If I declare bankruptcy, will my student loans be forgiven?
Will My Student Loans Be Forgiven If I Declare Bankruptcy?
Filing for bankruptcy does not automatically discharge all your debts, including student loans. However, you can discharge non-priority debts in bankruptcy. Student loans are one of these types of debts, and therefore they are hard to discharge. There are several ways to overcome this problem, including bankruptcy, but there are also many things you need to keep in mind before filing for bankruptcy.
Discharge of non-priority debts
When you file for bankruptcy, you can choose to discharge some debts and keep others. Non-priority debts include credit card bills, medical bills, and student loans. Unlike other debts, however, they are treated differently in bankruptcy and, for most people, will remain after the bankruptcy.
Most unsecured debts are dischargeable under bankruptcy. Depending on the type of bankruptcy you file, you may be able to discharge some or all of them. This will depend on the priority of the debts. Most non-priority debts are credit card bills, medical bills, and personal loans. Student loans are also a major problem in the United States.
The cost of filing a bankruptcy case for student loans
Filing a bankruptcy case for student loans can be expensive. Attorney fees, filing fees, and other costs can add up to thousands of dollars. In some cases, however, the student-loan debt can be discharged through bankruptcy without any out-of-pocket costs. If you need help with the case, you can contact a legal aid organization in your area. Students can also look to consumer-advocacy groups for advice and help.
Filing for bankruptcy for student loans is an option only if the amount you owe is more than you can pay each month. In other situations, you may be able to pay a reduced monthly installment because of income-based repayment plans. In these cases, your monthly payment reflects how much money you earn and are able to pay.
Alternatives to declaring bankruptcy
Since the 1970s, there have been concerns about the abuse of the bankruptcy system by student debtors. Legislators and journalists feared that law and medical students would use the bankruptcy process to avoid paying their debts after graduation. But there are many alternatives to declaring bankruptcy.
Bankruptcy isn't the only option for borrowers in trouble with their student loans. Federal loan deferments and forbearance can help borrowers temporarily delay or stop making payments without damaging their credit. Other options include income-driven repayment plans that tie payments to a borrower's discretionary income. Although interest will still accrue, these options allow borrowers to lower their monthly payments. In addition, some borrowers may qualify for an administrative or automatic discharge of their federal student loans without ever appearing in bankruptcy court.
If you have any questions, you can get a free consultation with the Best Attorneys in Utah.
Ascent Law LLC:
8833 South Redwood RoadSuite C
West Jordan, UT 84088
(801) 676-5506
