Des Moines, IA (Law Firm Newswire) July 9, 2013 – Students having difficulty paying their student loans may qualify for some type of relief to assist them.
Usually, student loans are not discharged as a result of filing bankruptcy. However, there may be relief in the form of income based payments, graduated payment plans, deferment or forbearance, remarked Iowa bankruptcy lawyer, Kevin Ahrenholz. It is important for a student in a cash crunch to take action with regard to their loan before it is considered to be in default.
Waiting for a student loan to default and not doing anything about it, means serious consequences with serious ramifications, such as: bad reports to credit bureaus, tax intercept, an inability to get other loans and wage garnishment. If a student is receiving notices from the financial institution holding their loan, it is a good idea to discuss what alternatives are available, rather than let the loan default.
Even on default, the student may be able to consolidate their loan or rehabilitate it. This is not an easy process and it only makes sense to deal with the situation before it gets this far, says Ahrenholz. Students may also check a federal ombudsman's website to find out more about other situations in which their loan may be cancelled at this website.
If a student cannot discharge their student loan, should they consider discussing their situation with a bankruptcy lawyer? Bankruptcies filed after 1998 allow a loan to be discharged only if the courts determine repaying would impose an undue hardship on the student and their dependents. To determine if this is the case, there is an adversary proceeding filed during the bankruptcy process.
There are three requirements to meet before the courts will consider a finding of undue hardship: the debtor will be unable to meet a minimal standard of living if they have to repay their loan, based on current income and expenses; the situation the debtor is in is likely to continue for a good part of the repayment period; and the debtor made an attempt to repay the loan or loans.
Even though this process is available, it is often wiser for the student to make future plans to repay their loan before they obtain it, and while they are using the funds. Most students are unable to present a strong enough case to justify an adversary proceeding, which would also be an added expense for them.
Kevin Ahrenholz is an Iowa bankruptcy lawyer and Iowa bankruptcy attorney. To contact an Iowa bankruptcy attorney, Iowa bankruptcy lawyer, or set up an appointment, visit http://www.iowachapter7.com or call 1.877.888.1766.
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