 2010. However, that didn't stop Educational Credit from garnishing her Social Security income, even though she had repaid the debt in full.
Apparently representatives of Educational Credit didn't even attend the hearing during which the woman provided evidence showing that she had paid off the loans.
Borrowers throughout the U.S. can undoubtedly relate with the pressure and anxiety brought on by collection agencies. While student loan debt is usually not dischargeable through bankruptcy, there may be ways of restructuring or discharging other types of debt. Speaking with a bankruptcy attorney can help clarify the plan of action that is right for a particular debt situation.
Source: The New York Times, "Loan Monitor Is Accused of Ruthless Tactics on Student Loan Debt," Natalie Kitroeff, Jan. 1, 2014