Q: Can loans owed directly to an institution be discharged through bankruptcy if the accounts were sent to collections?
I filed chapter 7 in 2019. I included several loans that were owed directly to the institutions (not gov't backed like Navient/Sallie Mae). These accounts were turned over to collections prior to me filing bankruptcy and were sent a bankruptcy notice. Am I still on the hook for the balances?
A:
It's the nature of the claim itself, and not who holds the claim, at the time of the bankruptcy filing, that determines how it will be handled in the bankruptcy. Claims being pushed by debt collectors are common, and just as commonly, are discharged in bankruptcy.
Certain types of claims are not dischargeable, and they are listed in Section 524 (fraudulent misrepresentation in a loan application, defalcation while in a fiduciary capacity, will destruction of property, some types of personal injury, etc.) of the Bankruptcy Code. An educational loan is almost impossible to discharge, or even reduce.
Even income taxes, sourcing to a tax return filed more than two years and four months prior to the bankruptcy filing, can be discharged if the IRS has not filed a lien against you and your property.
A: You should have a competent bankruptcy practitioner examine each of the loans to determine whether it is dischargeable or not
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