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THE SOLUTION TO YOUR STUDENT LOAN DEBT IS BANKRUPTCY. Andy’s article at Penny Less Dad: Andy is an editor at Penny Less Dad and only writes about matters pertaining to personal finance.

I’m going to presume that if you’re reading this, you’re struggling with student loan debt and looking for a solution.
If so, then you’re probably at the right place.

You should be aware that everyone’s student debt situation is unique before we try to help you resolve your issues. Your repayment alternatives, employment status, and income situation, for instance, may all be impacted by the sorts of loans you have.

Should Bankruptcy be an Option for Your Student Loan Debt?

It’s crucial that you comprehend every aspect of your loan in order to come up with the greatest solutions for your individual situation.
Although declaring bankruptcy should only be done as a last option, it can occasionally be quite beneficial.

HOW CAN DEBTORSHIP HELP? If you have a federal student debt that is subject to a wage garnishment or social security deduction, bankruptcy may be able to protect you. Garnishments and federal benefit offsets halt the moment you file for bankruptcy protection. Unfortunately, if you don’t cease your default status by the time your bankruptcy is over, the garnishment or offset may resume.

Any co-signer on your student loan, whether a family member or friend, is similarly shielded from collection efforts by the bankruptcy filing.

CAN Bankruptcy Affect You? Many private student loan promissory notes contain a default clause that kicks in if either the signer or co-signer files for bankruptcy. Sometimes, even though the borrower is current on payments, the co-signer files for bankruptcy relief, which results in a default against the signer.

The legitimacy of such a file is a topic of discussion, but no verdict has been reached as of yet. Understanding state legislation is a crucial first step in the process because solutions may differ depending on where you are.

WHEN DOES BANKRUPTCY HAVE NO POINT? Most of the time, if there is no extreme hardship, student loans are not dischargeable in bankruptcy. Unfortunately, it is often difficult and frequently expensive to establish this. This should not deter you, though. While there are some circumstances where proving hardships is simple, getting a discharge in bankruptcy is frequently the most challenging. Nevertheless, if you can demonstrate anything like a lifelong impairment, things can work in your favor.

A federal student debt can be easily dismissed administratively if the borrower meets the criteria for undue hardship due to a disability.
Yes, there is an administrative discharge available to borrowers of student loans who are totally and permanently handicapped.

If you meet the requirements, you will need to complete some paperwork, provide supporting documentation, and await a decision for 60 days. What’s more intriguing is that it’s completely cost-free in contrast to typical bankruptcy filings, which take years to complete and cost a lot of money.

Although a bankruptcy discharge is tax-free, an administrative discharge requires payment of taxes. That could yet be less expensive, quicker, and complex for the whole bankruptcy procedure .


Is Bankruptcy the Answer for Your Student Loan Debt Woes?

If you plan to discharge a student debt just because the payment appeared excessive to you, filing for bankruptcy might be pointless. Many borrowers of federal student loans are unaware of reasonable payments based on income.

If you are struggling, it is feasible to obtain inexpensive payment arrangements. Consider a scenario in which you ask the bankruptcy judge for a discharge owing to hardships and the creditor’s lawyer informs the judge that you can have a modest payment plan of $5 or $10 per month.

AT THE END There are numerous causes for bankruptcy. My point is to determine if you truly face a hardship and require a discharge before declaring bankruptcy or whether you are doing it voluntarily. To find out how it will affect your student loans, speak with your lawyer.

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