For Those in Need of Student Loan Debt Help, Statute of Limitations No Help at All

May 2, 2012 2:14 am Published by

“Student loan debt is just one step behind the IRS on the ladder of debt longevity,” says Steve Bucci of Bankrate.com.  What Bucci means, as I often explain to clients who come to the Zuckerberg bankruptcy law offices in need of student loan debt help, is that there’s no statute of limitations when it comes to student loans.

Each state has statutes of limitations, which are time limits after which debt is no longer legally enforceable.  In Indiana, where I’ve been a lawyer for bankruptcy for the past twenty-five years, the statute of limitations on credit card debt is six years, and, on written contracts, ten years.  Statutes of limitation exist for most federal crimes, too, with the exception of certain offenses such as espionage and treason – and…bankruptcy!

One other way in which student loan debt is an exception to the general rule is that it’s almost never dischargeable through filing personal bankruptcy in Indiana.  Basically, most courts have held that you are stuck with student loans unless you can prove you are permanently and totally disabled – or totally unable to earn even the barest of a living wage.

Has that always been true? one reader of my Bankruptcy in Indiana articles wanted to know. Not really.  Before 1976 (ten years before I had begun offering Indiana bankruptcy help), federal student loans could be discharged in bankruptcy.  One of the Columbus bankruptcy lawyers who works with me made a list of law change since then:

  • The 1978 Bankruptcy Act excluded student loan debt from being dischargeable unless the loan had been in repayment for five years or more.
     
  • In 1970, the five-years was changed to seven years.
     
  • In 2005, Congress eliminated the discharge altogether on all federal loans and most private student loans. The only exception became “undue hardship”.
     

I need to remind Bankruptcy in Indiana readers that this non-eligibility for bankruptcy discharge of student loan debt applies whether you are filing bankruptcy Chapter 7 in Indiana or filing under Chapter 13 bankruptcy law.

All good bankruptcy attorneys in Indiana continue to join their colleagues in other states in appealing to Congress to change the laws.  In the meanwhile, the way we help clients is that filing personal bankruptcy ion Indiana puts the student loan collectors on hold for as long as five years, giving debtors some breathing room and a chance to get rid of other debts.
 

Our clients are in essence saying “Gimme a break!”  Bankruptcy can do just that!

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This post was written by Mark Zuckerberg

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