Many of us are aware of the ways in which a Chapter 7 bankruptcy can help us eschew overwhelming amounts of debt and move on with our lives. It’s hardly surprising that 728,833 Chapter 7 bankruptcies were filed during 2013, or that bankruptcies stemming from medical debt affected some 2 million Americans that same year.
But how do student loans — the biggest debt facing Americans today — factor into the bankruptcy process? While you can’t typically discharge student loans with a bankruptcy filing, it may be possible to default on these loans if you’re unable to make your monthly payments. However, it’s essential to know the facts about defaulting on a loan of any kind before doing so.
Want to know even more about how student loans factor into the defaulting process — and whether or not you can discharge your student debt with the help of a Chapter 7 bankruptcy attorney? To learn more about student loan default, read this list of the three things your attorney should tell you about this financial tool:
Student loan lenders are more powerful than you think
Your student loan lender has an incredible amount of power over your finances while you repay your loans. They have the ability to garnish your wages and even levy your bank account if your loan payments aren’t made on time. Wage garnishing, in particular, can be a huge blow to anyone struggling financially.
Defaulting should be a last resort
Defaulting on student debt should only be used as a last-ditch resort. This is because defaulting can make one ineligible for loan forgiveness programs and other assistance. Before resorting to a default, contact your student loan lender. You may be surprised at the number of options your loan provider may be able to offer you, including reduced or even eliminated payments. And if you have other forms of debt that are too overpowering, it might be time to seek bankruptcy help.
A bankruptcy likely won’t eliminate your student loans
While it’s possible to get rid of virtually any type of debt during a bankruptcy filing, student debt is one of the few exceptions to this rule. It’s important to remember that student loan payments are one of the federal government’s largest sources of revenue — and the government is highly unlikely to forgive these debts as a result. However, you will be able to suspend payments on your student loans during your bankruptcy filing, which typically takes about six months. This is one way bankruptcy helps with student debt.
Have any other questions about student loan default, the Chapter 7 bankruptcy timeline or seeking bankruptcy help with a local bankruptcy attorney? Let us know in the comments below.