People seeking the advice of Las Vegas bankruptcy lawyers often carry excessive, unserviceable student loan debt. As recently as 1998 these debts were fully dischargeable in bankruptcy, though federally guaranteed student loans required a five-year waiting period because in the 1970s Congress believed (without evidence) that student borrowers were irresponsibly discharging their education loans in bankruptcy promptly after graduation. Along with a 2005 law that made all student loans nondischargeable without a difficult showing of “undue hardship,” student loan debt is rapidly swelling even though other kinds of debt have declined, particularly mortgage debt.
Recently, though, a student debtor won against student loan giant, Sallie Mae, and might be able to discharge her student loans. Here are three things to know about how she won and why.
(1) Sometimes the lender doesn’t pay attention. To discharge a student loan, the debtor must initiate an adversary proceeding before the bankruptcy court. Kirsten Gourlay [http://law.justia.com/cases/federal/appellate-courts/ca6/11-8066/11-8066-2012-02-21.html] did just this in May 2011, and she served Sallie Mae, which did not reply to the summons and complaint. She filed for a default judgment, which the bankruptcy court denied for improper service.
(2) Sometimes the lender really doesn’t pay attention. The debtor served Sallie Mae a second time. Again, it did not reply, citing the fact that it was moving its offices and it lost the summons and compliant. The bankruptcy court denied its motions to reconsider. Sallie Mae lost its appeal to federal circuit court.
(3) Don’t rely on creditors’ inattentiveness, but do rely on an experienced bankruptcy attorney. Kirsten Gourlay isn’t the only student debtor who won against her creditor. Another debtor in a similar case won against his creditors, who took the case up to the Supreme Court and lost. The key to winning these types of cases is tenacity. In both cases, the debtors’ lawyers were dedicated to their clients and didn’t back down, even when facing giant banks like Sallie Mae.
If your student loan debt is overwhelming you, it’s unlikely that your creditors will fail to appear at the adversary proceeding in which you ask the bankruptcy court to discharge your loans. Nevertheless, bankruptcy can wipe away credit card debt and other unsecured loans to allow you to shift your other income to pay your student loans.
For more questions about bankruptcy in Las Vegas, please feel free to contact an experienced Haines & Krieger Las Vegas bankruptcy attorney for a free initial consultation. Call us at 702-880-5554 to set up your free consultation.