The situation can become even more problematic if a borrower is unable to repay the loans on time. Late penalties can make loan amounts increase substantially. Collections agencies will also charge borrowers if their services are needed to collect past due amounts. The lending companies can also garnish wages or social security payments if loans are not repaid in full. Professional licenses may also be at risk in some professions if the loan goes into default.
The Difficulty of Discharging Student Loans in Bankruptcy
In many cases, individuals saddled with insurmountable debt can seek relief under the U.S. bankruptcy laws-that is, unless they are student loan borrowers. Under current law, student loans are generally not dischargeable in bankruptcy. In order to discharge a student loan obligation, borrowers must demonstrate that they have an undue hardship-a threshold extremely difficult to meet.
Options for Struggling Student Loan Borrowers
There are alternative options, however, available to those who have significant student loan debt such as:
• Renegotiating loan terms: In some instances, borrowers may work out a different repayment plan with their lender, if the lender is willing to negotiate the terms of the loan.
• Deferment: Debtors may also be able to defer student loan payments while searching for employment because of economic hardship.
• Consolidation: If the loans come from multiple sources, debtors may want to consider consolidation to help cut down on the monthly payment amount.
For some people, student loan payments are made easier by eliminating other kinds of debt, such as credit card debt or medical debt. Individuals can eliminate almost all other kinds of unsecured debt by filing a Chapter 7 or Chapter 13 bankruptcy.
Other ways to manage debt include using bankruptcy to reorganize their debt. Some individuals can actually lower their car payment and keep their vehicle in a Chapter 13 plan.
If you are having difficulty making your student loan payments, it’s recommended you speak with an experienced California bankruptcy attorney. Your bankruptcy lawyer carries the experience to advise you of your options when it comes to handling student loan debt.