The cost of getting an education in the United States is quite high with the average student loan debt approaching $30,000 in 2013. Many Americans struggling financially are looking for ways to be relieved from their student loan debt. Filing for a bankruptcy is not always an option, as student loans are generally exempt from bankruptcy unless an attorney can prove undue financial hardship. If you think you're crafty by taking out cash advances, which can be discharged, to pay off your student loans prior to filing for bankruptcy, think again.
The Cash Advances May Become a Nondischargeable Debt
In order to have your bankruptcy filing approved, you will need to submit detailed financial information to the bankruptcy courts. Although debts incurred from cash advances are dischargeable, the bankruptcy courts have a right to declare your debt nondischargeable if you
- Incurred the debt via fraudulent actions; or,
- Incurred the debt in order to pay off loans that are normally nondischargeable.
If you are found to be guilty of any of these actions, your creditors or the bankruptcy trustee can file a complaint or dispute against you via an Adversary Proceeding, which is a separate lawsuit that falls within your bankruptcy case. Your attorney will need to review the evidence that the creditors or the trustee have collected and submit a response to all allegations that have been made in a timely manner.
The Timeline Matters
Although your creditors can sue for the value of the cash advances or loans if they are able to find evidence of fraud, cash advances that have been taken out within 70 days of filing for bankruptcy and total more than $925 are automatically considered to be fraud. These debts will no doubt be deemed nondischargeable, and you will definitely be responsible for paying them back even after your bankruptcy case is over.
If the cash advances were taken well in advance, your creditors have the option of investigating your case and filing a lawsuit against you if they can find evidence that the money was used to pay nondischargeable debts.
To put it simply, don't take out cash advances to pay off nondischargeable debts, as it is considered to be fraud and you may face serious consequences for your actions. If the loan companies allege that you have used the money to do so and are still looking to collect, speak with a bankruptcy attorney like Bauer & French Attorneys at Law immediately to determine what you can and should do next to avoid other additional legal complications.