This is a HUGE national issue and growing to be so more and more each day. Whether you are concerned about your personal student loan debt, protecting the person that co-signed for you, or you co-signed for someone and are now experiencing collection calls – this type of debt can feel overwhelmingly complicated leaving people feeling hopeless.
When you take a very general look at bankruptcy law – student loan debt cannot be wiped out. But as with most rules, there are exceptions. If you can establish a substantial or undue hardship, you may qualify to wipe out this debt in a bankruptcy case. Easier said than done, but the exception is there.
So what can bankruptcy do for student loan debt?
In a Chapter 7, it can stop and then delay any collection actions such as taking your tax refund, garnishing your wages, etc for the period of time your Chapter 7 case is open. Filing a Chapter 7 may be what you need if you have substantial debt in other areas (credit cards, etc) and by wiping those debts out, you could handle your student loan payments.
Or – in a Chapter 13, you can stop any collection activity for up to 5 yrs and YOU decide what your monthly note will be during this time period. You can chose to pay $0 or you can chose to pay an amount that actually does work within your budget.
I have some clients that have over $200,000 in student loan debt and right now, there is simply no way they can pay the notes. They were being garnished, their tax refunds ceased, and had already negotiated the lowest payment acceptable to the creditors. We filed a Chapter 13, set their payments to $50 a month for the next 5 yrs, and they now have time to find the job they worked so hard in school to one day obtain.
There are options – within bankruptcy and without. I’ve only touched the surface. Let’s talk about your specific situation (are your loans federally subsidized or private? How old are they? Are they in default? Etc) and I can provide options for you to consider so that you can regain control of your finances.