Bankruptcy Student Loans

Student loan repayment problems are not easily resolved, although various postponement options can provide short to medium term relief for students in San Antonio. Also, bankruptcy is a potential approach, but full discharge is difficult to obtain and may depend on how the judge responds to your case.

One option often not considered, but available in San Antonio under federal regulations, is to switch the repayment plan, assuming there is one that is more suitable for the debtor’s current financial situation. The frequency with which this is available depends on the loan program.

A further option is known as forbearance. In this situation, repayments may be reduced or even postponed for a time but interest is unchanged and remains the debtor’s responsibility. If it is not paid in the usual way, it will be added to the debt.

Another way to deal with student loan repayment worries is to seek some type of deferment. If a deferment is granted, payments will be suspended for the period of time agreed upon. However, interest may still accrue depending on whether or not the debtor is subsidized or unsubsidized. An unsubsidized debtor can either pay the interest or have it added to the principal, an option which will mean higher loan repayments once payments are resumed. This approach can be made available to debtors facing unemployment. However, it is advisable to act quickly and contact the loan servicer to apply for deferment in order to avoid the late payment fees that otherwise may be incurred.

Because San Antonio is subject to federal regulations, a debtor experiencing financial hardship may be able to receive relief from the debt in the form of an economic hardship deferment that could be for up to three years.  A medical discharge may be available for those who have become disabled.

Military service deferments are available to those actively serving in military operations or actions of that type. This type of deferment may also be available to reservists during, and for a period following, active duty.

Bankruptcy options generally do not provide help with debt in the form of student loans, and this is particularly true if it is a government or other form of secured loan, which may be to some extent government sponsored. As there is no specific provision under the bankruptcy code for the discharge of student loans, the best approach is to take advantage of the option known as an ‘adversary action’ in an effort to prove that repayment would impose ‘undue hardship’ on the debtor and the debtor’s family, not only in the present circumstances, but in the future as well. A court appearance is required at which the debtor must make this case, and the court will also require proof of a genuine effort by the debtor to repay the loan. Clearly, this is not easy to do but doing so will make discharge of the debt in the bankruptcy court possible.

Despite the difficulties of achieving discharge on student loans, students in San Antonio with problems of this kind should consult a lawyer and consider other options available through filing bankruptcy. For example, filing provides temporary relief through an automatic stay that halts creditor harassment. Also, chapter 7 makes possible the discharge of unsecured debts. Alternatively, the development of a repayment plan when filing chapter 13 could include student loan repayment plans and protect the debtor from creditor harassment.

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