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Student Loans Can’t Be Swept Away Through Bankruptcy
By: Charles Essmeier
Bankruptcy is in the news these days, as Congress has finally overhauled the
Federal bankruptcy law after years of talking about it. The credit card
companies, rightly or wrongly, have been pressuring members of Congress to
tighten the bankruptcy statutes, saying that too many people were willfully
spending money they couldn’t repay with the intention of avoiding paying the
money back by filing for bankruptcy. That will soon change, and those with
student loans may pay a heavy price.
Most everyone knows that consumers with problem debt who are unable to pay their
debts may file for bankruptcy under Chapter 7 of the Federal bankruptcy code.
This allows for the court to basically wipe away all of the debtor’s bills and
allows them to start over. It’s not entirely free; the bankruptcy filing stays
on the debtor’s credit report for the next ten years and may affect their
ability to buy a home, borrow money or obtain employment. What many people fail
to realize is that while installment loan debt or credit card debt can be wiped
out through filing for bankruptcy, most student loans cannot. In fact, thanks to
legislation enacted several years ago, most any loans acquired for education,
including those issued by for-profit agencies, may not be eliminated through
filing for bankruptcy.
What this means for those with student loans is that they will need to be
repaid. If bankruptcy is inevitable, those with outstanding student loans should
contact their lenders and see if they can’t negotiate a repayment plan. Those
with Federally funded student loans should contact their lender soon, as rates
for student loans will go up on July 1, 2005. Now would be a good time to
consolidate student loans, as the rates can be locked in for the long term. If
these options are not viable, then holders of student loans should simply be
aware that their lenders and their lenders’ loan collectors will be keeping in
touch with them for the foreseeable future. Those with student loans and other
financial problems should also be aware that Federal bankruptcy law will change
in October, 2005, making it harder to file for bankruptcy. If you have problem
debt, now would be a good time to consider meeting with a credit counselor.
About the Author:
©Copyright 2005 by Retro Marketing. Charles Essmeier is the owner of Retro
Marketing, a firm devoted to informational Websites, including http://www.End-Your-Debt.com,
a site devoted to debt consolidation and credit counseling, and http://www.StructuredSettlementHelp.com,
a site devoted to information regarding structured settlements. |
