Dear Bankruptcy Adviser,
My ex-husband filed bankruptcy on our daughter's student loan after our divorce and it wiped out everything. Can they come after our daughter who is responsible for the loan?
I can't answer this question based on the information you provide, but I can give you some things to investigate. You are right to be concerned because your daughter could still be liable for all the student loan debt.
1. Did your daughter sign for the loans?
This is the first and most important information you need. In some cases, parents sign for the loans individually and not with their children. This means that while the loans are used for the child's education, the parents take on all liability. The child gets the benefit of going to school and the parents take on all responsibility to pay for that education. This is pretty easy to determine. You can have your daughter call the lender directly and provide her Social Security number. She can then ask for proof that she signed on these loans. If she did sign, she is liable for the loans whether or not her father filed bankruptcy.
2. Did your ex-husband eliminate his liability on the loans through the bankruptcy?
You make the statement that he filed bankruptcy and eliminated the student loan liability. I would challenge this assertion unless you can provide evidence that he did more than just file a run-of-the-mill bankruptcy petition. Eliminating student loans through bankruptcy requires a very specific step that most people either do not take or do not qualify to take.
Simply listing the student loans in the bankruptcy schedules does not eliminate the loans. To eliminate student loans through bankruptcy, you have to file an adversary complaint against the lender. The law requires the equivalent of a lawsuit against the student loan lender while the bankruptcy case is still open.
I say to clients all the time that the people who qualify to eliminate student loan debt generally cannot afford to file this adversary complaint. It is a frustrating Catch-22 that those in most need of relief can't afford to get it.
I often receive calls from prospective clients stating that a student loan lender is garnishing wages, Social Security benefits or intercepting tax refunds after the bankruptcy case ended. I take a few minutes to look at the bankruptcy case to confirm whether the student loans were actually eliminated. I haven't ever seen it accomplished yet.
While your ex-husband may believe he is off the hook, it is more than likely that he is not. Your daughter may be liable on the loans, but your ex-husband also may still share that burden.