Bankruptcy Rules for Student Loans

Macon Georgia Bankruptcy Lawyer | Bankruptcy Attorney Macon GA

Very often, people filing for bankruptcy have student loans that they prefer to include in their case. However, this is not possible in the majority of cases. There is protection offered to people genuinely unable to pay student loans through exceptions.

Bankruptcy protection is offered to every American citizen and gives the consumers a clean slate to make a new beginning but student loans are not discharged in a bankruptcy. Student loans are of two types, private and government with different regulations.

With help form Student Loan Borrower Assistance and National Consumer Law Association consumers can try and present a hardship defense to get their student loans eliminated. This is not as easy as it sounds and you would need to consult your bankruptcy attorney regarding the same prior to mounting the defense.

Bankruptcy law was written in 1993 and according to it a student cannot be denied student loans even if he has had a bankruptcy. This is particularly applicable to government student loans.

Exceptions

Current student loans that are in bankruptcy have to be reaffirmed. Reaffirmation is the process where a borrower takes responsibility of the student loans once again begins repayment. Government in general follows a policy of non discrimination with regard to previous bankruptcies.

Private loan lenders usually have student loan facilities and these are also for-profit businesses and hence they scrutinize credit reports in detail. Their main aim is the gain returns from their investment. Thus people with bankruptcy background will come under the scanner. The majority of applications would be rejected if bankruptcy occurs in their history. Typically, a private student loan lender will not grant credit to a person who has filed for bankruptcy in the past seven years.

The Free Application for Federal Student Aid or the FAFSA has to be completed by all student loan borrowers. This document is a questionnaire with queries regarding bankruptcy, credit history, and other details. It is wise to consult with a financial aid officer at respective schools prior to ensure your eligibility.

There are certain rules that are in favor of genuine cases of being unable to pay student loans and the situations are:

School Closure – if the university or college you went to is closed, your student loan obligations are discharged.

Fraud – if the university did not have proper accreditation and committed fraud to get students to attend, accepted a student without checking his skills, etc. Federal student loans taken for these purposes can be discharged in a bankruptcy case.

Disability – if you can prove that you have a permanent and serious disability that will make it difficult for you to pay student loans, it is very probable that the bankruptcy judge might forgive the debt and make it part of the case.

Contact a seasoned bankruptcy attorney in Macon if you need debt relief assistance or want to file bankruptcy.