Student loan debts are one of the most serious financial difficulties people face. According to data reported in a recent USA Today article:
"... in 2005 student loans accounted for less than 13% of the total debt load for adults age 20-29. Today, student loans account for nearly 37% of that group's outstanding debt."
If your financial difficulties are such that you're thinking about filing for bankruptcy, the following are some things you need to know about bankruptcy and student loans:
Student loans are generally not dischargeable in bankruptcy
This means that after filing for Chapter 7 bankruptcy, you'll still be on the hook for repaying them once other debts are wiped out. And if you're filing for Chapter 13 bankruptcy, you have to work them into your repayment plan and resume paying off whatever is left over after the bankruptcy process has concluded.
How bankruptcy can help is to give you some room to breathe
With other debts wiped out or diminished, you may have more money freed up to pay off your student loans. During Chapter 13 bankruptcy, the monthly payments you have to make on your student loans may be reduced for the duration of the bankruptcy repayment plan.
Sometimes, student loan debts can be discharged
What you would need to do is apply for undue hardship, showing that your financial situation is dire and unlikely to soon change, that you have a serious medical condition, and/or that you've made a good faith effort to pay off your loans. However, don't count on the court to rule fully in your favor. At best, you may get your loans only partially discharged.
Work directly with the agencies you borrowed from
You may be able to negotiate a more favorable repayment plan with the people you took loans from. If you've taken out loans from the federal government, here's a website you should look into that includes situations where your loans may get discharged.
Private lenders are generally going to be much tougher to deal with. Also, keep in mind that you could be on the hook for debts if you cosigned on the loans. (For example, a recent article from the Consumerist describes the harrowing situation of parents stuck with student loan debts after their child dies.)
If you want to discuss all of your options for how to deal with student loan debt, especially if you're considering bankruptcy, don't hesitate to contact us. Our Torrance bankruptcy attorneys will help you come up with solutions that work best for your circumstances and advocate for you in court.