Student loan debtors need not go begging, and need not avoid bankruptcy either

If you have been looking into bankruptcy, and have a lot of student loan debt, you probably have discovered that it isn’t easy to wipe out these loans in bankruptcy court.

Eliminating a student loan requires filing an adversary proceeding (a fancy name for a lawsuit) in addition to the basic bankruptcy case, and then getting yourself declared a special “hardship” case.

This is a difficult, although not impossible, task for most bankruptcy debtors.

But all is not necessarily lost: a bankruptcy in tandem with other proactive action might be a viable course of action.

Syndicated columnist Anya Kamenetz has written that there is no need to go begging just because you have student loan debt. In particular, she advises that you

* not try to avoid the problem by “forgetting” about it;
* investigate income based repayment programs. These are not bankruptcy, and some take 25 years to complete, but can be a way of managing unwieldy payments;
* investigate “forebearance” and “graduated repayment” clauses in the loans you have signed;
*if you (or a loved one) is still in school, avoid private student loans to the extent possible.

For those deep in debt, forbearance or income based repayment plus a bankruptcy filing may be all they need to relieve debt pressures, avoiding the long and costly adversary proceeding route.

 

By Doug Beaton

This entry was posted in Student loans. Bookmark the permalink. Both comments and trackbacks are currently closed.