While it’s possible to discharge student loans in bankruptcy, it’s not very easy. Generally, unless you can show undo hardship, student loans are not dischargeable in bankruptcy.
Chapter 13 bankruptcy can provide relief to the student loan debtor but there are some big problems with a Chapter 13 bankruptcy.
Chapter 13 bankruptcy plans will normally last 3 to 5 years and at the end of the Chapter 13 plan, you may end up with a higher student loan balance after bankruptcy, if you haven’t made payments during your Chapter 13 bankruptcy.
One practical tip in a Chapter 13 bankruptcy is to pay your student loans with the money you saved during the Chapter 13 plan. It’s all about budget but sticking to the budget can be tough.
There are better solutions!
Alternative solutions to Chapter 13 bankruptcy
There is no doubt that a Chapter 13 bankruptcy can provide some relief for student loan debt. It can stop collection and garnishment activity but, for most, student loans are paid on a proata basis during the Chapter 13 bankruptcy. That proata sum is usually not enough to keep your student loan balance from growing during the Chapter 13.
So, what’s the answer? Income based repayment plans!
Income contingent or income based repayment plans
There are two income adjusted programs available for Federal student loans. Income contingent repayment (ICR) and income based repayment IBR programs are both intended to provide you with an affordable monthly payment based on your income and family size. Under both plans any remaining loan balance is forgiven after 25 years and under both programs your monthly payment amounts will be adjusted annually based on changes in your income.
While there are key differences, income contingent or income based repayment plans are an excellent way to address your student loan problems even if you have to file for bankruptcy.
It is crucial that you find an attorney who specializes not only in bankruptcy but student loan law so you know your options. Those options include filing for bankruptcy or determining whether an income contingent or income based repayment plan will provide you with relief.
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How to deal with your student loan debt today
According to The Institute for College Access and Success (TICAS) project on student debt, the average student loan borrower graduates with $26,600 in debt! One in 10 graduates accumulates more than $40,000 in debt. There is almost $1.2 trillion dollars in college student loan debt in the United States.
Regardless of the amount, student loan debt can limit your financial future. Are you stuck with an unaffordable monthly payment?
How to deal with your student loan debt
There are many options for Federal student loan borrowers, including income contingent or income based repayment plans that can help reduce your monthly payment.
Both plans provide you with an affordable monthly payment based on your income and family size. Monthly payment amounts can be adjusted annually based on changes in your income and any remaining loan balances are forgiven after 25 years.
There are key differences in these programs and you should consult a student loan attorney in determining what payment plan or consolidation options provide you with a fresh start. You can learn your repayment options today!