Student Loans and Bankruptcy

Student Loans and Bankruptcy

Honolulu Bankruptcy Lawyer Explains How We Can Help

Recently, student loans have surpassed credit cards as the largest amount of unsecured debt owed in our country. Unlike medical bills, credit cards, past due income taxes and other unsecured debt, student loans are generally not eligible for discharge in a bankruptcy. However, that does not mean that you have to endure harassing phone calls, wage garnishment or lawsuits by lenders. Additionally, by receiving a discharge of other debts, you will be better able to continue to pay your student loans in the future.

How Can Bankruptcy Help with My Student Loans?

The vast majority of people with student loans will not be able to discharge their debt in bankruptcy. However, this does not mean that a Honolulu bankruptcy cannot help you. If you file Chapter 13 bankruptcy, you will work out a payment plan with your lawyer and the bankruptcy court, which can include your student loans. This means that you will pay down the loan throughout the plan, and receive a discharge of other unsecured debts. After completing the Chapter 13 payment plan, you will be in a better position to pay your student loans.

Additionally, upon filing for bankruptcy under either Chapter 13 or Chapter 7, all collection attempts from your student loan lender will halt. This means no more harassing telephone calls or letters, and you can stop wage garnishments or other forms of collection against you.

When Are Student Loans Dischargeable?

Although it is generally the case that student loans are not dischargeable in bankruptcy, in certain extreme situations, you may argue that repaying the loan would put you through unimaginable and undue hardship. In the vast majority of cases, a person would not be able to receive a student loan bankruptcy discharge without demonstrating extraordinary circumstances.

The crux of the hardship discharge is to prove the following factors:

  • Paying back the loan would make you unable to maintain a minimal standard of living
  • Your current financial situation will remain in its current state for a number of years
  • You have made a good faith effort to pay the loan

Student Loan Debt Settlement

Student loans are not as easily discharged in bankruptcy as other kinds of debt, which means that a debt settlement (also called debt negotiation) might be a good solution to easing your financial burdens.

Student loans can originate both from the federal government and private financial firms, and the laws concerning how the loans are handled and collected can be more complicated than in other forms of debt settlement solutions. Though the lender may have their own repayment program, a Honolulu bankruptcy lawyer may be able to negotiate a plan that is far easier on your wallet, and allows you to maintain a comfortable standard of living while still making payments.

You Don’t Have to Face Student Loan Debt Alone

We understand that times are hard and that you may have had trouble finding a job since leaving school. Contact our office today to find a solution to your problems. There is no need to keep avoiding telephone calls and throwing away the billing letters – contact us at (808) 528-4274 to set up a free consultation.