Federal Student Loans Vs Private Student Loans
There are many different types of student loans. Each type has its own specific rules, interest rates, and policies. All of these different loans fall into two categories: federal student loans and private student loans.
Often, but not always, federal student loans are offered at a lower interest rate than private student loans. And federal student loans usually come with more repayment options than private student loans. Federal loans also have more protections available if you lose your job or donât make much money after you graduate.
But the government has borrowing limits for some types of federal student loans. In other words, thereâs a maximum amount that each student can borrow from the federal government. When students choose to take out private student loans, itâs often because they have exhausted their federal borrowing limit.
What If Bankruptcy Cannot Discharge My Student Loan Debts
Bankruptcy filing may still be the right move for you even if you fail to have your student loans wiped out. Individuals struggling to make payments for credit card debts, mortgages, and other loans may find that personal bankruptcy helpful in freeing up funds to pay for student loans. Repossession of property by a creditor and collection by debt collectors and collection agencies are temporarily prevented by the automatic stay that comes into effect after filing bankruptcy.
Where Do I Go From Here
Simple. Fill out the contact form on the side of this page and you will be instantly connected to one of our expert attorneys who will find out what your options are free of charge. Don?t waste any more time with student loan debt collectors harassing you every day. Get proactive, contact us right now and we?ll do all we can to help make your life easier and get you a fresh start.
Is student loan bankruptcy possible for you? There?s only one way to find out?connect with an expert bankruptcy attorney for a fast and free bankruptcy consultation today!
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Criteria Based On Student Loan Characteristics
A student loan is not considered a qualified education loan if:
- The loan is owed to a person who is related to the borrower, defined as a brother or sister , spouse, ancestor or lineal descendant.
- It is a loan from qualified employer retirement plans, such as a 401 or 403.
- Timing requirements are not met. A qualified education loan is borrowed within a reasonable period of time before or after the qualified higher education expenses are paid or incurred. Loans used to pay primarily for prior-year balances are not necessarily qualified education loans. Note that this timing requirement applies only to the original qualified education loan, not any subsequent refinance of the qualified education loan.
- The loan must have been borrowed to pay for the cost of attendance as defined in the Higher Education Act of 1965 as of August 4, 1997. This includes tuition and required fees, room and board, books, supplies and equipment, transportation, miscellaneous personal expenses, dependent care costs, study abroad costs, disability-related expenses and loan fees. It does not include room and board for students enrolled less than half time, the cost of obtaining professional licensure or certification, and the rental or purchase of a personal computer.
Bankruptcy: A Brief Overview
You probably already know that bankruptcy is a court procedure you can use to get your debts erased or reduced. But you may not know there are two different kinds of bankruptcy proceedings.
Liquidation bankruptcy. Chapter 7 is the most common type of bankruptcy. When you file for Chapter 7, you may have to surrender some of your property to pay creditors, but the end result is that most of your debt will be completely wiped out. But student loans are a big exception to this rule you must file additional paperwork and meet a high standard to discharge your student loans in a Chapter 7 case.
Reorganization bankruptcy. When you file for Chapter 13 bankruptcy, you get to keep all of your property, but you must partially or fully repay your debts over a period of time. You wonât be able to get rid of your student loans in a Chapter 13 case, but you may be able to relieve some short-term pressure.
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Get A Bankruptcy Attorney
A borrower is more likely to obtain a bankruptcy discharge of their student loans if they are represented by an experienced attorney.
However, most bankruptcy attorneys are unwilling to pursue an undue hardship claim because these cases involve an adversarial proceeding, which are expensive and involve a lot more work. It can cost $10,000 or more to pursue an adversarial proceeding and borrowers who file for bankruptcy usually dont have the money to pay the lawyers fees. Lenders are also likely to appeal the decision, so a favorable decision is unlikely to be final.
Even if you dont have an attorney and are representing yourself pro se, always show up in court. If you dont show up when required, the lender can win the case by default.
Deferment And Grace Periods
When you take out a student loan, itâs important to know when your first payment will be due. Payments on federal student loans arenât due while youâre in school at least half-time. Thatâs not always true with private student loans. Many private student loan companies require you to make payments while youâre still in school.
The first payment for most federal student loans is due six months after you graduate, leave school, or switch to an enrollment that is less than half-time. The six months between graduation and your first payment is called your âgrace period.â During your grace period, you should start to receive repayment information from your loan servicer. Federal Parent PLUS loans donât have a grace period. Your grace period can be extended in special situations, for example, if you are called into active military duty.
