They just did you a big favor!
Did a Debt Collector Say Your Student Loan Couldn't Be Discharged in Bankruptcy?
by Steve Rhode
I was just reading a recent document filed by the Consumer Financial Protection Bureau (CFPB) in another case. It brought up a point I hear all the time from people.
If you are the subject of any debt collection activity over student loan debt, you should listen very carefully for the debt collector to say your student loans are not dischargeable in bankruptcy. While getting student loans discharged in bankruptcy is tough, there is no blanket factual statement that can be made that it is not possible.
If a debt collector tells you your student loans can't be discharged, get their name, time you talked to them, and the date you spoke. This will become very important.
According to the CFPB brief filed, such incorrect information can be considered a violation of the Fair Debt Consumer Protection Act (FDCPA). The FDCPA applies to third party debt collectors, not the original entity you borrowed from.
And while the CFPB brief is regarding a case filed in New York State, the points raised apply for all debtors being contacted by a debt collector.
The brief states, "In Easterling, the collector stated that a consumer's student loan debt was not eligible for discharge in bankruptcy. Even though it was undisputed that the consumer could, in fact, seek discharge, the district court thought that the collector's contrary statement could not violate section 1692e. The district court pointed out that the consumer had never tried to obtain a discharge and that it can be difficult to discharge student loan debt. This Court reversed. It found the collector's statement to be not just false, but "fundamentally misleading." Easterling, 692 F.3d at 235. The collector's suggestion that the consumer could not discharge her debt under any circumstances could make a big difference to a consumer who "might very well refrain from seeking the advice of counsel, who could then assist her in pursuing all available means of discharging her debt through bankruptcy." Id. The Court emphasized that the statement's "capacity to discourage debtors from fully availing themselves of their legal rights renders its misrepresentation exactly the kind of 'abusive debt collection practice' that the FDCPA was designed to target." Id. (quoting 15 U.S.C. section 1692(e))." - Source
Am I a good candidate for bankruptcy?
The section of law mentioned, 15 U.S. Code section 1692e - False or misleading representations does seem to apply if the debt collector is actually stating unequivocally student loan debt can't be discharged in bankruptcy. Keep in mind, I'm not an attorney. But I've written a number of articles about how it is actually possible and people have discharged their private and federal student loan debt. Click here to read more about how to eliminate your student loans in bankruptcy.
Debt collectors who violate the FDCPA actually hand the consumer a gift. These violations can result in:
- Damages for Physical Distress
- Damages for Emotional Distress
- Lost Wages Recovered
- Wage Garnishment Recovery
- Statutory Damages of $1,000
But the big consumer win in these cases is the cost of the attorney fees can be recovered from the debt collector when the consumer wins. So with this award, the consumer can essentially sue the debt collector for free and some attorneys will take these cases on contingency so little to no money is required upfront from the consumer.
"In cases where the debtor successfully proves that a FDCPA violation occurred, the court may allow recovery of attorney's fees and costs. This recovery is especially important because without this reimbursement, debtors may not be able to afford to bring FDCPA actions against unscrupulous debt collectors." - Source
The FDCPA suits can also be a great leverage to negotiate a settlement or reduction of the debt with the debt collector who violated the law. All-in-all, false debt collection statements can be used as leverage for dealing with problem debt.
So if you are getting collection calls over student loan debt and the collector says it is not possible to eliminate the debt in bankruptcy, you can go to ConsumerAdvocates.org to find an experienced debt collection consumer attorney in your state and get ready to turn the table on the collector.
If you have a credit or debt question you'd like to ask, just click here and ask away.
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