If you owe student loans, you are not alone. The amount of student loan
debt in the United States is the second biggest source of personal debt.
Student loan debt has surpassed credit card debt and auto loans, and is
second only to home mortgages, in the total amount owed by American households.
We commonly see clients with heavy student loan debt and idea how to address it.
Although there has been a lot of talk in the news lately about how to provide
relief for borrowers, the options are currently limited. We hope that
overt the next few years Congress will establish a policy that makes sense
for both the borrower and the lender. In the meantime,
bankruptcy provides a limited ability to discharge certain student loans. Bankruptcy
can also be part of a two-stage process of discharging your other debt
first, and tackling your student loan debt after your discharge.
Hardship discharge through bankruptcy: Generally, bankruptcy does not allow for forgiveness of most student loans.
This applies to both federal and private student loans. There are a few
exceptions, however. If any of the following apply to you, then it may
be worth your time to talk to a bankruptcy attorney in more detail about
- You have suffered a hardship, such as permanent disability, where it is
unlikely that you will ever be able to pay your student loans.
- You went to a college that is not a Title IV institution. For example,
truck driving school.
- The debt was incurred to pay something other than educational expenses.
- The debt was incurred for the education of someone besides yourself, your
spouse, or your dependents.
Discharge of other debts, to provide funds to pay on the student loans: Although it is unlikely that bankruptcy will result in a discharge of
your student loan obligations, bankruptcy may still help you with your
student loans in the long run.
Discharging your other debts in a
Chapter 7 bankruptcy may free up money in your budget to help you tackle your student loan
obligations, possibly saving you thousands of dollars in interest. Alternatively, a
Chapter 13 Bankruptcy would allow you to defer student loan payments for up to five years so
you can focus on paying off certain debts, such as taxes, deficiencies
on a home mortgage, or auto loans, without the additional pressure of
the student loan payments. We invite you to contact Garrett Law LLC to
discuss your bankruptcy options.
Outside of bankruptcy, the government provides many payment options for
federal student loans. Click here for more information about how to reduce
your payments based on your income and your ability to pay. Click here
for important information about consolidating your loans. We also encourage
you to contact an agency such as Housing and Credit Counseling, Incorporated,
to review your options with a professional counselor.
Unfortunately, if you have private student loans you are bound by the contract
you signed and the lender's policies. However, do not let that keep you from
contacting us. You want to be aware of all your options before setting out your Plan
for financial recovery.