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Student Loan
Consolidation |
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Student
Loans Can't Be Swept Away Through
Bankruptcy
Bankruptcy is in the news these
days, as Congress has finally overhauled the Federal
bankruptcy law after years of talking about it. The
credit card companies, rightly or wrongly, have been
pressuring members of Congress to tighten the bankruptcy
statutes, saying that too many people were willfully
spending money they couldn't repay with the intention of
avoiding paying the money back by filing for bankruptcy.
That will soon change, and those with student loans may
pay a heavy price.
Most everyone knows that
consumers with problem debt who are unable to pay their
debts may file for bankruptcy under Chapter 7 of the
Federal bankruptcy code. This allows for the court to
basically wipe away all of the debtor's bills and allows
them to start over. It's not entirely free; the
bankruptcy filing stays on the debtor's credit report
for the next ten years and may affect their ability to
buy a home, borrow money or obtain employment. What many
people fail to realize is that while installment loan
debt or credit card debt can be wiped out through filing
for bankruptcy, most student loans cannot. In fact,
thanks to legislation enacted several years ago, most
any loans acquired for education, including those issued
by for-profit agencies, may not be eliminated through
filing for bankruptcy.
What this means for those
with student loans is that they will need to be repaid.
If bankruptcy is inevitable, those with outstanding
student loans should contact their lenders and see if
they can't negotiate a repayment plan. Those with
Federally funded student loans should contact their
lender soon, as rates for student loans will go up on
July 1, 2005. Now would be a good time to consolidate
student loans, as the rates can be locked in for the
long term. If these options are not viable, then holders
of student loans should simply be aware that their
lenders and their lenders' loan collectors will be
keeping in touch with them for the foreseeable future.
Those with student loans and other financial problems
should also be aware that Federal bankruptcy law will
change in October, 2005, making it harder to file for
bankruptcy. If you have problem debt, now would be a
good time to consider meeting with a credit
counselor.
Copyright © 2005 Retro
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