Student Loans
A bankruptcy filing does not create a "safe harbor" from student loan debt. Although past due tuition owed to an institution is usually dischargeable in bankruptcy, student loans rarely are, regardless of whether their funding comes from (or is guaranteed by) governmental agencies or non-profit institutions (note: this is the usual type of student loan), or from private, for-profit lenders. The one instance where a student loan can be discharged is if the debtor can establish an "undue hardship", which in our experience is very difficult to do. To meet this threshold a debtor must establish that if forced to repay the student loan he/she will be unable to:
- Maintain a minimal standard of living for the debtor and his dependents.
- This state of affairs will continue for a significant period of time.
- The debtor has made a good faith effort to repay the loan prior to the bankruptcy filing.
When the government is your student loan creditor it is usually advisable to enter into a repayment arrangement with them. The government has many collection options available to it, all of which can make your life miserable and none of which become barred by the passage of time (ie. no statute of limitations defense). The following steps may be taken by the government to recover the outstanding balance due:
- Offset (a fancy word for seize) federal and/or state income tax refunds, and any other payments authorized by law, including Social Security benefits.
- A debtor is liable for all collection costs incurred in collecting the defaulted loan.
- Garnish 15% of your disposable pay each pay period. For government employees an "offset" occurs, and for those employed in the private sector a "garnishment" occurs.
- You may be sued in state or federal court to collect the balance.
- Credit reporting agencies are notified of your default, which can adversely affect your credit rating.
Middletown, New York 10940 
