An important legal victory was recently obtained for a borrower attempting to discharge a student loan debt. Ryan, the consumer, filed for bankruptcy and following the bankruptcy Wells Fargo Bank sued Ryan and obtained a state court judgment to collect on the debt.
Ryan had attended Capella University, a for-profit school. In the case, Educational Financial Services, a division of Wells Fargo Bank, made the argument the loan was not actually discharged in the 2007 bankruptcy. When Wells Fargo sued Ryan in State Court to collect on the student loan debt they made no mention of Ryan’s previous bankruptcy and discharge.
Ryan felt pressured to enter a consent judgment over the debt in 2008 and made monthly payments of $150 on the loan for the next seven years. Frustrated, he sought legal help to reopen his previous bankruptcy case and his attorney raised the valid point, “that the loans from Wells Fargo were discharged by operation of law on November 29, 2007, because the loans were not a student debt protected by any subsection of Section 523(a)(8).”
The issue at hand was if Ryan’s discharge had been violated because the loans were not student loans under Section 523(a)(8).
“Given Wells Fargo’s actual and constructive knowledge of the timing of the Plaintiff’s loans, the “cost of attendance” at Capella University, and the nature of the Loans it extended to the Plaintiff, Wells Fargo knew or should have known that the Loans were discharged in the Plaintiff’s bankruptcy,” the complaint states.
The Judge ruled that even though Ryan had previously repaid the debt through the State Court judgment he was not prevented from reopening his bankruptcy and filing an adversary proceeding to rule on the discharge of his non-protected private student loan debt.
This is why it is important for anyone who includes student loans in a bankruptcy to pursue an adversary proceeding to get a ruling on the dischargeability of the loans, a key step which is often overlooked.
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For borrowers who are struggling with student loan debt, relief options are available. Many student loan borrowers are unaware that they have rights and repayment options available to them, such as postponement of loan payments, reduction of payments or even a complete discharge of the debt. It is important you contact an experienced Miami bankruptcy attorney who can advise you of all your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade Garcia McMaken, P.A. has been helping people from all walks of life build a better tomorrow. Our attorneys help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade Garcia McMaken website at www.miamibankruptcy.com.