Student Loans and Bankruptcy

We have written before on this important topic, and we like to revisit this issue one more time. It is very important issue and none of the political parties are addressing this very important issue. The student loans are sky rocketing and default is equally high yet no concerted effort is made to address this very important issue and limit the damage to student and our future generation.

Our Office handles student loans:
Student loans are tough area and there is no easy solution, but we still can offer assistance depending upon various factors either to cut down the principal, interest, delinquent interest and collection charges. In rare case, this can be addressed via filing a bankruptcy also. We help you develop a strategy to help this inflaming issue from many angles.

Garnishment and Tax Withholding:
The government can initiate an Administrative Garnishment. Unlike other creditors, who must first go to court, the government simply fills out the paperwork and sends it to your employer, Social Security Administration and Internal Revenue Service. You don’t like to be embarrassed in front of your employer if these deductions starts taking place.

One can also be sued for not paying his/her student loans? The department of justice (DOJ) may file a lawsuit.

Separate or marital property:
A student loan acquired prior to marriage is a separate property. However, student loans acquired after marriage can be a marital property and both spouses are liable to pay this debt.If the student loan debt was acquired during your marriage and you live in a community property state Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin.

Lawsuit initiated by DOJ?
Can you defend me against a DOJ lawsuit?
In some typical cases, the DOJ can initiate a lawsuit against student loan delinquency.

Additional penalties by collection agencies.
The Collection Agency added 25% to the balance of my defaulted student loans, can they do this?
Yes. The law allows collectors to add a “collection fee”. However, during our review if we find the collector engaged in illegal behavior or failed to follow specific guidelines, you may be entitled to damages which may include forgiveness of this fee.Also, if the student loan borrowers had joined the national armed forces, they are entitled to a significant cut in the interests rate under SCRA.

This is an illegal tactic used by unscrupulous debt collectors. Also, there are laws to prevent illegal and abusive debt collection practices under the FDCPA. Of course, if we see an abuse, we can help you, but simple debt collections tactics are not tantamount to abuse under the FDCPA.

What information do you need from me for the Free Case Review?
We need the names of your creditors and balances owed along with your monthly income and expenses. We will also ask you questions regarding your current employment status.

What is a Consultation and what happens during the Consultation?
One we determine we can help you, we will schedule a consultation between you and one of our attorneys. Most consultations take between one and two hours (depending on the complexity of your case). During the consultation, the attorney will review your case in detail with you. Most importantly he or she will review all of your options. Most clients are very surprised by the amount of information gained through the consultation.

How much does it cost?
The exact fee to resolve your case is based on the total debt amount and the complexity of your case. Keep in mind; we will only take your case if during the case review we determine we are able to help you. If we are not able to help you, we will let you know and there is no charge. If your case requires litigation against a debt collector; you may be able to recover the cost of the consultation. Most of our student loan clients agree it is the best money they ever spent.

Is bankruptcy an option?

Generally speaking, you will not be able to discharge your student loan obligations in a Chapter 7 bankruptcy as the standard required for a student loan bankruptcy discharge, in most jurisdictions, is very difficult for most people to meet. However, there are times where a Chapter 13 bankruptcy will be appropriate for repayment of your student loans. Click here for more detailed information concerning student loans and bankruptcy.

If you fail to pay your student loan(s) your student loan will be considered delinquent. Once you are 270 days (9 months) behind, your student loan is considered in default. Once this occurs, Collection Efforts will begin which may include any or all of the following:

Collection Calls – may be made by either the Servicer or Third Party Debt Collector. Collectors may call your home or place of business. The purpose of these calls are to get you make a payment.

Tax Refund Offset – The Department of Education files documents with the Internal Revenue Service (IRS) in order to intercept (offset) your tax refund. The IRS will remit an amount equal to the defaulted amount up to and including the entire amount of your refund. Many of our clients find out they are delinquent when they do not receive their tax refund and instead receive a letter from the IRS explaining their refund was applied to the client’s defaulted student loan.

Social Security Offset (Garnishment) – The Department of Education files documents with the Social Security Administration. The Social Security Administration will withhold an amount up to 15% of your Social Security (including Social Security Disability Income) check.

Wage Garnishment – The Department of Education serves your employer with an “Administrative” Wage Garnishment for up to 15% on your income. An Administrative Wage Garnishment is different from a standard garnishment. The primary difference is there are no court proceedings. The DOE simply fills out the necessary documents and serves them on your employer.

Department of Justice Lawsuit – This is the most serious Collection Effort. If the actions above fail to resolve the issue or they are unsuccessful, the Department of Justice (DOJ) will file a lawsuit against you. A DOJ lawsuit is almost impossible defend and nearly always results in a judgment against you. Once the DOJ obtains a judgment, they may enforce the judgment by seizing your personal or business bank accounts, retirement accounts and other assets like your home, automobile or other valuables like jewelry. Many self employed individuals (doctors, lawyers etc.) make the mistake of thinking because they can’t be garnished, nothing can happen. The reality could be far worse than a garnishment.

Don’t make the mistake of ignoring your student loans and thinking they will go away. They won’t! The best thing to do is proactively engage the problem. Call us today and ask our help at (702) 270-9100 or email us at


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