Expert: Mark J. Markus- California Bankruptcy Attorney - 2/16/2010

Question
QUESTION: Yes I have a two fold question please. When my husband and I filed for Chapter 7 we explained the medical hardships, financial hardships, etc in paying our bills (end of 2007). The attorney put all Sallie Mae school loans including the private loans on the bankruptcy. We paid the trustee the monies we had to pay to keep our vehicles for the allotted time and then after the final payment our debt was discharged... Including the Sallie Mae school bills (which show are the discharged items).

I do not think that the attorney did a do a undue hardship (if I said that correctly), as I am sure I would have known this. He said that he would list all the school bills and see what happens. My first question is-if it shows on the discharge papers that the loans were discharged does Sallie Mae have to honor that? I know that not all private loans are discharged (but these were also listed on the discharge papers).
I am so confused, do to extreme hardship (medical-disabled-unable to work) I can not pay these bills back). So if they are not required to honor the discharge though all loans are listed.

Can I hire an attorney to go back and do a hearing for undue hardship-to amend the bankruptcy?  I am not sure which way to turn, or who to ask about they having to honor the discharge. Would it be expensive to go back and amend the bankruptcy?

Thank you in advance for your help.

ANSWER: There are no debts listed on the "discharge papers".  Your discharge discharges you from any debts which are dischargeable under the bankruptcy code.  For cases filed in 2007, student loans are only dischargeable if you prove, after trial, undue hardship, which is very difficult to prove.  To see the requirements in the 9th circuit, visit http://www.bklaw.com/chapter7/student_loans.html

You can file the undue hardship action at any time.  If your case is already closed, you can move to reopen the case to file the undue hardship action.  It's not just a hearing, it's an entire litigation and trial.  I don't know where your case was filed or what other attorneys charge, but to reopen a case and go through a trial out here in Los Angeles would probably require a minimum up front retainer of $7,500, but I don't know all the facts of your case.

You should consult with a bankruptcy attorney in your area about your options.

http://www.bklaw.com/

---------- FOLLOW-UP ----------

QUESTION: Hello I decided to write again to be more specific... When the bankruptcy papers were filled out, each and every student loan was entered in when we first filed the bankruptcy... Then when the Trustee's sent us the proposed dividends it included payment to Sallie Mae and they recd a portion of what we paid out to the trustee.... It shows the dividend and then the unsecured claims timely filed and how it was disbursed.  Then we got the discharge papers and final papers from the Trustee... So, I am trying to understand, Sallie Mae was listed (they submitted for unsecured claim and recd dividends from the Trustee)... So would this mean they were discharged or not? How can they not be discharged but accept payment from the Trustee? Thank you for your help.

Answer
You didn't tell me this was an asset Chapter 7 case, but it doesn't change my answer.  Dischargeability of a debt has nothing to do with whether assets are distributed in a case.  The only difference that makes is that the total amount you owed on the student loans was obviously reduced by the amount they received from the Trustee.