30,000 Student Loan Borrowers Sue Regarding Bankruptcy

Student Loan Borrowers Are Being Charged For Loans That Were Already Discharged

At Galler Law, we are here to stop you from getting taken advantage of financially. Unfortunately, situations happen where people are wrongly charged for money that they don’t owe. Case in point: 30,000 student loan borrowers are suing their lender, Navient (formerly Sallie Mae), for collecting for student loans after they already declared bankruptcy.

The plaintiffs want Navient to stop collecting on discharged student loans, and to compensate the plaintiffs for money they already paid. How did this mess happen? We will examine below.

Student Loans Can Be Discharged In Bankruptcy

There is a common — and unfortunate — misconception that student loans cannot be discharged, even after the borrower has filed for bankruptcy. As an experienced bankruptcy attorney at Galler Law will tell you, certain types of student loans can be discharged during Chapter 7 bankruptcy. The plaintiffs and attorneys in the case allege that Navient intentionally deceived and harmed borrowers by continuing to collect on loans that were discharged. Sadly, this situation happens all too often in the U.S. If you believe that a lender is taking advantage of you in this way, call an attorney at Galler Law today. Sometimes, a lawsuit is your only recourse.

Wider Implications Of The Case

This case is noteworthy because of its wider implications: the ruling of this case could affect nearly 500,000 borrowers across the country. To fully understand these implications, we must backtrack a little. In 2009, a student loan borrower filed for Chapter 7 bankruptcy and requested that his student loans be discharged.

The court granted his request on the grounds that the loans (totaling $12,000) were not used for qualified educational purposes and caused an “undue hardship” for the borrower. These are the two exceptions to the rule that student loan debt cannot be discharged due to bankruptcy. 

While the court ruled that the student loan debt was dischargeable, Navient did not agree. The company engaged debt collection agencies to collect the loan debt despite the fact that the loans should have been discharged. The borrower repaid the debt in 2011 but was confused about why the debt was still being collected. As this case indicated, this was not an isolated situation.

This class action lawsuit represents 30,000 borrowers in New York who are in the same circumstances. The ruling in this case will have an impact on the nearly 500,000 borrowers nationwide who are in a similar position of having to pay back student loans that should have been discharged.

Finding The Right Attorney

Perhaps you are in a situation where debt is wrongly being collected after you’ve successfully filed for bankruptcy. If so, a law firm like Galler Law can fight for your rights. If you are considering bankruptcy as a way to rid yourself of undue hardship, you can also get in touch with the experienced bankruptcy lawyers at Galler Law. We will help you take charge of your future.