The Orlando Chapter 13 bankruptcy court has established a new program for helping those who are drowning in student loan debt. Student loans represent a special debt problem, because once you take out a student loan, very few things can be done to keep you from paying it back. You are required to repay your loans, and you cannot claim that you have no responsibility to repay your loan. It is only in very rare circumstances that permit your loans to be forgiven, cancelled, or possibly discharged in a chapter 7 or chapter 13 bankruptcy.
The new program helps students get back on track by setting up payment plans with their student loan lenders. The plan can extend for as long as five years. The benefit of this program is to get the student loan out of default status so that default penalties and interest can be brought under control. Monthly payments are made as part of a Chapter 13 bankruptcy plan.
Often, we see that Student loan debt causes other forms of financial distress, like credit card debt, repossessions, missed mortgage payments and bad credit. Chapter 13 bankruptcy has solutions for these problems too and helps our clients get their financial life under control.
Without a repayment plan, your options for eliminating the student loan debt are very limited. You could be eligible for discharge of your federal student loans based on Borrower defense to Repayment. If you were misled into taking out loans by the college, or the school was engaged in any misconduct in violation of state laws, it may be possible to dispute payment of the loans.
Currently, more than 4 million borrowers have defaulted on student loans, and student loans are among a handful of debts (including child support, alimony, tax obligations, fines, and fraudulent debt) that cannot be discharged in either a chapter 7 or a chapter 13 bankruptcy, except in very rare cases.
“The “Hardship Discharge” is very difficult to obtain in the bankruptcy court. These exceptional circumstances are usually based on one of three conditions:
- Severe and well documented medical problems: The debtor must show that they are mentally and physically not able to earn an income that can sustain payments for student loans. There must be expert medical evidence by the medical providers to substantiate the claims.
- Extreme economic circumstances: The borrower has large student loan debt, has tried to repay it for 10 to 15 years, but cannot find full time work that allows them to keep up with the loan payments.
- Age: The borrower has reached retirement age and still has huge student loan debt – even more than $100,000, Austin said – this might get empathy from the judge.
If you are considering bankruptcy, your loans are most likely in default already. The national default level on student loan repayment is approximately 10% and $1.4 trillion to Americas student loan problem. Ignoring your student loan debt is not a good option. The Federal government may collect on your defaulted government held loans, garnish wages, seize tax refunds, rescind portions of social security benefits, and place liens on bank accounts and other property. There is no statute of limitations on federal student loans. You can be pursued by the federal agency that services loans on behalf of the Department of Education. A loan can be transferred to a private collection agency with more fees and collection costs added to the loan balance. If you cannot qualify for a hardship discharge, at least you can get this problem under control by setting up a payment plan to avoid the loan balances growing with the additional of additional penalties, interest, attorney’s fees and collections costs, all of which get added to your loan balance.
If you need assistance with filing for bankruptcy in Florida, call The Badgley Law Group and consult with us on your bankruptcy circumstances. Many student loans can be discharged if it is found to be caused by undue hardship on the borrower or the borrower’s dependents. Meeting the standard of undue hardship can be very difficult without the assistance of an experienced bankruptcy lawyer. Contact The Badgley Law Group at 407-487-4154 and take control of your student loan debt.