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Discharge of private student loan in chapter 7
I am not terribly informed on loan disclosures however I know that loan
repayment amounts and interest must be disclosed under the federal Truth and
Lending Act Regulation Z. I am pretty sure that this would cover
student loans. I have not seen this failure to disclose issue before and I
always felt student loans were
pretty much a losing proposition in BK. Maybe this is a "bad loan" in the
inception and you have a winner here. Here's hoping, Carolyn
To: "Cdcbaa@Yahoogroups. Com"
Sent: Tuesday, April 27, 2004 12:31 PM
Subject: [cdcbaa] Discharge of private student loan in chapter 7
> To: cdcbaa@yahoogroups.com
> Subject: RE: [cdcbaa] Student Loan Discharge
>
> Hello everyone, I will preface my question with a comment that this
> listserve is great. The questions and answers are very helpful. So here
is
> my question:
>
> Facts: client signed 3 school loan contracts with Wells Fargo in 1998
> in the amount of $37,919.00. When I called Wells Fargo and questioned the
> source of the loans, I was told the school loans are private, independent,
> "alternative loans administered through private banks designed to assist
> undergraduates. An alternative loan is privately insured, credit based
loan
> and is not part of the Federal Family Education Loan Program [FFELP].
>
> I just received a legible copy of the loan documents. The relevant
> section states "I understand that this loan is an educational loan and is
> made under a program which is funded in part by a non-profit organization
> and as such is not dischargeable in bankruptcy during the first seven
years
> of repayment. I have a call into opposing counsel to determine what
exactly
> is the non profit organization referenced in the quoted clause. To date I
> have no further information.
>
> 5th Circuit Caselaw: In IN RE CLARA ADDINE ROBINSON, Southern District
> of Texas, Houston Division - 5th Circuit, the court held a loan contract
> taken out with Apple Computer Loan program in which the loan was
requested
> "for my computer purchase for education use" and the contract language was
> identical to that stated above with the exception that the name of the non
> profit organization was specified in the contract clause, the court held
the
> loan met the requirements of a student loan under section 523(a)(3) and
thus
> was not dischargeable under Chapter 7 bankruptcy. Haven not located 9th
> Circuit caselaw as of yet.
>
> Questions:
> 1. Has any one run into this situation in the 9th? What result? The
> school defines the loan as an alternative loan from private banks. The
> contract asserts the loan is not dischargable because it is partially
funded
> by a non profit.
>
> 2. If a non profit organization funded client's loans in whole or in
> part, and if the percentage of funding from the non profit qualifies the
> loan to be non dischargeable, are then any options for arguing discharge
> that I am not seeing? Lack of notice when signed the contract? Adhesion
> contract?
>
> 3. Client is claiming that when he took out the loans, he was not
> notified of the payment schedule he would be facing when he graduated.
> Client also states that after he graduated that he received his first
> billing from Wells Fargo, stating that his payment schedule was
> approximately $5,000 a month. When he objected, the payment was reduced
to
> approximately $3,000 a month. Either way, that is a ridiculous amount of
> money for a freshly graduated B.A. to be able to pay. Wells Fargo
> collectors became very abusive. My question is, therefore, given these
> facts, if true, are these facts aggregious enough, ie. is Wells Fargo
> conduct [lack of information as to payment schedules] in violation of
> regulations regarding student loans and loans in general; and can these
> facts be used to negotiate a reasonable payment schedule with Wells Fargo.
> If negotiation of a payment schedule is the option, on a $37,919.00 loan,
> what is a likely bottomline monthly payment schedule.
>
> Patricia S. Depew, Esq.
> Law Offices of Patricia S. Depew
> 1801 Century Park East, Suite 2400
> Los Angeles, CA. 90067
>
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