Bankruptcy Indiana

As an Indiana bankruptcy attorney and debt consolidation lawyer, , I offer student loan debt help.  This past calendar year, there's been a lot of debate about whether student loans should be treated the same as other consumer debt when it comes to bankruptcy. While some measures were passed extending repayment time for parents, student loan debt in Indiana (as I pointed out in yesterday's blog post), is a big problem getting bigger all the time.

Two weeks ago, National Public Radio ran a story about a Supreme Court case involving bankruptcy and student loans. Since my blog is devoted to offering Indiana bankruptcy information, I thought sharing the details of the case with my Indiana bankruptcy clients and blog readers would help me teach certain principles about how bankruptcy law works.

In 1988, Francisco Espinosa, a baggage handler for America West Airlines, enrolled in technical school to learn computer drafting and design.  When Francisco graduated, he had student loans of $13,000 and no other debt.  But, when America West began to falter, the company cut back on pay, so that Francisco was making only $6 an hour.  He no longer was able to keep up the payments on the student loans.  United Student Aid Funds, Inc. began to hound Espinosa, to the point where he hired an attorney and filed Chapter 13 bankruptcy.

The bankruptcy trustee worked out a debt repayment plan for Espinosa.  He was to pay $274 a month for five years. That would be sufficient to pay off the debt, but not the interest that had accrued of $4,000. The bankruptcy judge approved the plan, and notified United Student Aid Funds.  When the court received no objections from the lender, it assumed the lender had agreed to the plan. Five years went by, and, Espinosa had completed all his payments, the bankruptcy court declared his debt paid in full.

Two years later, though, United Student Aid started collection efforts again, even putting a lien on Espinosa's tax refunds.  Eleven full years after the bankruptcy court had confirmed the plan, United Student Aid challenged the court's decision, saying Espinosa never proved hardship.

After several steps of appeal, the case has risen to the Supreme Court.  The two sides are as follows:

Side #1: Espinosa and the National Association of Bankruptcy Trustees

What they're saying: Bankruptcy courts would be thrown into chaos if their judgments were not final and could be challenged so many years later.

Side #2: Student loan companies and 24 state governments.

What they're saying: We need to prevent people from walking away from their obligations, and that includes paying accrued interest on their loans.  There was no adversarial hearing where a United Student Aid Funds representative could have challenged the hardship claim.

As NPR sums things up: Now the Supreme Court will decide!