Student Loans and Bankruptcy: What You Need to Know | Ranger student loan


You may have heard somewhere that student loans cannot be canceled in bankruptcy, but it is a myth. Although very difficult to do, it is possible, and you might consider this route if you have exhausted all other options and meet the exit criteria. Here’s what to know if you’re wondering how to file for student loan bankruptcy.


First of all, if you are feeling overwhelmed with your student loan payments or are struggling to make ends meet, it is extremely important to understand and use all of your options to pay off your student loan debt by first. Filing for bankruptcy can have huge long-term consequences on your ability to access credit and it can be costly, so it should only be used by people whose finances have collapsed completely and who have no money. ‘other options.

Read on for answers to common questions on this topic.

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Should I file for bankruptcy?

If you’re struggling to pay off your student loan each month, you should first contact your loan officer and ask them what the repayment plans and other options are to keep your loans in good standing. Loan managers manage your student loan account management, including billing and repayment, and are staffed with people who can help you find the right solution for your situation.

If you have private student loans, repayment terms will vary, but contacting your manager is the best place to start.

Many troubled borrowers find misleading information online or fall victim to predatory companies that claim to offer debt relief, so it’s important to work directly with your student loan officer for this type of assistance.

One option for federal student loan borrowers to avoid bankruptcy is to enroll in one of four income-oriented repayment plans, which base the monthly payment on income and family size and could reduce that. amount up to $ 0.

Other options for avoiding bankruptcy include deferral or forbearance, which are short-term solutions that allow you to temporarily stop making your federal student loan payments or reduce the amount you pay each month. You may be eligible if you are experiencing financial hardship, significant medical bills, a job change, or some other type of hardship. And even if your federal student loans are already in arrears, you may want to consider pardon and loan consolidation.

If you’ve tried all the options available to you and your student loan payments still prevent you from paying basic necessities, you should consult a lawyer who has experience in the area of ​​student loans. bankruptcy. Trusted organizations like the National Consumer Law Center can also be a good resource for information on bankruptcy proceedings and understanding your rights as a student loan borrower.

Can my student loans be discharged in bankruptcy?

To successfully pay off your federal student loans in bankruptcy, you will need to prove that paying them off would be “undue hardship.” There is no standard definition of undue hardship, and each situation is left to the discretion of each bankruptcy court. This can make it difficult to understand if your loans will be canceled, but it also gives judges the ability to consider each individual situation when making a decision.

Most courts use a set of criteria known as the Brunner test to determine whether paying off student loans would cause undue hardship. To pass the Brunner test, you must prove that you meet the following three criteria:

1. Your income and expenses currently do not allow you to maintain a basic or minimum standard of living for you and your dependents if you are required to repay your student loans.

2. This financial situation will most likely continue for most of your student loan repayment period.

3. You made good faith efforts to try to repay your student loans before you declared bankruptcy.

How do I start the bankruptcy process and get my student loans released?

If you’ve thought about the decision carefully and done your due diligence to exhaust all other options, you might consider filing for bankruptcy. If this is the case, you will first need to decide which of the two common consumer bankruptcy options would be best for your situation: Chapter 7 or Chapter 13. You must weigh the pros and cons of each when making your decision. your decision.

Chapter 7 is the most common type of bankruptcy filing. This forces the declarant to liquidate the assets, which means you will likely have to sell a large chunk of your property to meet some of what you owe your debtors. Ownership can include land, your house, your car, and even part of your retirement fund. This type of bankruptcy stays on your credit report for up to 10 years, making it difficult to access credit during this time.

Chapter 13 bankruptcy requires you to pay off some of your debt according to a court-structured payment plan. It stays on your credit report for up to seven years, and you may not need to sell your assets to pay off your debts.

You can start the process by filing a Chapter 7 or Chapter 13 bankruptcy. If you are considering seeking a discharge of your federal student loans, a separate written complaint must be filed, which will trigger an additional lawsuit known as ” adversarial procedure ”.

A judge will then review your situation, possibly using the Brunner test. If your application is successful, your federal student loans could be fully or partially canceled, or they could be recalculated with a lower interest rate.

Declaring bankruptcy is not easy and has serious repercussions, but it is possible to pay off your student loans through bankruptcy if you meet the criteria. Because of the cost and the serious long term consequences, just make sure you have done your research and considered all of the other options before going ahead.


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