Roseville Student Loan Bankruptcy Lawyer
As more and more employers emphasize the importance of having a college degree, many students are thrusting themselves into large amounts of debt to fund undergraduate and graduate degrees. Unfortunately, some students do not get the position they desire upon graduating. This can make it difficult to make a dent in a mountain of student loan debt. If you or a family member are considering filing bankruptcy to deal with student loan debt, you should consult with our experienced Roseville student loan bankruptcy lawyers today.
While the truth is bleak, it remains true; discharging student loans through bankruptcy is challenging, if not impossible. However, this does not mean you should not consider bankruptcy as a viable option. In some cases, even if your loans are not discharged, a more manageable payment could be negotiated. Additionally, bankruptcy could provide temporary relief from high payments or disruptive collection activities.
The skilled lawyers at The Bankruptcy Group possess a wealth of experience handling various types of bankruptcy issues, and we will use this experience to represent you. Managing student loan debt is a stressful process, but we are here to help you explore options that can alleviate the process. To schedule a free legal consultation to discuss filing for bankruptcy, call The Bankruptcy Group at 1-800 921-5351.
Student Loan Debt Statistics
In recent years, there are about 42 million individuals with student loan debt that equals $100,000 or less. Of these 42 million borrowers, approximately 2 million people have accumulated debt that is over $100,000. Additionally, about 415,000 borrowers are in debt that totals more than $200,000.
It is important to note that the average student loan borrower has between $10,000 to $25,000 worth of debt. This amount of debt has permitted some individuals to enter into 10-year repayment plans to deal with their debt. Other borrowers that have large amounts of loans are often forced into income-driven repayment plans that could last several decades.
Unfortunately, if some borrowers are unable to pay for a period of time, they may accumulate additional debt in the form of high interest rates. That is why some individuals consider bankruptcy to avoid being mired in debt for much of their life. To learn more about how to discharge your student loan debt, you should continue reading and consult with an experienced Roseville bankruptcy attorney.
How to Discharge Student Loan Debt
Normally, filing for bankruptcy would not allow a debtor to discharge their student loan debt. This may seem strange as most forms of debt can be discharged or reorganized into a more manageable form when a person files for bankruptcy. The likely rationale behind the student loan bankruptcy discharge rule is that legislators were concerned that a student could earn an expensive degree and shun their responsibilities by filing for bankruptcy. Fortunately, some exceptions may allow a debtor to discharge student loan debt in bankruptcy.
Financial Hardship Test
The financial hardship test analyzes a borrower’s financial situation and various other circumstances on a case-by-case basis to determine whether they should be exempt from paying their student loans. Generally, three factors are considered for the financial hardship test:
- Whether the student loan borrower has a justifiable explanation for their financial hardship
- Whether the extenuating circumstances will not be resolved throughout the loan repayment term
- Whether the borrower has in good faith tried to pay off the loan
These elements may vary depending on which bankruptcy court is handling the proceedings. It is also important to note that you may not have to actually repay a portion of a loan to prove that you were trying to repay it.
To claim undue hardship, a student loan borrower must utilize an adversary proceeding. This process allows a debtor to claim that repaying their student loan would result in severe financial difficulty.
Outside of claiming an undue hardship, it is difficult to have your student loans discharged through a bankruptcy proceeding. Decades ago, borrowers would be able to discharge student loan debts along with other debts when filing for bankruptcy. However, some judges and legislators are beginning to look for alternative ways to alleviate the burden of student loans. For example, allowing a debtor to repay the debt in a Chapter 13 bankruptcy reorganization plan could be useful for borrowers who cannot afford their current monthly payments. Some advantages of filing Chapter 13 will be discussed in more detail below.
Bankruptcy is not a decision that should be made quickly. Our firm will walk you through the benefits and problems of bankruptcy to help you make the choice that is right for you.
Alternative Solutions to Discharging Student Loan Debt
As discussed above, discharging student loan debt through bankruptcy is challenging, if not impossible. However, that does not mean that filing for bankruptcy will not provide relief or effective ways to better manage your student loan payments.
