Bankruptcy on Student Loans and When All Else Seems Lost

June 25, 2010 - PRLog -- What happens with student loans? Many people ask this question when they go through bankruptcy. Student loans have to be listed, because, by law, all debts that you owe have to be listed. What you have to do is contact the student loan services and make arrangements for deferment while you are in bankruptcy. If the trustee finds out that you have been making payments to your student loan, they will make you pay back your other unsecured debt. For example, if you paid 25% of the student loan, then you would have to pay 25% to all your other unsecured creditors. Student loans can not be discharged through bankruptcy. You will have to pay the loans back when you have completed the case.

Many people think that student loans can be paid through the bankruptcy. They were able to be paid in the past, but laws have since changed. People who filed their cases back in 1999 had their student loans paid through the bankruptcy, but end up having questions about why they still owe on the student loan. The misunderstanding is that the trustee did pay the student loan but did not pay any interest on the loan, so over the three to five years, it has still accrued interest, and will continue to do so until it is completely paid off.

If you have additional questions about the student loans, contact your attorney’s office before you do anything.

When people file a Chapter 13 bankruptcy in order to reorganize their debt to protect their home or car, they intend on making sure that their payments are made timely.

However, the Chapter 13 process is a long process that lasts at the most, five years. In that five years people can get sick, lose their jobs, or have their hours or overtime cut, causing a lack of income that they have been reliant on.

When this happens many people begin to lapse back into old habits that got them in bankruptcy to begin with. They pay some bills but not others; wait to make the mortgage payment in order to make the plan payment, or vice-versa.

This can cause the individual to tail spin again and potentially have their case dismissed and be forced to give back the items that they filed the bankruptcy to protect.

Although this is a dire situation, not all is lost. It is important to at least get out of a Bankruptcy with a “discharge” and not a “dismissal.” A dismissal means the case is gone and the credit report is ruined with a bankruptcy without any benefit to you. A discharge is when at the least your credit card debts, medical bills, or signature loans are treated through the bankruptcy case and you are relieved from their financial burden.

There is no reason to file a Bankruptcy and not at least get some benefit from doing so. That is why it is important to know all of your options when filing your case so you can be better aware of what lies ahead.

For more information visit http://www.bankrupcy-alternative.com/bankruptcy-means-tes... or call us directly. Here is another bankruptcy article http://www.prlog.org/10760017-bankruptcy-what-happens-now... for your reading enjoyment.

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