Bankruptcy and Student Loans
Student loans can be a huge financial burden on recent graduates. With the economy in the state that is, jobs are not as available as they once were. With a degree and no job, you may find yourself in a situation where you default on your student loans. You may think bankruptcy is an option, however, many government-backed student loans and loans back by nonprofit agencies are not discharged in a bankruptcy. This means that whatever you owe you will still have to pay after the bankruptcy.
There is one exception. You can rid yourself of you student-loan-debt if you can prove the debt is a substantial hardship—this is difficult hard to prove.
To have a student loan discharged, David Light, managing editor of Consumer Bankruptcy News, a Florida-based newsletter, said you must prove things:
1. You cannot keep up with your payment schedule.
2. Your future inability to pay and that your financial situation is permanent; and
3. You’ve made a good faith effort to pay
Good faith efforts include: being fully employed as you can be, being upfront and honest with your lender, and while you were employed you were making payments.
Recent graduates have the hardest time proving a substantial hardship because you have no prior history of non-payment.
If you cannot discharge your student loans in a bankruptcy, what are your alternatives? One advantage to student loans is that is has more repayment options than any other type of loan. If you foresee yourself defaulting you need to inform your lender, this is one fatal mistake student-loan-borrowers make frequently. If you talk to you lender early on, the more likely it is a plan can be constructed to fit your condition. Other options include: consolidation, negotiating with the lender, and consulting with a counseling service to get your other financial affairs in order so you can afford to repay the loans. To read more on this topic see The financial burden of student loans.
Contact a Florida Bankruptcy Attorney to discuss whether or not you may be able to prove a substantial hardship and include your students loans in your bankruptcy.
Greg Gilbert
Keith Maynard