Deferment is a word that lenders use that means postponement or delay. If a private student lender offers a choice between a deferred loan and an immediate loan, the difference is generally that the first payment will be due for an immediate loan shortly after you borrow the money, while payments for the deferred loan would generally not be due until after you graduate. Private student lenders usually charge higher interest rates for deferred loans than they do for immediate loans.
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Providing You With Debt Relief Solutions Through Bankruptcy
Regardless of the reasons that brought you to financial distress, filing for bankruptcy does not make you a bad person. In fact, the government created bankruptcy in order to help people recover from unmanageable financial problems. At Lawrence & Associates, we help our clients understand how bankruptcy laws are made to protect them and will allow for a brighter financial future.
We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.
If you or someone you know has large amounts of student loans that they are having a problem paying back, have them contact Lawrence & Associates today to see if we can help!
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You Can File For Chapter 7 Or Chapter 13 If A Chapter 7 Bankruptcy Is Approved You May Be Able To Plead Undue Hardship On Your Student Loans
Since you do not have to have a lawyer help you, you can keep the costs down by filing without one. If you want to try to discharge your student loan in bankruptcy, you must file an adversary proceeding to determine dischargeability with the bankruptcy court. You can find their names and contact information. In kentucky what property can i keep? Private student loans have a default level of 10 percent.
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Immediate Relief For Pressing Financial Problems
Above all, do not ignore your financial problems or lawsuits that creditors bring against you. These issues will not disappear. Your best option is to contact a bankruptcy attorney at the first sign of financial distress. Even if you are facing immediate foreclosure, repossession or wage garnishment, Lawrence & Associates can provide swift legal action to help protect you. Your start to a fresh financial future begins when you contact the bankruptcy law firm of Lawrence & Associates. Our firm helps clients file Chapter 7 bankruptcy and Chapter 13 bankruptcy. When you work with our firm, we will take the time to fully explain your legal options and the bankruptcy process in an understandable way not with complex legal jargon. We can also provide advice on how to stop creditor harassment, garnishment, foreclosure and repossessions.
How To File Bankruptcy In Kentucky For Free
Chapter 7 bankruptcy is a relatively quick process to eliminate debts while keeping property the Kentucky bankruptcy laws protect from your creditors. Since you do not have to have a lawyer help you, you can keep the costs down by filing without one, either with Upsolve’s help or without it. Folks making less than 150% of the federal poverty guidelines may even be able to have their court filing fee and credit counseling costs waived.
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What If I Cannot Prove Undue Hardship
If you cannot prove undue hardship, it is still possible to negotiate and make your student loan payments small and affordable.?Chapter 13 bankruptcy is a process whereby the majority of your debts are discharged and the remaining debts are ?reorganized? so that you can make payments that you can afford based on your budget for a period of between three and five years. Once your plan is over, you can attempt to discharge more of the student loans based on hardship.
If I Am Married Do I Have To File Bankruptcy With My Spouse
No, but this question should only be answered after a review of your specific circumstances. If most of the debt is in one spouses name, it may be better for just that person to file and preserve the other spouses credit. However, while your spouse does not have to file with you, you will still need to report their income on the bankruptcy paperwork, and it is a factor in determining which type of bankruptcy better suits your needs.
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How Student Loan Debt Settlement Works
Under our student loan debt settlement program, a licensed attorney contacts your student loan lenders and begins a negotiation process to significantly reduce the interest AND principal the lender claims is owed. At the end of a successful student loan settlement, the borrower ends up paying only a fraction of the original balance claimed by the lender. The rest of the debt is forgiven by the lender and the settlement is a full and final settlement of the debt, leaving the borrower without the burden of student loan debt going forward. All of this is done without filing bankruptcy.
What Happens If I Have More Debt Than Just My Student Loans
If you are facing debt outside of your student loans, you can consider a bankruptcy or consumer proposal. These debt relief programs wont absolve you of your loans but will allow you to pause your payments until you have completed your program. The idea is that once your consumer proposal or bankruptcy is completed, you will have the tools and be in a better standing to repay your student loans.
When you book a consultation with David Sklar & Associates, you can have peace of mind knowing that your trustee will work with you and consider your student loans when helping you weigh your debt relief options.
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Demand Proof That The Student Loan Debt Is Owing
In any court case involving student loans, demand proof that the debt is owed. In particular, ask for a copy of the signed promissory note, especially if the loan has been sold.
