Student Loans And Bankruptcy
Below is a MRR and PLR article in category Finance -> subcategory Wealth Building.
Understanding Student Loans and Bankruptcy
Overview
Many students wonder how filing for bankruptcy will affect their student loans. In most cases, due to rules established in 1998, student loans are not dischargeable through bankruptcy.
In the past, numerous students accumulated significant loan debts and filed for bankruptcy before finding employment, aiming to avoid repayment. While bankruptcy might not erase your student loans, it can help manage other debts, making student loan payments more feasible.
Considerations in Bankruptcy Court
When student loans are involved in a bankruptcy filing, the court examines three factors:
1. Undue Hardship: The borrower must demonstrate that repaying the loan would cause extreme financial difficulty, preventing them from maintaining a basic standard of living.
2. Repayment Duration: The court will consider if the repayment period is excessively long.
3. Repayment Efforts: If the borrower has diligently tried to pay off the loan over several years (e.g., five years) but still struggles, the court may consider discharging the debt.
Even if student loans remain, filing for bankruptcy can alleviate other debts, freeing up resources for loan payments.
The Importance of Legal Assistance in Bankruptcy
Though individuals can file for bankruptcy on their own, doing so can be risky. Representing oneself in legal matters?"known as "pro se"?"may save money initially, but any errors could lead to the dismissal or denial of the petition.
Court procedures require precise paperwork, and many assume bankruptcy involves merely completing and submitting a few forms. However, the reality is more complex; forms must be correctly completed and submitted in a specific order.
Choosing the right attorney is crucial. Seeking recommendations from legal aid services or friends can help you find a reliable lawyer who has the capacity to focus on your case. Some attorneys may have large caseloads and might not provide the service level required.
Conduct thorough research on bankruptcy attorneys to ensure your financial future is in capable hands.
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