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[B163]Bankruptcy Discharge Student Loans

by John Mailer, Joh

When it comes to bankruptcy and student loans, is this a viable option?

In the case of bankruptcy and student loans, the situation is a bit more complicated than with other types of debt. If you have a government-sponsored student loan or one issued by a non-profit agency, then filing for bankruptcy is not the answer. These types of loans are not discharged by declaring bankruptcy. You would still be responsible for paying back the entire amount, even if other debts were discharged.

There is a place for bankruptcy and student loans, but it's quite difficult to satisfy the requirements for having your debt discharged in this manner.

The borrower would have to prove that he or she is unable to keep up with the agreed-upon payment schedule. In addition, he or she would have to demonstrate that an effort to pay was made and that the individual's financial situation is permanent.

In the event that there is no hope that the person's financial situation will improve in the future so that payments can be made on the outstanding loan, the Court may consider bankruptcy and student loans. As you can see, this would be a pretty difficult condition to prove.

Alternatives to Bankruptcy

If you are having trouble keeping up with your loan payments, the best approach is to tell your lender. A lot of people are hesitant about discussing their financial situation with their lender. This is the best approach if you feel that you can't make your loan payments as arranged.

You will be much better off making some sort of alternate arrangement before you are in default on your loan. Once you are in default, you will have fewer options to rectify the situation.

Keep in mind that your lender has dealt with people in your situation before and that in the vast majority of cases, an alternate payment arrangement can be worked out.

Just because bankruptcy and student loans generally don't go together, it certainly doesn't mean that you are lacking in options if you are having difficulty in keeping up with your payments.

Once the classes have finished and it's time to get out into the real world, it's also time to decide how you are going to handle your deferred student loan into the future.

You don't want a cloud hanging over you forever, nor do you want to miss then fun your new earning power gives you.

So what's the deal then?

Let's just look at what a deferred student loan is all about. Whilst some student loans are deferred, you need to realize that many require payments even while you are still at college, which as you might already realize, is like topping up a water barrel that has the plug already out at the bottom.

Question is, can you put money in at the top fast enough to stop your barrel becoming empty?

So, if you can, it might be a great idea to have a loan, like a Stafford loan that needs no repayment until graduation is over, often with a 6-month grace period as well, to get you started in your job and new home etc.

Whatever the benefits of this are, there are rules upfront. If you leave college, or do too few hours of class, for example, you may well be required to pay back all you have borrowed right away. From this point of view, so long

as you stay enrolled in the college that you have chosen, or a similar qualifying one, you will be OK In this way, the loan is regarded as a deferred student loan.

With a Stafford Loan, there are two ways that it works. Sometimes the deferred student loan is offered by the college itself.

The alternative is where private funding is arranged, by a specialist in student loans and guaranteed by the federal government. Repayment is the same in both situations and the loan remains payable under the terms of the agreement.

An alternative, the Perkins deferred student loan, comes through the college and has government funds to back it and is focused on those who cannot afford a loan from any other sector.

You need to remember that there is a range of schedules for deferred student loans that are not as 'deferred' as you might want. Getting into one of these without the right plan going forward will give you a tough time, so make sure that you realize fully what you are getting into.

You see, as an example, a 'Federal Direct Parent Loan for Undergraduate Students' start their repayment demands within a couple of months of classes starting!

This is not really one of the deferred student loans that you would want to take, if you are in the emptying that water barrel situation. If you do find you have one of these loans, it's vital to get your budgeting and cash flow well organized well before you start to fall behind.

Article Source : Pg. 16

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Both John Mailer & Martin Haworth 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.

John Mailer has sinced written about articles on various topics from Pets, College Student Loan and Parenting. John Mailer's articles look at students financial problems and the ideas using private student loans. His other site is about the. John Mailer's top article generates over 60500 views. to your Favourites.

Martin Haworth has sinced written about articles on various topics from Finances, Interview Questions and Team Building. (c) 2007 . Products, services and step-by-step guidance to help you make the best decisions you can. Checkout Martin Haworth's website. Martin Haworth's top article generates over 3350000 views. to your Favourites.