Podcast #3: Student Loans, Creditor Harassment, Chapter 7 vs. Chapter 13


While the information given in this podcast is instructional, it is not intended to be taken as legal advice for your particular legal or financial situation. The recommendations that we give to one person may not be appropriate to your particular situation. The information contained in these podcasts is also not intended to replace the advice that you would receive from an actual consultation with a competent legal professional practicing in the area of consumer bankruptcy law.


Welcome to Morsebankruptcy.com podcasts. Where various topics on these podcast, this one in particular we are answering questions from visitors to our website. These are the people who are making inquiries for the first time, at least on our site, looking to see if bankruptcy perhaps could help them with their situation. We do edit these to some extent just to make sure that the writer couldn’t be identified for their protection but other than that these are the actual questions they’ve submitted. This particular visitor writes

Viewer Question

My debt has increased significantly over the years due mostly in part to student loans which I know can’t be rid off by bankruptcy, but I definitely have at least $21,000 in other debts that I’d love to be rid off especially being a single mother, college student and I definitely made bad choices as a young adult but I am definitely trying to better myself and know how crucial credit standings can affect you. I would love to get collection agencies off my back and start somewhere new and I feel bankruptcy at this time in my life is my only option.

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Actually, this isn’t too unfamiliar of a question for us to get. We’ve all made some interesting choices when we were younger and unfortunately if those choices were made with credit cards in particular because those debts can be bought and sold for years to the point where the statute of limitation becomes sort of a legal joke, they do follow you and so you find yourself in couple chapters later in life and you still reading the conclusions of the former chapters.

This person correctly points out the beginning that student loans can’t be handled in a bankruptcy and that’s true. Every couple of years we do see people writing advertisements that’s usually around the area of $1,500 they want, to get rid of your student loans and they usually profess the hardship doctorate can do that. My experience is that that’s often over touted. It’s not something you’d ever wanted to rely on. But as far as bankruptcy law in particular is concern we really don’t have any great mechanism or anything that I would rely on as a general rule for getting off student loans. so you just have to assume those are going to survive the bankruptcy.

The next issue she brings up that I would like to point out is probably the most common reason that the people come in to our office and they just get ready to collection agencies off their backs. There was a time when they would just beret you personally with phone calls. We had some clients who had actually documented over a hundred phone calls in a day if you can imagine that, but nowadays they’ve taken it a step further lot of clients report that they are getting phone calls at work their family members are getting phone calls and then more often than not if your late, even neighbors are getting called and your business is being broadcast around the neighborhood.

Our firm like many we have a policy where once the first $100 of our fees has been paid we consider ourselves retain and then you’re just allowed to give the creditor and collection companies our name and number and you just have them call here and set to somewhere else its nothing revolutionary just the ideas to give you some peace of mind or little bit of a respite while you are getting everything together to file bankruptcy so that at least that initial worry that initial stress that can be dealt with relatively expensively and fairly quickly at-least within 24 hrs of retaining an attorney.

Now this individual goes on to describe her situation that aside from the student loans she’s got about $21,000 in other debts. While doesn’t tell us exactly what kind of debts these are, I think for our purposes we can just assume that we are talking about things like credit cards or medical debts. The stuff that haunts most of us at one time or another. What kind of relief she would be entitled to is going to depend greatly on what type of chapter of bankruptcy she files.

If her income is below the limit, which is the income limit which is based on her household sized file a chapter 7 and then she would most likely file a chapter 7. In a chapter 7 she’d be entitled to discharge of all medical or credit card related debts regardless of age or where they are at in the collection process doesn’t matter whether they’ve been sued or not – it doesn’t change what they are just changes how they are collecting on them, but that would be the strategy, the idea would be to take care of those debts in a bankruptcy that you can, and that way you are not trying to fight a two front war, you are not trying to juggle credit cards and medical debts on one hand and juggle your student loans in the other which is all but impossible.

So, our strategy here if she qualified for a chapter 7 would be to wipe out the debts that we could wipe out through a chapter 7 discharge its $21,000 and then see if she couldn’t go back and re-negotiate with her student loan company. If she is not having to make payments to both these then perhaps she could put enough payments towards her student loan that she could start invading that principle and you know live the American dream of actually being free of student loans.

Now, in the event she ends up in a chapter 13 because her income is too high to qualify for a chapter 7 she may end up paying back of percentage of the $21,000 but at least during the life of the chapter 13 plan her student loans would go on hold so she still wouldn’t be trying to deal with the student loan debt in one hand and the credit cards and medical debt in the other so in either event this juggling act which she trying to perform right now can literally be halted by the bankruptcy filing

Whether its chapter 7 where she is looking to discharge $21,000 or chapter 13 where she is looking to manage it, hopefully discharge the vast majority of it and pay what she can pay of it and then when that’s gone regroup and deal with student loans of that time. So, all in all she right about the student loans she just needs to get some strategies in place for getting rid of the debt that she can get rid and I have a strange suspicion that all this is going to look a lot more possible when she is not getting 100’s of phone calls from the collection agency every day.


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