Can bankruptcy eliminate student loans?


Frank: So this is my situation: I graduated medical school roughly about eight years ago, been paying my loan debt since that period of time. It caused me to become severely in debt with credit card. I have nearly $16,000 in credit card debt because of it. Have not gone into residency yet because I can’t get into residency. I would say about three months ago, I defaulted by not paying them because my son was born and I’m in low-paying jobs and entry-level jobs because, in essence, I’m an overqualified.

Attorney Tom Olsen: Okay.

Frank: Now I’m 120 days past due. Do I need to seek legal advice or is this something I’m able to do myself?

Attorney Tom Olsen: So Frank, let’s talk to attorney Jim Monroe, he’s a bankruptcy attorney, he’s my guest today. Jim what you think about Frank’s situation?

Attorney Jim Monroe: Yes, he has a big problem with the student loan defaults because once a student loan defaults it’s my understanding that it accrues default rate of 18.25% and the interests can be capitalized at the end. Frank, you need to come talk with us to see whether or not there’s any remedy available for you outside of bankruptcy or inside of bankruptcy.

Frank: I spoke with them, tried to plead with them, “Hey look, this is my situation, I can’t afford it.” In essence they wanted me to pay half my income, which there’s no way I could survive.

Attorney Jim Monroe: Frank, I can tell you that the collectors are not going to tell you what all the remedies are available to you. You’ve got to go seek other advice. I’m going to give you the telephone number of my office, I don’t charge anything for a consultation. You come in, you sit down and chat with us. We’ll try to figure out what we can do for you. The telephone number at my office is 407-872-7447. And there are remedies available both inside and outside of bankruptcy for student loan situations.

Attorney Tom Olsen: So this is attorney Jim Monroe and, by the way, if you’re a regular listener to this radio show you know that usually, while I’m doing this radio show, Jim is in the office giving out free legal advice. Today he’s actually on-air with me, but if you want to get hold of Jim Monroe anytime of course you can always call our office at 407-423-5561 and we will put you in touch with attorney Jim Monroe. Now Jim, I know from past shows that bankruptcy cannot wipe out student loans, am I still correct in that thinking?

Attorney Jim Monroe: No, it’s just difficult to wipe out student loans in bankruptcy because you have to show additional undue hardship. And right now, in the 11th circuit, they've adopted a test that makes that very difficult. I can say that the thinking around that particular test is beginning to shift, particularly with the fact that we have $1.2 trillion in student loan debt. It’s greater than automobile debt for consumers, it’s bigger than credit card debt, it’s just below mortgages, so it is a major, major problem and I know that the court system is rethinking the situation right now.

Attorney Tom Olsen: Thank you Jim, we appreciate it.