The lender may not have the original loan promissory note or a copy. If so, they will have difficulty proving that the borrower owes the money or that they hold title to the debt.
Spreadsheets showing a history of loan payments are business records and are not proof that the debt is owed.
Generally, courts show a lot of deference to lenders. Many will allow the lender to provide a copy of the promissory note that was in use at the time and proof that the borrower received or benefited from the loan proceeds in lieu of the borrowers actual signed promissory note.
But, if there is any evidence that suggests that you did not borrow the loan, present it and challenge the veracity of the lenders proof. For example, compare the signature on the promissory note with your actual signature and present the court with copies of your signature on other documents. If you were incarcerated at the time the loan was supposedly borrowed, present the court with documentation of this, since incarcerated individuals are ineligible for federal student loans.
What Is A Discharge
A discharge is a permanent release from personal liability on a debt. A debtor is no longer required by law to pay a debt that has been discharged. If a debt is secured by a creditor with a lien on your home, car or boat, for example, bankruptcy can end the obligation to pay the creditor, but the lien survives and the lender may take the property back. In a Chapter 7 bankruptcy, if the lender agrees, you can choose to keep property that is secured by a lien, such as your home or car. The method for keeping this property is known as a reaffirmation agreement. In a Chapter 13 bankruptcy, you may be able to keep property by continuing to pay a secured creditor directly, or by paying them the value of the property during the five years of your plan.
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Outcomes Of Adversary Proceedings
There are several outcomes that may come if you file an adversary proceeding to have your student loans discharged and are at least partially successful.
First, the court may order that the loan be fully discharged, meaning you no longer need to make payments and any collection activities must cease.
Alternatively, the court may decide that only part of your student loans can be discharged. This means that you will have to pay back at least some, but not all of your student loans.
The court may also determine that you still have to pay back the entirety of your student loans, but the court may alter the terms of the repayment, for example, by applying a lower interest rate.
Obtaining The Hardship Discharge For Government Student Loans
If you have government loans then, the Income-Based Repayment loan program is probably the best method to manage your student loans. Payments are graduated on a scale from $0 per month upwards to never over 10 % of your income. At the end of 20 years the loan is forgiven . National Student Loan Data System allows you to check if the loan is government or private. The bankruptcy judge normally requires you to attempt an IBR loan before he will consider a hardship discharge government student loan. One of the requirements is to exhaust all of your other options first.
The department of education has strong abilities to collect including the interception of government benefits, wage garnishments, tax refund interceptions, and DOJ lawsuits. Private lenders must sue to enforce collections and few of the private lenders are willing to sue to collect. Simply moving to other states may defeat private student loans from being able to collect. Many states have 3-5 year statutes of limitations. Others like North Carolina do not allow meaningful garnishments. Kentucky has a 15-year statute of limitations and any payment starts the period over again.
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Qualifying For Bankruptcy In Kentucky
If you’ve never filed for bankruptcy before, you’ll meet the initial requirement. Otherwise, check whether enough time has passed to allow you to file again. The waiting period varies depending on the chapter previously filed and the chapter you plan to file. Learn more about multiple bankruptcy filings.
You’ll also need to meet specific chapter qualifications.
You’ll qualify for Chapter 7 bankruptcy if your family’s gross income is lower than the median income for the same size family in your state. Add all gross income earned during the last six months and multiply it by two. Compare the figure to the income charts on the U.S. Trustee’s website .
Want an easy way to do this online? Use the Quick Median Income Test. If you find that you make too much, you still might qualify after taking the second part of the “means test.” If, after subtracting expenses, you don’t have enough remaining to pay into a Chapter 13 plan, you’ll qualify for Chapter 7.
Qualifying for Chapter 13 can be an expensive proposition because the extra benefits come at a hefty price, and many people can’t afford the monthly payment. To qualify, you’ll pay the larger of:
- your priority nondischargeable debt
Print Your Bankruptcy Forms
Even though filing Chapter 7 in Kentucky can be accomplished by filing only the voluntary petition and paying your court filing fee, it’s better to complete and print all of your bankruptcy forms all at once. Otherwise, the court may throw out your case if you miss just one of the deadlines for filing the rest of the documents. If that happens, you will have to start from scratch . Instead, once you have completed the forms, go ahead and print two copies of everything. The Kentucky bankruptcy court will keep the original as your official case documents the second copy is for you to keep in your own files. If you are headed to the print store to get your bankruptcy forms printed, make sure they do not print on both sides of the paper as the court will not accept double-sided print outs.
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