October 12, 2007
Bankruptcy and Student Loans
I seem to be getting a lot of comments recently on student loans, bankruptcy and what your options are when you can’t pay. Here’s an interesting article for you from the American Chronicle. Please note, though, that declaring bankruptcy should be a last resort – it will take you years to recover your credit from declaring bankruptcy.
Bankruptcy Student Loan – The Laws Regarding Non-Dischargeable Debts
October 12, 2007
Bankruptcy student loan, as the term suggests, describes the situation when a person is not able to pay off the student loan that he or she owes. Here, it is very important for you to understand that the student loan is some of those loans that are non-dischargeable as per the bankruptcy laws in the United States of America. The non-dischargeable debts means that even if you have been declared as bankrupt because of any reason, the student loan will not be discharged or exempted – neither completely nor partially. However, there are some specific cases, in which the bankruptcy court may declare the student loans as dischargeable debts.
What Are The Situations In Which The Student Loans May Be Treated As Dischargeable Debts?
There is only one situation in which even the student loans may become dischargeable debt. This is the case when you can prove in the court that there will be undue hardship on you and your family if the student loans are not declared as dischargeable. Of course, this is not an easy cake to do. For example, in order to prove this, you may have to prove that you are physically challenged in a way that you cannot do any kind of work. What is more, even proving that you are physically challenged may not be enough. You will also have to prove that there is no hope in the near future for the recovery or getting a gainful employment. Other than such rare cases, the bankruptcy student loan can never be declared as dischargeable debts.
Changes Brought By the New Bankruptcy Laws
The new bankruptcy laws have come into effect from October 2005 and it has changed the provisions regarding the bankruptcy for student loans. For example, before the introduction of the new laws, the privately funded student loans, which were not guaranteed, had been considered as dischargeable debts, but now, even such student loans are treated as non-dischargeable. Now, these loans are also treated as similar to the student loans, guaranteed by the federal government or nonprofit institutions.
Is Student Loan Major Part Of Your Overall Debts?
If the student loan contributes the major part of your overall debts, filing bankruptcy is not recommended to you. You had better look for some other alternative, such as student loan debt consolidations etc. even if you file for bankruptcy in such a case; the chances are that your bankruptcy claim will be rejected by the court. What is more, even if you are declared as bankrupt, you will get no debt relief, as you will still be responsible to pay off the loan on your loan. No exemptions of any kind will be allowed to you.
If you have taken some students loan and are now unable to pay off the same, it is important for you to understand that the bankruptcy student loan is not considered as dischargeable debts in any case. That is the reason, why filing bankruptcy is not recommended for people who owe huge debts as student loans. The new bankruptcy laws have made the provisions much tougher in this regard. Log on to Bankruptcy for more information and related articles.