Bankruptcy student loans : what you need to know?
September 28, 2023
Do you Need a Student Loan?
If you are considering pursuing your post-secondary education, but are short of funds, then you might be wondering if you could get a student loan. While student loans can be fairly easy to get, you also need to think about what you will do after you graduate – because you will need to pay back your loan. While some lenders give students a bit more time to pay back loans, and often at a lower interest rate, the truth is that student loans do need to be paid back – or you could find yourself losing credit score due to non-payment.
What if I can’t pay back my Student Loan?
So what happens if you get through school (whether you graduate or not) and find yourself unable to pay off your student loan? Whether you have received a student loan through a private institution or one of the larger lenders, or through the federal government, it is most likely that you will be required to pay this loan back – and not paying it will show up on your credit score for years to come – even for life.
Will I Face Bankruptcy if I Default Payment on my Student Loan?
For anyone in the U.S. who is facing loans bankruptcy – particularly bankruptcy of private student loans – you may be wondering how you can get a student loan bankruptcy discharge. To get your student loan discharged in bankruptcy, you must first file for bankruptcy and then demonstrate to the bankruptcy court that paying back your loan would cause you extreme and undue hardship. This would mean proving that if you were forced to pay back your loan you would not be able to meet a certain minimum standard of living, that this minimal standard of living would last for a significant portion of the loan repayment period, and that you have tried your best to pay back the loan thus far.
If you are at this point now in your life, then you really need to talk to an expert – like the team of credit counsellors at Debt Helper USA. Our team of compassionate, understanding financial counsellors will take a look at your personal financial situation and advise you on the best steps you can take.
What do I need to know about Loans Bankruptcy and Discharge?
In a small percentage of cases, you can qualify for a student loan bankruptcy discharge. In the case if you are disabled, or if your school did not provide the education you expected, or closed down, or if you can show that you are in extreme financial distress that is affecting your basics of life – such as providing food and shelter for your family – you may be able to qualify for a discharge. However, it is important to note, that you likely cannot apply for this discharge yourself.
To apply for a discharge on a student loan, you will need to enlist the help of a credit counselling agency, such as Debt Helper USA. Then, your credit counsellor will negotiate loans bankruptcy with the lender of your student loan on your behalf. They could potentially negotiate a discharge, but this could mean that you are still responsible for paying back part of the loan, potentially over a longer period of time and at a reduced rate. This scenario is better than declaring bankruptcy over an unpaid student loan because entering into a payment plan will lessen the effect on your credit score.
However, if you do decide to declare bankruptcy, and your lender was the federal government, then you may qualify to have your loan discharged. Debt Helper USA can also help you with this filing, which is called an “adversary proceeding” and on your behalf we ask the bankruptcy court find that repaying the loan would cause you and your dependents undue hardship.
What do I need to do to file for student loan bankruptcy?
Filing for student loan bankruptcy in America can be more difficult than with other loans because:
- Student loans are harder to get discharged than other types of unsecured debt
- There is an extra step involved to getting a student loan discharged, which is filing an adversary proceeding
- It is best to consider alternatives before filing for student loan bankruptcy, such as working with a credit counsellor to reduce your debt amount with the lender, or working on deferment, forbearance or income driven repayment
It is important to understand that you are not alone. According to sources, in 2022, 43.5 million Americans are in the exact same position as you – dealing with loans bankruptcy. Of those people, up to 10 percent are dealing with unpaid student debt of between $20,000 and $40,000.
It is good to know in times like these that there are credit counselling agencies such as Debt Helper USA that can help you determine your options, especially if you are worried about going bankrupt over an unpaid student loan. Reach out to us today if you are looking for information on student loan bankruptcy discharge and we can help.
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