STUDENT LOAN DEBT
While student loans can assist you achieve a degree and increase your overall success, they can also be crippling to your finances. High monthly payments, particularly for new graduates still looking for work, can become challenging almost instantaneously. The fact is, a examination of recent graduates revealed that a fourth had gone lengths of time without paying their loans.
For such graduates, bankruptcy may seem like the only way out of an increasing mountain of debt. But the truth is bankruptcy almost never eliminates student loans. Current laws require that people with student loans continue making their payments even if they go bankrupt. However, it is not completely impossible to get rid of student loans through bankruptcy. Though the process is long and difficult, it can help relieve your debt when you are in the direst of circumstances. If you’re thinking about bankruptcy, your loans are in all probability already in default, meaning you’ve missed nine or more consecutive payments. This is more prevalent than you may think; the national default level on student loan repayment is close to 9 percent. The problem of student loan debt has and continues to be a problem for many, especially in the wake of the significant economic downturn of the past few years.
Ignoring your student loan debts is the most unfortunate decision. Once you’re in default on government-held loans – which accounted for 90 percent of all student loans in the 2010-11 school year – the federal government has extraordinary collection capabilities. It can garnish wages, seize tax refunds or portions of Social Security benefits, and place liens on bank accounts and property. And in contrast to other forms of debt, there is no statute of limitations on federal government student loans. That means that a student loan debtor can be held responsible for lifetime by the federal government or the agency that services loans on behalf of the Department of Education.
Also, after a determined period of time in past due status, a loan can be transmitted to a private collection agency. Additional fees and collection costs are then added to the loan balance.
Rather than trying to disregard your student debt difficulty, it’s paramount to take action sooner rather than later, even if that means going into bankruptcy.
There are rigorous guidelines as to whether your student loans can be removed through bankruptcy. They apply to any loan purposely given for education expenditures, including both private and public student loans. They apply to student borrowers as well as parents borrowing loans to pay for their children’s education. If you want to have student loans discharged through a personal bankruptcy filing, you must have the ability to verify that your student loans could cause you “undue hardship.”
These guidelines are fairly subjective and are open to the discretion of the bankruptcy court. Each court can have its own variances as to what composes undue hardship. A request to remove of student loans is generally made at the close of bankruptcy proceedings.
Even if bankruptcy can't discharge your student loans, it may still be the right choice for you.
People having trouble keeping up with student loan debt often have various other outstanding debts ranging from bankcard debt to unpaid mortgages. Bankruptcy can discharge these other debts, freeing up more funds to reduce your student loans.
That being said, it’s shrewd to help prevent bankruptcy when probable. Give consideration to student loan consolidation as an approach to simplify education loans, and endeavor using debt settlement to minimize other types of debt.