People who file for bankruptcy in California often have questions regarding the process and its impact on their lives after filing. Having a bankruptcy on your credit report could affect your ability to rent an apartment, obtain a loan, or qualify for a mortgage. Some potential debtors are concerned about how filing for bankruptcy will affect their eligibility for student loans or financial aid in the future.
The simple answer is, “it depends.” Bankruptcy filers will qualify for certain student loans and will struggle to be approved for others. Another common question is whether a parent’s bankruptcy will diminish their children’s chances of qualifying for financial aid or a student loan. Below, our Roseville, CA bankruptcy attorney will explore these issues in more detail.
The Bankruptcy Group is committed to helping people through their difficult financial times. While filing for bankruptcy is often the best option to deal with overwhelming debt, some consequences could continue to affect your life after your discharge. To discuss the pros and cons of filing for bankruptcy during a free consultation, call our office at 1-800-920-5351.
Qualifying for Student Loans After Filing for Bankruptcy in California
Students and potential students seeking financial aid have several options. Stafford and Perkins loans are federal loans that are based on an individual’s financial needs and not their creditworthiness. Generally, if you have filed a Chapter 7 or Chapter 13 bankruptcy, it will not impact your eligibility for a student loan. However, it is still necessary to maintain good credit after you have received a discharge. You do not want to begin incurring new debt after your discharge, especially if you plan to take out a student loan. Our California bankruptcy attorney offers guidance and assistance on rebuilding credit after you have completed your bankruptcy.
If you are currently in school, any previous loans you have taken are probably in a grace or deferment period. However, if you have taken some time off and are looking to return to school, any default in your student loan payments will adversely affect your ability to qualify for additional loans. Fortunately, federal loans offer a number of repayment programs based on need and current income. While discharging student loans in bankruptcy is difficult, you should discuss your situation with an experienced California bankruptcy lawyer if you are struggling with your monthly payments.
In addition to federal loans, students could obtain loans from private lenders. If you have filed and completed a bankruptcy, it could lower your chances of being approved. However, if you have successfully completed a Chapter 13 bankruptcy, your odds of obtaining a loan from a private lender are better than if you received a Chapter 7 discharge.
Eligibility for private student loans is determined by your credit score and the likelihood that you will be able to repay the loan. Therefore, a bankruptcy could affect your ability to qualify for a loan from a private lender. In some cases, a student could require a co-signer with a better credit score or significant assets. Students who are required to rely on private loans should consult with their school’s financial department and various lenders if they have completed a bankruptcy. Private loans often offer higher interest rates and inflexible repayment options for debtors who have defaulted or are grappling with repayment. As a general rule, private student loans should only be taken when necessary and, then, for the smallest amount possible.
Students who filed for bankruptcy could still qualify for other forms of financial aid, including grants and scholarships.
Does a Parent’s Bankruptcy Affect Their Children’s Student Loans in California?
Similar to a student filing for bankruptcy, a parent who files will not affect their child’s eligibility for a federal student loan. As stated previously, federal loans are based on financial necessity and not the credit score of the child or parent.
Furthermore, a parent’s bankruptcy will not impact other forms of financial aid, including scholarships, state grants, or student work-study programs. Some parents who filed for bankruptcy might be eligible for tuition installment payment plans that are structured as qualified student loans.
Bankruptcy will impact a student’s parents’ eligibility for PLUS loans. More specifically, a parent will not qualify for a PLUS load for at least five years from the date of their bankruptcy discharge. Additionally, an adverse credit history, such as a foreclosure, wage garnishment, repossession, or tax lien, will negatively impact a parents’ ability to qualify for a PLUS loan. If you have filed for bankruptcy and are looking to find financial aid for your child, speak with our experienced California bankruptcy attorney to discuss your available options.
In situations where a parent is denied a PLUS loan because of their credit history or previous bankruptcy, their child could be eligible for an increased Stafford loan. In many situations, parents and students prefer the Stafford loan because it has a lower fixed interest rate than the PLUS loan.
Loans from private lenders should not be impacted by parents filing for bankruptcy. However, if your child required a co-signer for their private loan, you might not qualify if you have a bankruptcy on your credit history.
Our California Bankruptcy Attorney is Ready to Assist You Today
There is a significant amount of erroneous information regarding bankruptcy. The attorneys and staff at the Bankruptcy Group are available to answer any questions you might have, including why you should file, what does the process requires, and how will filing for bankruptcy impact your life after discharge. This includes how it affects your eligibility for student loans. Contact our experienced Orange County bankruptcy lawyer at 1-800-920-5351 to schedule a free appointment.