Thanks to all of you who have responded to the story about my client Mr. A. Many of you have asked why Mr. A has not tried rehabilitation or consolidation to get out of default. We have discussed these options with Mr. A many times. They are useful for many borrowers, but there are drawbacks. Most important in Mr. A’s case, he does not believe he owes the loans and does not want to take any action that would appear to revive the debts. Further, consolidation creates a new loan and borrowers generally lose rights and defenses, such as forgery, related to the underlying loans. This information sheet reviews the pros and cons of rehabilitation and consolidation.
Mr. A could consider applying for a disability discharge, but he believes, whether realistically or not, that he should still be able to work. In any case, this is hardly a straightforward process in our experience and the government denies many meritorious claims. Mr. A might be able to meet the heightened bankruptcy student loan discharge standard. Discharging a student loan in bankruptcy, however, is difficult both procedurally and substantively. Mr. A is not prepared to go to court and present the detailed evidence of his medical condition and other personal testimony required to prove the common sense argument that he simply cannot repay these loans.
We will keep working with Mr. A, but these are the main reasons he remains in default. However, we encourage you to review these various options as they do work for many borrowers. The available options are far from perfect. For example, loan cancellation or discharge applies only in limited cases. But getting out of default if possible, even though the debt survives, is generally preferable to facing a life time of collection.
We also appreciate the comments about V.A. services. Mr. A does get some very limited prescription drug benefits and other medical assistance from V.A., but not enough to pay for all of his health care needs.