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Is bankruptcy the answer to student loan debt?

On Behalf of | Dec 15, 2021 | Uncategorized

January 31, 2022. If you are struggling with outstanding student loan debt, this is a date you need to watch closely. That is when the pause on student loans is due to end. So far, there is no sign that the government will extend it. 

If they do not, you may need to look at filing for bankruptcy. Technically you can include student loan debt in a bankruptcy filing, yet, it is so complex that hardly anyone has managed to do so. Therefore, it is simplest to assume you cannot. Why then would you want to file for bankruptcy?

If your student loan were your only debt, perhaps you could pay it. Yet, if you are like most people, you also have other obligations. It is the combined total that you cannot meet, rather than any particular item. So, by using a Chapter 7 bankruptcy to rid yourself of credit card debt, personal loans or car loans, you will hopefully have enough left over each wage check to meet your student debt.

What about the promised $10,000 of student loan forgiveness?

You probably heard this during the electoral campaign, yet it has not happened so far. As with any electoral campaign, candidates often find that fulfilling those promises is not so easy once they get in power. There is considerable opposition from several quarters to any student debt forgiveness, so it is hard to say if it will ever happen. 

If you cannot meet your total monthly debt repayments, sitting here hoping the government will do something will not help you. All it will do is increase how much you owe as interest accrues. If you miss payments, things will worsen due to penalty fees.

The new year is a chance for a new beginning. Finding out more about Chapter 7 requirements is a crucial first step toward getting your finances under control.