While you might not be able to discharge your student loan debt through Chapter 7, you still could eliminate other debts that have been straining your financial resources. If you were paying the monthly minimum balance on credit card debt, making monthly installments on a personal loan, or slowly paying off old medical expenses, discharging these and other outstanding debts could make paying your student loan more manageable.
Furthermore, a Chapter 7 bankruptcy could last five or six months. During this period, a filer is protected by an automatic stay that prohibits creditors from taking any collection actions. This period of respite, along with the discharge of other debts, could help improve an individual’s financial position.
A Chapter 13 bankruptcy lasts up to five years. If you are above median, then your case must be sixty months long. If you are below median, you could choose a thirty-six month plan. However, if you are struggling with unmanageable student loans, opting for a longer period is probably more beneficial.
So how does a Chapter 13 case provide relief for student loan payments? First, the primary reason someone files Chapter 13 is to reorganize their debt. Sometimes a debtor will file to pay back mortgage payments they have missed or pay a lower amount to the unsecured creditors they owe. The key component in a Chapter 13 case is the bankruptcy plan. This plan will propose a monthly payment that will be disbursed to the debtor’s various creditors. Our California bankruptcy lawyers will determine this payment in one of two ways depending on whether you are a below or above-median case.
Below Median Chapter 13 Case
If your monthly income is below median, you are eligible to file Chapter 7. Nonetheless, you are still entitled to file Chapter 13. While you will have to pay a monthly trustee payment, there are times when filing a below-median Chapter 13 makes sense. One reason someone files a below-median case is that they are behind on their mortgage payments and they want to keep their house. In this case, the monthly trustee payment will be determined by how much the debtor owes the mortgage lender. When there is no secured debt, the amount paid will be based on the difference between the debtor’s monthly expenses and their monthly income. If you have any creditors, including student loans or unsecured creditors, each will be paid the same percentage. For example, if your payment is $100 a month, you will have paid $6,000 over sixty months. If you have a $50,000 credit card bill and a $50,000 student loan, each will receive $3,000. The difference is, the remaining $47,000 owed to the credit card company will be discharged while the student loan balance will survive the bankruptcy. Still, the trustee payment will likely be substantially lower than your current student loan payment. Hopefully, your financial situation will have improved over the five-year case, so once your bankruptcy is over, you will be able to afford your student loan payments.
Above Median Chapter 13 Cases
Above median cases work slightly differently. If you are above median, you are not eligible to file a Chapter 7 bankruptcy. The underlying principle is that your income is high enough to pay a portion or all your unsecured debt. Unlike a below-median case, the amount you have to pay will not be the difference between your income and expenses. Rather the means test will look at your income, some actual expenses, and other IRS and federal deductions to determine your disposable monthly income. This is the amount you will be required to pay each month. In some cases, this amount might be more than a straight income and expenses comparison. Nonetheless, in nearly every case, it is still significantly less than your required student loan payment.
The Significance of the Automatic Stay
The government has more options and collection powers than the average creditor. If you fall behind on your student loans, your wages could be garnished, your bank account frozen, and your tax refund seized. However, whether your file Chapter 7 or Chapter 13, you are granted the protection of an automatic stay. This court injunction stops all creditors, including the government, from taking action against you.
In some situations, a student loan might have required a co-signer. The co-signer is legally responsible for your debt as well. This means that if your parents co-signed for your loan, their property, bank accounts, and wages are also in danger. If you file for bankruptcy, you also protect any co-signers from collection actions. To discuss the benefits of filing Chapter 13 to manage your student loans, contact our California Chapter 13 bankruptcy lawyers.
Our California Student Loan Debt Bankruptcy Attorneys are Ready to Work with You
If you or a family member want to know whether bankruptcy is the best choice for discharging student loan debt, you should contact an experienced California student loan bankruptcy attorney today. The Bankruptcy Group understands the frustration of dealing with insurmountable debt, and we are here to stand with you. Our attorneys will evaluate your unique situation and help you determine whether filing for bankruptcy is a good decision for you. To schedule a free legal consultation, call The Bankruptcy Group at 1-800 921-5351.