Student loans are not typically included in bankruptcy but there are ways to get them included. In this article I will share with you how to get your student loans included in bankruptcy and what the consequence and benefits of going bankrupt are.
The amount of student loans debt in the United States recently surpassed the amount of credit card debt in the United States, totalling in at 2.1 trillion dollars in student loan debt. You may be among the students who graduate college with thousands of dollars in student loan debt. You may be among the students who struggle or find it impossible to make payments every month and are wondering what you can do to find relief. If you are considering filing for bankruptcy, you know the hardship that comes with being in extreme financial crisis. Student loans will not be automatically included if you choose to file for bankruptcy, but there are ways to get student loans included in bankruptcy.
Student loans are not included in normal bankruptcy
What do I have to do to declare bankruptcy on my student loans?
Since student loans are not included in normal bankruptcy, you or your attorney to file for an adversary proceeding. This is simply asking for the courts to make an exception for you, so you are allowed to file for bankruptcy from student loans.
In order for the courts to grant you the exception, you must demonstrate three things:
- You need to prove that if you continue to make the student loan payments as scheduled, you would not be able to live at a reasonable standard of living. This means that luxuries such as cell phones or cable couldn’t be afforded even if the student loan payment was not due.
- You need to prove that this financial hardship will continue on through the majority of the loan repayment period.
- You need to have been making on time payments on your loans before your financial hardship set in. This shows the courts that you were making an effort to repay your debt.
Should I file for bankruptcy?
When finding ways to ease the burden of student loan repayment, bankruptcy should be the last option. Experts agree that the decision to declare bankruptcy should absolutely not be taken lightly. Declaring bankruptcy will drastically lower your credit score, and remain on your credit report for seven to ten years. Having a low credit score can hurt your life in many ways. During that time, it will be nearly impossible to take out a mortgage or any other type of large loan. Having a low credit score will drive up the interest rates on any small loans you qualify for. Some cell phone companies even run credit checks before offering you a cell phone contract. Your credit cards will also be taken away.
If you are struggling to make your loan payments, talk with your lender about alternative options to declaring bankruptcy. Bankruptcy results in everyone(including you) losing, from the lender to the taxpayers. There are other options that can reduce the burden of student loan repayment that will end in a much more agreeable situation for all parties. The Department of Education can also be a valuable resource when finding alternative ways to pay off student loan.
Bankruptcy results in everyone(including you) losing, from the lender to the taxpayers