Discharging Student Loans through Bankruptcy

Posted on in Personal Bankruptcy

Illinois bankruptcy attorneyNext to a home mortgage, student loans are among the largest debts that most people owe. While government regulations had made it easy over the past several decades to obtain financing for educational purposes, you can find yourself paying tens of thousands of dollars for a degree you never got or rarely use. While student loan debt is typically excluded from bankruptcy proceedings, there are certain limited situations in which your debt may be discharged and eliminated.

Student Loan Debts

A March 2017 Time/Money report states that the easy availability of student loan aid has made it easy to go back to school in order to further your career goals. Unfortunately, a sluggish job market and a lack of well-paying positions mean much of this debt ends up going unpaid.

During 2016 more than eight million student loan borrowers gave up on ever repaying more than $137 billion in student aid. Roughly one out of every six borrowers failed to make a payment over the previous six-month period, and are in danger of defaulting on their student loans. Options currently offered for dealing with these debts include:

  • Committing to a regular payment plan, which can result in payments of several hundred dollars per month or more.
  • Requesting income-based repayment, which can significantly reduce the amount you have to pay monthly, though interest will accrue;
  • Payment deferment, which allows you to avoid payments for an extended period of time, such as when you join the military or while you continue your education. while you look for a job after graduation. Interest is often waived during your deferment period.
  • Payment forbearance, which allows you to avoid payments for a shorter time period, usually several months, while you look for a job after graduation. Interest will accrue during this period.

Discharging Student Loans through Bankruptcy

While student loans are traditionally exempt from being included in your bankruptcy case, there are certain circumstances under which these debts may be discharged or forgiven. The U.S. Department of Education advises you may be entitled to have your student loans eliminated if you can prove continuing to make payments would be an undue hardship. This may occur in the following situations:

  • When the borrower suffers a temporary or permanent disability;
  • When income is minimal or falls below poverty level;
  • When the payor reaches retirement age;
  • When the school involved loses accreditation or is involved in fraud; and
  • When the degree you received proves to be worthless in obtaining a job.

Your student loans may be eligible for debt forgiveness if you work in social services or law enforcement, particularly in underserved areas.

Reach Out to Us Today for Help

There is no guarantee that any of the above conditions will warrant a discharge. To discuss your particular situation and the options which may be available, call or contact the Law Offices Of Eric G. Zelazny today. We can arrange a consultation with our skilled Tinley Park bankruptcy attorneys, who can advise you on the best course of action to clear your debts.

 

Sources:

http://time.com/money/4701506/student-loan-defaults-record-2016/

https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation/bankruptcy

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