According to CNBC, there are “44 million Americans” with student loan debt. If you find yourself falling into this category you are clearly not alone. It’s likely that if you’re considering bankruptcy, all those thoughts you had of making millions after your graduation from college have long since melted into the abyss of crushed dreams. You may have also encountered setbacks such as finding a viable job in your major after graduating. Scenarios such as this have left many individuals feeling disillusioned, and has pushed them further into debt.
If that degree in Underwater Basket Weaving is not paying off as you had hoped, you may be considering filing for Chapter 7 Bankruptcy to eliminate your debts and start anew. While this is a fine idea, and certainly a tangible one you must take certain things into consideration.
You may be able to discharge your debts as it pertains to all those basket weaving supplies you purchased with your credit card; but unfortunately your degree is not a complete write off. In most cases student loan debts are unable to be discharged during a bankruptcy. However, once you are involved in active bankruptcy proceedings your lender should put a freeze on your account making a break in payments possible until your case is fully resolved. To take advantage of this you must first contact the lending institution and let them know you are involved in an active bankruptcy case. Only under rare circumstances can student loan debts be eliminated under Chapter 7 Bankruptcy.
The bottom line is it’s best to consult with your lending institution and see what options they have available for you. Student loan institutions offer programs such as “income based payments,” and “payment deferments.” Although helpful, deferments are still subject to accruing interest. Whereas, “income based payments” may result in an individual paying as low as “0” dollars per month.
Chapter 7 Bankruptcy is a viable option for those who feel they have no means to continue paying off their debts. However, it is not meant to be a long-term solution for staying out of debt. During bankruptcy proceedings individuals will most likely have to go through credit counseling and learn how to do things like create a budget. The best way to see if Chapter 7 Bankruptcy is right for you is to contact an attorney that specializes in this area. An attorney will help you navigate through potential pitfalls, and help you achieve your goals.