What If You Have Private Loans?

Your Hidden Advantage in Bankruptcy Court

At The Independence Law Firm, we have great news for borrowers drowning in private student loan debt: these loans are often easier to discharge in bankruptcy than federal loans. Private lenders want you to believe their loans are as protected as federal debt, but the legal reality is very different. Let us show you why private student loans might be your ticket to financial freedom.

Understanding Private Student Loans

What Makes a Loan “Private”?

• Issued by banks, credit unions, or other private lenders
• Not backed by the federal government
• Include Sallie Mae, Navient private loans, Wells Fargo, Discover
• School-issued institutional loans
• State-agency loans (often treated as private)
• Refinanced federal loans become private

The Critical Legal Difference

Unlike federal loans, private student loans:

• Have statutes of limitations
• Require proper documentation to collect
• May lack “educational benefit” qualification
• Face more discharge-friendly court interpretations
• Don’t have government attorneys defending them

Why Private Loans Are More Vulnerable in Bankruptcy

Weaker Legal Protection

Federal Loans: Protected by clear statutory language Private Loans: Protection often questionable

The law protects “qualified education loans,” but private lenders must prove:

• The loan was solely for qualified educational expenses
• At an eligible educational institution
• For an eligible student
• Properly documented and certified

Documentation Problems

Private lenders frequently cannot produce:

• Original loan applications
• School certifications
• Disbursement records
• Chain of ownership (if loan was sold)
• Proper cost of attendance documentation

Statute of Limitations Issues

• Private loans have time limits for collection
• Varies by state (typically 3-6 years)
• Clock starts at default or last payment
• Bankruptcy can exploit expired limitations
• Federal loans have no such limits

The Independence Law Firm’s Private Loan Strategy

Phase 1: Loan Analysis

We immediately investigate:

• True creditor identity
• Documentation completeness
• Qualification status
• Statute of limitations
• Previous collection attempts

Phase 2: Strategic Attack

Multiple angles of attack:

• Challenge “qualified education loan” status
• Demand complete documentation
• Assert statute of limitations
• Question ownership/standing
• Pursue undue hardship discharge

Phase 3: Negotiation Leverage

Private lenders often settle because:

• Litigation is expensive
• Documentation may be weak
• No government backing
• Business decision vs. principle
• Partial recovery beats total loss

Types of Private Loans We Successfully Discharge

Traditional Private Student Loans

• Sallie Mae/Navient private loans
• Banks (Wells Fargo, Chase, etc.)
• Credit union student loans
• State agency loans
• Direct-to-consumer education loans

Questionable “Education” Loans

• Bar exam loans
• Residency and relocation loans
• Computer purchases
• Living expense loans
• Parent loans to children

Institutional Loans

• Direct lending from schools
• Perkins-like institutional loans
• Emergency student loans
• Tuition payment plans
• Gap financing

Strategic Advantages with Private Loans

No Administrative Hurdles

Federal: Extensive government involvement Private: Direct creditor negotiation

Business Decision Framework

Federal: Policy and politics involved Private: Pure cost-benefit analysis

Faster Resolutions

Federal: Government moves slowly Private: Businesses want quick resolution

Creative Settlements

Federal: Limited flexibility Private: Everything negotiable

Common Private Loan Discharge Scenarios

Full Discharge Opportunities

• Loans past statute of limitations
• Missing critical documentation
• Non-qualified expenses included
• School lost accreditation
• Lender can’t prove ownership

Favorable Settlement Scenarios

• Significant documentation gaps
• Questionable qualification status
• Strong undue hardship facts
• Costly litigation anticipated
• Business relationship considerations

The Refinancing Trap: When Federal Becomes Private

What Happened When You Refinanced:

• Lost federal protections
• Became private loan legally
• Gained discharge opportunities
• Lost forgiveness programs
• Changed legal landscape

Silver Lining in Bankruptcy:

• Now treated as private debt
• Easier discharge standards possible
• Better negotiation position
• No government opposition
• Business decision for lender

Building Your Private Loan Discharge Case

Documentation We Need:

• Original loan documents
• Payment history
• Default notices
• Collection attempts
• School enrollment verification

What Often Helps:

• Long payment gaps
• Lender ownership changes
• School closure or problems
• Co-signer releases or deaths
• Previous settlement attempts

What Doesn’t Matter:

• High credit scores
• Assets (if exempt)
• Previous payment amounts
• Original loan purpose
• Current lender threats

Private Loan Creditor Tactics (And How We Counter)

Scare Tactics They Use:

“These loans can never be discharged” Our Response: Challenge them to prove qualification

“We’ll sue if you file bankruptcy” Our Response: Bankruptcy stops all lawsuits

“You’ll ruin your cosigner” Our Response: Strategic options exist

“This will destroy your credit” Our Response: Default already has

Timeline for Private Loan Discharge

Months 1-2: Foundation

• File bankruptcy petition
• Analyze loan documentation
• Identify discharge strategies
• Begin adversary proceeding

Months 3-4: Discovery

• Demand lender documentation
• Expose weaknesses
• Build discharge case
• Settlement discussions begin

Months 5-6: Resolution

• Push aggressive settlement
• Trial preparation if needed
• Achieve discharge/settlement
• Ensure proper documentation

Private vs. Federal: Strategic Considerations

Why We Often Prefer Private Loan Cases:

Legal Advantages

• Weaker statutory protection
• Documentation requirements
• Statute of limitations
• No government resources

Practical Advantages

• Business-minded creditors
• Faster resolutions
• Creative settlements
• Less political involvement

Success Rate Factors

• Higher discharge rates
• Better settlement terms
• More negotiation flexibility
• Clearer path to freedom

Warning Signs You Have a Strong Private Loan Case

Green Flags for Discharge:

• Loans over 5 years in default
• Multiple loan transfers
• School no longer exists
• Unclear loan terms
• Mixed educational/consumer purposes

Even Stronger If:

• Lender already wrote off debt
• No recent collection activity
• Documentation requests ignored
• Statute of limitations questions
• Previous settlement discussions

The Bottom Line on Private Loans

Private student loans are the bankruptcy success stories the lenders don’t want you to know about. At The Independence Law Firm, we’ve discharged millions in private student loans by understanding their vulnerabilities and exploiting them for our clients’ benefit.

Key Takeaways:

• Private loans lack federal protection
• Documentation problems are common
• Statutes of limitations apply
• Business decisions drive outcomes
• Discharge rates are higher

Don’t let private lenders intimidate you with federal loan rhetoric. Their loans are different, their protections are weaker, and your opportunities are greater.

Contact The Independence Law Firm today to discover why your private student loans might be far more dischargeable than you’ve been led to believe.