Student loan money follows a different guideline than other debt when it comes to bankruptcy. These loans will not be discharged or forgiven during bankruptcy. The government backs federal loans and requires you to make payments on them. Private student loans now have the same protection when you file bankruptcy. If student loans are the reason you are declaring bankruptcy, you will need to look for another option.
Student Loans and Bankruptcy
Student loans are protected during a bankruptcy. This means that you will rarely be approved for a student loan to be discharged during bankruptcy. The federal government backs all federal student loans and wants you to make the payments on them until they have been paid off. Private student loans are rarely forgiven as well. You may have credit card debt, and other consumer debt discharged during bankruptcy, though.
Student Loan Forgiveness
There are programs available for student loan forgiveness. The programs focus on people who work in the public sector for the government or as teachers. Many teachers can have their loans forgiven after five years of service as a teacher. People who work for local or state governments may qualify for student loan forgiveness after 10 years of service. Contact your lender to see if you qualify for the program. However, to qualify for forgiveness you need to make on time payments the entire time you are in the program.
Student Loans and Disability
The only way to have student loans completely discharged is to be declared permanently disabled. This is an extensive process, and it is very difficult to complete. If you have a debilitating accident or illness, you may qualify for disability. Once you qualify for disability checks, you will need to send a copy of your approval letter to your student loan lender and go through the process again with your lender. This rarely happens and the most difficult part is qualifying for disability benefits.
Working with Your Lender
If you find that you are having difficulty making your payments, there are several options available to you. Student loan lenders are more likely to work with you if you cannot afford to make payments. You can defer payments by applying for a hardship deferral. You can also have income-based payments, which can lower your monthly payment to something you can afford. If you are having difficulty with making payments, contact your lender instead of skipping payments to see what you can work out.
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