Student Debt Cancellation Disputes

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Can Student Debts Be Cancelled or Discharged?

Student loan debts may always be cancelled or discharged at the discretion of the lending institution. However, in terms of discharging student loans through bankruptcy, several laws have made student debt forgiveness very difficult to obtain. 

For example, under both Chapter 7 and Chapter 13 bankruptcy categories, student loans are not automatically discharged if the debtor files for bankruptcy. In effect, the only way to obtain a student loan discharge under bankruptcy is through proof of severe financial hardship. 

On the other hand, if the lending institution does not act upon the debt in a timely manner, the debt may sometimes be subject to an automatic discharge. Also, creditors cannot collect on debts while a bankruptcy proceeding is underway or is pending.  

What Are the Consequences of Defaulting on a Student Loan?

Depending on who issued the loan, and what the loan amount is, there can be several legal consequences of defaulting on a student loan. The Department of Education or the lending institution itself may take the following actions in order to recover payment for the debt:

Can I Contest or Appeal Student Debt Collection Efforts?

If the Department or lending agency utilizes any of the collection efforts listed above, such as seizing a tax refund, they will usually first send the debtor a notice that they will be initiating such measures. The notice will usually contain the option to either repay the debt or appeal the tax refund seizure. If the debtor does not choose to appeal, then the tax refund may automatically go towards the debt repayment. 

An appeal against a tax refund seizure, garnished wages, or other collection methods listed above may be based on the following grounds:

Therefore it is very important for a student lender to be aware of any conditions that may affect their current debt situation.

Do I Need a Lawyer for Disputes over Student Debt Cancellation?

Defaulting on a student loan can lead to several legal consequences including possible exposure to a civil lawsuit. You may wish to consult with a lawyer if you are unsure of the status of your debt situation. Also, it may be very helpful to hire an attorney if you will be contesting or appealing any collection efforts initiated against you. Your lawyer will be able to present all your options to you and guide you through the appeal process. 

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Last Modified: 12-18-2013 05:25 PM PST

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