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What options do I have for my student loans?

We meet a lot of different people with a number of different financial situations. Often times, people considering filing for bankruptcy are people that never thought they would be in such a position. Many of our clients have gone to college, maybe even graduate school, and/or have had steady employment. Sometimes life just adds up and it becomes too much to handle on your own. We have a lot of clients that want to know if their student loans are dischargeable, and there is a lot of contradicting and wrong information floating about. So, while this is not meant to be a substitute for legal advice, we want to try to set the record straight.

The general rule is that student loans are not dischargeable. This even includes private student loans that are not funded by the federal government. There are some very specific exceptions, including that repayment is a substantial hardship to the debtor. This is a much harder burden to prove that what it may seem. Basically, you would have to show that you cannot now, nor could you ever feasibly repay the student loan.

That being said, if you are considering a Chapter 13 Bankruptcy filing your student loans can be repaid through the plan and may impact the amount you are paying to unsecured creditors. Basically, your student loan, while not dischargeable, does factor into your budget and what will be paid to other debts that are dischargeable (i.e. credit cards and pay day loans).

Now, there is some good news. Even though your loans are not generally dischargeable, there are still some options available. You will have to contact your loan servicer to discuss these options, but we can give you some general information.

If you are struggling you can apply for a forbearance of deferment of your loans. A deferment is delays repayment for specific reasons (i.e. you are enrolled in school at least half time). A forbearance is more of a catch-all. A forbearance can delay your payments for other reasons, including enrollment in certain residency programs, inability to pay, or illness. These options may impact what you pay over the length of the loan, however, a forbearance/deferment may give you the time you need to get back on your feet.

You can also look into different repayment plans. There is a standard plan that allows for up to ten years of payments. There is a graduated repayment loan, and in essence, the payments start out lower and increase every two years for a ten year period. There is an income based repayment plan which basically means your repayment is calculated by what you make, but this can stretch the length of repayment to up to 25 years. There may also be other plan options available, depending on your situation.

If you have questions about this, or any other questions, please contact your St. Louis Bankruptcy Attorney today!


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