Illness Bankruptcy And Student Loan Penalties
Q: I just got a notice from my University that I am being sued for failure to repay a student loan. Can bankruptcy stop my University from adding even more penalties and interest, and then even more lawyers fees onto what I owe for a student loan? In other words, bankruptcy may not dischatge the principal of the loan, but what about preventing the penalties and interest, and lawsuit lawyer fees from being added to my debt? The thing is, they want to increase my debt by 40% due to the lawyers fees. The loan is $7000 plus $3000 in lawyers fees. (I also have another outstanding student loan for ~$10k, but they have not sued me for that loan yet). I have been too ill to work since 1995 when I left school early. I filled out some medical deferrment papers (signed by a doctor) for a number of years since 1995 to get a deferrment from the school due to illness. Well, the school only allows for a medical deferrment for X number of years, and that time has long since past. So now they sue.
A: - As far as I know, no. Student loan interest and penalties are not dischargable any more than the principal is. I don't care for this rule, so let's all complain to our elected representatives. You might possibly have a case for an undue hardship discharge, I would at least speak to a lawyer about it, one that specializes in that sort of thing. It's not easy...to be honest, it's often almost impossible, but at least speak to someone. - The creditors from student loans are usually very easy to talk to and very accomodating (because they know that student loans cannot be discharged). Do they know your situation? Do you provide them any documentation? Do you communicate with them? If you have been just ignoring them, they may feel that they have no choice but to take legal actions against you. - Given your circumstances, you may be able to qualify for a hardship discharge, which would wipe out the entire student loan (or, in your case, both loans). I recommend speaking with an experienced bankruptcy attorney who has handled student loan hardship discharges before. .
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