Legal Question in Bankruptcy in California

Student Loans, non-government funded in a Chapter 13

I had to file for bankruptcy this past April 2005. I have a student that had been purchased from the Federal Student Loan program by a non-government entity, in consolidation about a year and a half ago. I had made all payments up until my April bankruptcy filing--never late, and then notified the lender of my desperate financial situation, and my bankruptcy petition.

I discovered just recently, that in May---a month after my court filing and after notifying them, that the loan was sold again.

Being that this loan was owned by a non-government lender at the time of my bankruptcy filing---is it treated the same as other non-secured debt, OR is it treated as student loans owned by the federal government, which I have heard, that the only way one can legally dismiss federally owned student loans is through an additional process called an adversarial complaint filing. I listed the loan company and amount on the bankruptcy petition as one of my creditors as I was told that you had to list ALL creditors They have not submitted a claim. If they don't submit a claim by the trustee's deadline of August 31, must they forgive the debt and not hold me resposible in the future. Very confusing! Thanks, Donna


Asked on 7/02/05, 5:15 pm

1 Answer from Attorneys
Mark Markus Law Office of Mark J. Markus

Re: Student Loans, non-government funded in a Chapter 13

Your confusion comes from your mixing up two distinct concepts. One is whether the debt is dischargeable. The other is how the claim is classified and paid through your Plan. Student loan debts are generally not dischargeable. The fact that the loan was transferred is irrelevant since the original loan, as you describe it, was a federal loan funded, presumably through a government program. Thus, it is not dischargeable unless you file and prevail at trial on a complaint to determine the dischargeability of that debt, proving "undue hardship". The debt itself is an unsecured debt and will be treated the same as other unsecured debts in your plan, unless you separately classified the student loan claim pursuant to 11 USC 1322(b)(1) in your Plan. This has nothing to do with whether the debt is discharged or not. You will likely still owe them whatever hasn't been paid to them at the end of your plan term.

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Answered on 7/02/05, 6:07 pm


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