Today indebtedness on Student Loans is larger than it has ever been and is larger than any other single category of debt. Many students emerge from universities and college with no hope of ever paying back their student loans. The impact of the enormous amount of student debt is still not entirely understood.
A bankruptcy, in most cases, cannot remove student loan debt. In rare cases student loans can be discharged, but typically this process requires you to show that in all likelihood you will never be able to pay back the student loans. In order to receive a discharge the debtor must file what is called an Adversary Proceeding in her bankruptcy case. An adversary proceeding is a trial. In most cases where the bankruptcy judge grants the student loan debtor a discharge, it is because the debtor successfully demonstrated that she has a long term physical or mental disability that interferes with her ability to earn a sufficient income to pay the student loans. Often these are cases where the cost of education was high and the student was either not able to work in the occupation due to the physical or mental disability or did not complete the education. Although courts consider many factors, a key consideration is whether the student loan debt made their financial situation worse by making poor financial choices such as taking on large or unreasonable house or car payments.
Helping You Stay Out Of Default
Avoid default if at all possible. Be proactive and call the lenders to arrange an alternative payment arrangement if at all possible. A defaulted student loan debt, can destroy your credit, lead to garnishment, the recapture of your tax refunds and even other financial difficulties, interfere with eligibility on other public benefits and future eligibility on student loans. Depending on what type of loan you have will determine how long it takes to go into default and what your options are before and after default. There are generally two types of student loans: government student loans and private student loans.
Options for Repayment of Your Government Student Loans
Government Student Loans:
For government backed student loans, you will be eligible for 3 total years of deferment and forbearance. Deferment typically lasts a year and may be renewed by an application which requires that you demonstrate insufficient income to pay the loan. A forbearance is generally a shorter time period and can be granted without completing the paperwork that is required for a deferment.
Whether or not you have used up your deferment options, you may want to consolidate your loans and enter into one of the various repayment options available. There are standard long term repayment options, graduated repayment options, and income based repayment options. Many people choose the income based repayment option, if they have run out of deferment and are still unemployed or underemployed because often no payment is required. These programs will base your payment on your adjusted gross income and your income is reviewed on an annual basis for a term typically of 25 years. If you are a public service employee, your loan may also be eligible for public service forgiveness after 10 total years of public service employment.
Helping You Stay Out Of Default
Defaulting on a student loan can be dangerous. The government can decide to garnish your wages, seize tax refunds, seize federal benefits, or deny you eligibility for Pell grants or other student loans. Once the loan is in default, it will usually be transferred to a debt collector and the high debt collection fees are charged to the account. This can be very expensive and stressful.
Explore Your Options
Contact A Minnesota Bankruptcy Attorney
Student loan debt can be crippling when it comes to trying to move forward with your future. If loans are too high, then your debt-to-income ratio can prevent you from buying a car or a home. Even if loans are in deferment or forbearance, they can cause challenges and they cannot be discharged in bankruptcy. There are ways that you can deal with student loans so that they don’t become difficult for you to deal with and the McKinney Law Office can help. Contact the Minneapolis office at 612-206-3706 or the Issaqah, WA office at 425-395-6064 to schedule a free consultation.
This law firm is a debt relief agency, and we help people file for bankruptcy relief under the United States Bankruptcy Law.