Declaring Bankruptcy on Student Loans
Student loan debt is on the rise across the country as students take in more and more loans to finance their rising tuition fees. In fact, Americans collectively own more than $1.5 trillion in student debt, and the figure is still rising. If you are struggling with managing your student debt, you may wish to file for bankruptcy. However, there are some things you should know before declaring bankruptcy on student loans.
1. Qualifying for Chapter 7 Is Difficult
To file for chapter 7 bankruptcy, you must first make sure you are eligible for it by passing the means test. The income requirements often disqualify many bankruptcy filers from filing under this Chapter.
2. Filing for Bankruptcy Won’t Guarantee a Debt Discharge
Even if you qualify for Chapter 7, you would still have to prove to the court that you are not in the position to pay your student loan debt. You will have to convince the judge that the debt is inflicting extreme hardship on your well-being and that your financial situation is unlikely to change in the near future. As one would expect, cases that win out are quite rare. Filing under Chapter 13 is easier, but it would only reorganize your repayment plans based on your judged ability to pay back the loan.
3. Filing Bankruptcy Is a Stressful Process
It should be stressed that filing for bankruptcy is a lengthy process. Debt discharge can take up to 4 to 6 months under Chapter 7 – that is if you win at court. During the process, you will have to manage finances for the legal fees involved, as well as go through a lengthy list of paperwork. Therefore, seeking the advice of an experienced attorney can help ensure your case is successful. Don’t be discouraged though. While your student loans may not be discharged and the process may be stressful – you may still be able to get some relief. Bankruptcy can eliminate your other debts freeing you up to tackle your student loans or allow you to put them in a reorganization plan. For some loans, there may even be an income-driven repayment program you can avail yourself of in conjunction with your bankruptcy case.
4. You Can’t Hack Your Way out with a Credit Card
Some clever-mind students may think that they can cheat the system by putting all their student debt on their credit card and then file for its bankruptcy. However, such an attempt would be categorized as fraud. If the court thinks that the attempt was deliberate, expect some negative consequences.
5. It Will Impact Your Financial Health
A completed bankruptcy can linger on your credit report for up to 10 years, impacting your financial health. This may sound discouraging, but not filing for bankruptcy and allowing your debt issue to worsen would also negatively impact your credit score. Discharging your debt allows you to start anew with a clean slate, and many are able to rebuild their financial well-being even before the bankruptcy gets dropped off their report.
Get Legal Help
If you fail to plan, you plan to fail. As mentioned before, filing for bankruptcy is a tiresome process and the court case will not always result in your favor. Therefore, a qualified legal attorney is essential for helping you navigate successfully through the figurative legal labyrinth. At the Law Offices of Sean T. Flynn, PLLC in Austin, TX, I offer personalized legal assistance for filing under Chapter 7 and Chapter 13 the bankruptcy code. With over 8 years of experience in the profession, you can be sure to obtain a satisfactory resolution in a bankruptcy case. Call 512-640-3440 or contact me online to schedule an appointment.