Student loan and bankruptcy
Posted by andrewmoura on December 16th, 2018
One of the worst things that can happen to your life is when you have to think of filing for bankruptcy. Bankruptcy is a process that helps you, especially during your worst financial situation. It can help you to have a breathing space and gives you hope from paying up the debt or capital. But there is a common notion that student loans cannot be written off in bankruptcy.
However, if you’re someone who’s heard the same earlier, don’t give up hope. It is completely possible to write off your loans through filing for bankruptcy. However, not everyone can get their student loans discharged through a bankruptcy filing. It is one of the rarest forms of discharge. Only a few qualify for this form of discharge and it takes a lot to get it discharged. Let’s take a look into why it's rare and why most don’t qualify. Originally, until the year 1976, student loans were written off when people filed for a bankruptcy proceeding.
But this created a problem for the government and institutions as a lot of student loans began to be written off and there were a growing debt and less inflow of cash. Hence, in 1976, the court of the United States ruled that the bankruptcy loans will be written off for people who have been repaying for the last five years. Then, it was changed to seven years since there was a debt again. The recent ruling from the court is that the student loans will be written off for people who have an undue hardship with paying back the loans. But the court failed to define what ‘undue hardship’ meant and this has confused a lot of lawyers about the bankruptcy rules with respect to the student loans.
So, what goes in qualifying for the undue hardship? Some of the expert bankruptcy lawyers say that your financial situation should be in a critical situation to qualify for the discharge. By critical, the lawyers mean that paying up money for your students’ loans could make you not afford for everyday needs. When you’re in such a dire situation, the bankruptcy courts discharge you from paying up your loans. There are some other methods through which you can qualify for the discharge as well.
Sometimes, if you’ve made an effort to increase your cash inflow and made efforts to save up on needless expense, the court can discharge your loans. But again, qualifying for a discharge is actually difficult. The government has a lot of programs to help you with the student repayment plans. There are also programs that help you with your financial situation especially if your situation has turned worse.
Because of all these things, and because you will be able to survive with the financial help, you can’t escape from the first rule of qualifying and hence, you will not be able to escape from the discharge. But having a clear talk with your bankruptcy attorney can help you to know what’s the best way for you.Top Searches - Trending Searches - New Articles - Top Articles - Trending Articles - Featured Articles - Top Members
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