Can money owed to a state university be dismissed in a Chapter 7 Bankruptcy?

Asked almost 2 years ago - Columbus, OH

I attended a state university in 2001 and signed promissory note for the loan on those classes. I dropped class and the school returned money to the gov't. I continued on with classes at another college and 10 years later received my Masters degree. I have since consolidated my actual student loans and pay on them monthly. The state university is now trying to collect money from 2001 classes that were dropped ( $2460 plus attorney general fees for a whopping $7600) I would have been fine if the University never returned money - as I pay my student loan debt. They have taken my state refund last 2 yrs and now taking me to court. What can I do? I cannot afford payment to them- I struggle to barely get by with 3 children. Please help! Will a Chapter 7 resolve this? yes I have other debt

Attorney answers (6)

  1. David Jay Sternberg

    Contributor Level 14


    Lawyers agree

    Answered . It is almost impossible to discharge this type of educational loan in bankruptcy. You need to sit down with a bankruptcy attorney to review all the facts in your case.

    Attorney Sternberg is admitted to the practice of law only in the State of Ohio. His answering of this question... more
  2. Robert Perez Soto

    Contributor Level 12


    Lawyers agree

    Answered . I agree with everyone that student loans are not dischargeable. However, it is unclear whether this particular debt is a student loan at all. As stated by Mr. Smith in a comment, not all debts owed to state schools are student loans. In fact, based on the information provided, it sounds like the alleged debt may not be a student loan and, therefore, may be dischargeable.

    As a result, I would strongly recommend that you consult with a bankruptcy / debt defense attorney to discuss your case as soon as possible.

  3. Matthew Scott Berkus

    Contributor Level 20


    Lawyers agree

    Answered . How do you know the money was returned to the lender?

    In any event, as the others have suggested, no bright line answer exists for your circumstances. You said you signed a promisory note; when did you withdraw, did you give notice, did you sign a "Master Promisory Note." Were you actually eligbile for student loans. Those are just some of the questions that need answering to know if you have any "technical" defense to the student loan.

  4. Michael Avanesian


    Contributor Level 16


    Lawyers agree

    Answered . Get a free consultation with a bankruptcy attorney to see what they can do for you. This is not something easy where an attornwy will just say yes.

    I feel like those attorney fees are just wrong and that they will be dischargeable but I don't know and I wouldn't want to speculate when you can get a consultation from someone in your area.

    The above is general legal and business analysis. It is not "legal advise" but analysis, and different lawyers may... more
  5. Ryan Cullen Wood

    Contributor Level 6


    Lawyers agree

    Answered . I agree with Mr. Soto. I have had a number of client with debts owed to Universities for whatever reason. All discharged. You need to determine if the debt is a student loan or not. If not, the debt should be dischargeable when filing Chapter 7 bankruptcy.

  6. Diane L Gruber


    Contributor Level 18


    Lawyers agree

    Answered . 11 USC Sec.523(a)(8) states that certain debts are not dischargeable: educational loan guaranteed by a governmental unit, or non-profit institution; any other educational loan that is a qualified education loan as defined in Sec. 221(d)(1) of the Internal Revenue Code. So, you need to meet with an attorney who specializes in student loan problems, take him/her your loan agreement and see what he/she has to say. Good luck.

    Be sure to designate "best answer." If you live in Oregon, you may call me for more detailed advice, 503-650-9662.... more

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