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Bankruptcy And Student Loans

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In the past, bankruptcy could be declared on most any debt. Going Bankrupt with student loans was fairly common. In 2005 the bankruptcy laws were changed, the changes that were made in the Bankruptcy Code have effectively stopped an individual from being able to file bankruptcy due to student loans - no matter how old the student loan may be.

Unless you can prove that you are in dire hardship, the only way that filing bankruptcy benefits people with student loans is that the bankruptcy may free up money from other debts that can be applied to the student loan. For instance, if you have $600.00 worth of debt payments per month discharged through a bankruptcy, this amount can be applied to a student loan.

If you want to try to prove hardship and do a bankruptcy due to student loans, you should know that you would have to prove that paying back the loan would put you or your family under undue hardship. This means you must show that paying back the student loan would greatly impact you or your family and would keep you from maintaining an adequate standard of living. In the instance that hardship is proven, the court will discharge a portion of the student loan but may still require the debtor to repay a portion of the loan.

While bankruptcy due to student loans may not be an option, you should know that there are other avenues you can investigate which may help you with your student loans. There are various agencies and counseling services which offer consolidation programs and budget help. They can even work with your lenders to arrange a repayment program that will be based on your income.

If you have been through a bankruptcy and are looking to go back into education and feel that you will need to take out student loans then you will need to obtain as much financial information as you can before applying for them. It is possible to get student loans after bankruptcy but it is not as simple as it is without a bankruptcy in your past.

Bankruptcy And Student Loans

Today's college graduates have to face financial reality more quickly than just a few decades ago. You are given only six months grace from your graduation date until you have to start repaying your student loans. Don't have a job yet? Too bad, kid. Welcome to the real world. In the 1970's, college students figured out that by declaring personal bankruptcy, student loans could be forgiven or pushed back a few years. Unfortunately for future generations of American college graduates, in 1998 the law was changed to make student loans non-dischargeable.

Make Student Loans What?

"Non-dischargeable" is our vocabulary word of the day, class. Translating it into American English, this means that if you declare personal bankruptcy, student loans still need to be paid. You cannot get out of it, unless you suddenly drop dead, but that kinda defeats the purpose of getting a college degree in the first place. The Federal Student Aid Ombudsman (FSAO) says there are only three extremely hard to fulfill criteria for exemption of this non-dischargeable rule. You must fulfill all three. They are:

If the loan repayments force you to a "lower than minimum standard of living". If the loan repayments will force you into poverty most of the time you need to repay the student loans. You have to make some sort of effort to repay the loan before filing for personal bankruptcy. Student loans will usually be dischargeable only if you have been able to make payments for five years.

Your Options

You really don"t have many options left if you need to declare personal bankruptcy. Student loans can sometimes be consolidated, which can often make paying them back a lot easier, but you will still need to pay them back. If your college closed permanently before you graduated, then you have an excellent shot of contesting the loans. But what about for the other 99.9% of college graduates?

If you've consolidated and stretched your student loans for years, at this point it can be next to impossible to disentangle who is owed what, and you can challenge the enforceability of the loans. Since it is the creditor's job to provide proof of claim about what you owe, this legal loophole might be your only chance. Otherwise in declaring personal bankruptcy, student loans will still be staring at you in the face. Creditors are only allowed to take 10% of your paycheck in order to repay a

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About Author

Both Ken Charnley & Scott Goodman are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.

Ken Charnley has sinced written about articles on various topics from Chapter 13 Bankruptcy, Cooking Tips and Bankruptcy Law. Ken Charnley is a personal finance publisher whose website is dedica. Ken Charnley's top article generates over 1000000 views. to your Favourites.

Scott Goodman has sinced written about articles on various topics from Supplements, Cure Anxiety and Arthritis Signs. You can find many more Bankruptcy related articles at For all your Bankruptcy needs, please visit. Scott Goodman's top article generates over 60500 views. to your Favourites.

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