Why can't you claim school loans on bankruptcy?
School Loans on Bankruptcy - Why You Can't Claim School Loans on Bankruptcy
A bankruptcy filing does not automatically discharge a private student loan. You must meet additional criteria to discharge a private student loan. Generally, undue hardship is a requirement to discharge a student loan. But even if a private student loan is discharged, the debtor must show undue hardship in order to receive a discharge.
Discharge of private student loans would still require undue hardship
To qualify for a discharge of private student loans on bankruptcy, borrowers must meet certain criteria in order to qualify. First, they must show that they have an undue hardship in paying the loans. The circumstances that constitute a hardship will differ between courts, but most will require that the borrower show that they are unable to keep up with their monthly obligations or maintain a minimum standard of living.
If you are filing for bankruptcy, you will be required to file a lawsuit against the student loan holder. The court will then review your finances and decide if the hardship is actually undue. You may need to call in experts and produce supporting documents to prove your case.
Time limit for discharge of student loans
The time limit for the discharge of student loans on bankruptcy is currently five years. This is the time limit that federal student loans are eligible for bankruptcy discharge. Private student loans will continue to require proof of hardship. A proposed law would change this. It would eliminate the need to prove hardship before a student can receive a discharge.
However, this provision does not apply in all cases. Some bankruptcy court cases do not involve undue hardship. In other words, the bankruptcy court must decide whether the student loan repayment plan will result in substantial hardship for the student. If the financial hardship of the student is too great, the court may refuse to discharge the student loan.
The impact of bankruptcy on credit score
The impact of bankruptcy on school loans is important to know, but there are options. First, you should exhaust all other means of repayment before filing for bankruptcy. Then you should decide which bankruptcy type is best for your situation. There are two common consumer bankruptcy types: Chapter 7 and Chapter 13.
Even though bankruptcy will lower your credit score, it doesn't automatically mean that you're ineligible for federal student loans. Different types of bankruptcy will affect your credit in different ways. However, if you have a relatively good credit history, you might be hit harder than someone with a bad credit score. Remember that everyone's credit scores are different and that you probably struggled with your bills before you filed for bankruptcy.
If you have any questions, you can get a free consultation with Ascent Law LLC:
Ascent Law LLC:
8833 South Redwood RoadSuite C
West Jordan, UT 84088
(801) 676-5506
