Student Loans and the Elderly: How to Stop Student Loan Collectors and Social Security Garnishment

15 Oct Student Loans and the Elderly: How to Stop Student Loan Collectors and Social Security Garnishment

An increasing number of our senior citizens are faced with the same problems faced by many of our young adults: student loans. A recent PBS story, “More older Americans than ever are struggling with student debt,” highlights an issue that many bankruptcy attorneys have seen in recent years. As the article notes, ” The number of Americans age 60 and older with student loan debt quadrupled between 2005 and 2015 to nearly 3 million. And the average amount they owe has nearly doubled from 12-thousand dollars to almost 24-thousand.” That’s a lot of debt–my cheap calculator doesn’t have enough digits to display it, but it works out to about $72 billion dollars.

[Grand]Parent Plus loans, co-signing on private student loans, children and grandchildren who go into default on these loans, and even old, unpaid student loans they took out years ago are all resulting in collection efforts against seniors who just wanted to help a child or grandchild get a college education. And once a loan goes into default, the powers of the student loan collectors are massive. If a government loan, there is no statute of limitations, meaning that they can collect, quite literally, forever. I once had a client who was sued in 2014 for a student loan from 1976. Perfectly legal. (I was successful in getting the Court to throw the case out of court because of a doctrine called the “statute of repose,” meaning that because of the passage of time, my client could not have been reasonably have been expected to keep the records showing that he paid off the loan in the 1980s.) Government collectors can obtain an “administrative garnishment,” meaning that they can garnish wages and attach your bank accounts without having to sue and get a judgment. They can even garnish your Social Security! Private student loan collectors do have to deal with the statute of limitations, and do have to sue you before they can garnish or attach.

What are your options if you are faced with a student loan in default? One option that you may not have considered is a Chapter 13 bankruptcy.

“Aren’t student loans non-dischargeable?” most people ask. Not always, However, depending on circumstances, it nevertheless can be difficult and expensive to obtain the discharge in bankruptcy of student loans. But a discharge isn’t always necessary for a Chapter 13 to help.

When you file for Chapter 13, a provision of the Bankruptcy Code called the Automatic Stay goes into effect immediately. The Automatic Stay prohibits all creditors–including student loan creditors–from taking any action that could be considered an attempt to collect a debt from you or your assets. They cannot call you. They cannot send you nasty letters. They cannot send you bills. They cannot sue you, or continue with a pending lawsuit. They cannot attach, garnish, repossess, or foreclose on your assets. All proceedings immediately stop. The Automatic Stay remains during the entire course of your case, five years for a typical Chapter 13.

What do you need to do during that time? You have to make a monthly payment to a trustee, who takes that payment and distributes it to all of your creditors. How much will that payment be? It depends on your circumstances. But many of my senior clients in these circumstances have little more than Social Security and a small pension as income, so their payment is small–$25.00 a month. And as long as they make it, the Automatic Stay completely protects them from all collection efforts.

A Chapter 13 isn’t a long-term remedy–until Congress changes the law to allow for the discharge of student loans, it usually will not result in the discharge of the student loan. But it will stop the immediate problems, the calls, letters, garnishments and attachments. It will relieve a significant amount of stress, both emotional and financial. It will let you move forward instead of being dragged backwards. It will let you live your life free from the student loan collectors. It is something to seriously consider.

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Brett Weiss, a senior partner at Chung & Press, LLC, represents people and businesses in all phases of bankruptcy. He has experience in complex individual Chapter 7, Chapter 11 and Chapter 13 bankruptcy cases, and in Chapter 11 small business restructuring and reorganization. Mr. Weiss lectures nationally on bankruptcy issues. He has testified before the Federal Bankruptcy Rules Committee, the Consumer Financial Protection Bureau, and has twice testified before Congress on bankruptcy and credit issues. Brett Weiss is the co-author of Chapter 11 for Individual Debtors, and has written Not Dead Yet: Bankruptcy After BAPCPA, for the Maryland Bar Journal, as well as hundreds of blogs for the Bankruptcy Law Network. With his law partner, he recorded a 13-hour basic bankruptcy training series, and leads intensive three-day Chapter 11 training boot camps. Mr. Weiss has received international media attention in connection with his work. He was interviewed by Barbara Walters on The View, has appeared on the Today Show, Good Morning America, ABC News with Peter Jennings, the Montel Williams Show, National Public Radio, AARP-TV, the BBC World Service, German state television, and numerous local radio and television programs, and been quoted in Money magazine, The Washington Post and The Baltimore Sun, among others. Brett Weiss is the Maryland State Chair for the National Association of Consumer Bankruptcy Attorneys, a founding member of the Bankruptcy Law Network, on the board of the Maryland State Bar Consumer Bankruptcy Council, and a member of the American Bankruptcy Institute, the Bankruptcy Bar Association of Maryland, and the Civil Justice Network. He has been recognized as a “Super Lawyer” every year since 2007 for Maryland and the District of Columbia, and in 2011 received the Distinguished Service Award from the National Association of Consumer Bankruptcy Attorneys for his work on behalf of consumers across the country. Mr. Weiss is admitted to practice before Maryland and District of Columbia federal and state courts, the United States Courts of Appeals for the DC, Fourth and Eighth Circuits, The United States Tax Court, and the Supreme Court of the United States, and has been practicing law since 1983.
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