If you are considering filing for bankruptcy, you may be wondering: Does filing for bankruptcy get rid of my student loans?

Unfortunately, student loans are usually not discharged in the case of bankruptcy.  According to Chapter 7 Bankruptcy law the only time a student loan might be discharged is if it would cause the debtor “undue hardships”.  The same basic rule also applies to Chapter 13 Bankruptcy cases.  

Discharging student loans became popular during the 1970s, when students would file for bankruptcy soon after they finished their pricey education.  They would do so before they started earning so that they could get the loan out of the way.  However, the requirements for discharging student loans were changed in 1998.

According to these new changes, your student loan will only be discharged if the bankruptcy court is convinced that paying back the loan would bring about undue hardships for you or the people who are dependent on you. 

There are three things that would are used to determine whether a person is eligible to have their student loan discharged or not:

1. Will repaying your student loans prevent you from maintaining a minimal standard of living?
2. Will it be difficult for you to maintain your minimal standard of living over the repayment period?
3. Did you make an effort to repay the loan before filing bankruptcy? Have you been repaying your loan for at least 5 years?

Even if you are unable to fully discharge your student loan debt by filing bankruptcy, there are many other options for dealing with student loans including deferments and forebearance.

Even though it is difficult, you should still discuss your student loans with your Bankruptcy attorney.  They know the law and can help you get the most benefit out of filing for bankruptcy.

If you are considering Bankruptcy, there are alternatives you should consider.  Our Debt Solutions Specialist can discuss your financial situation with you, and help you determine if Debt Settlement or Debt Consolidation would be a good solution for you! Give us a call at 1-877-492-4109 or click the link below.

 

NO!! Stop!  Don't do it. . . .you'll regret it!  After filing for bankruptcy, you will be wailing like the witch from Wizard of Oz, "No. . .I'm melting. . .aaaaa!"

Although bankruptcy gives you a reprieve from your current bills, it will be on your credit report for 10 years.  Now, ask yourself this, would you rather have a ding--or rather a huge dent--dogging you for ten years or a small ding for two to three years by using Debt Consolidation or Debt Settlement programs?  Hold that thought while we take a trip into understanding a bankruptcy vs. debt consolidating and debt settlement programs and their affect on your score.

Bankruptcy And Your Credit Score:

In the latest report by the National Bankruptcy Research Center, there has been a slight decrease in bankruptcy filings as people are slowly pulling themselves out of the economy dump.  It also states that this year's first eight months have seen a 10% drop.  That is a start, but the national average shows that one out of 285 people are still filing to get the debt out from under them.  FICO has recently made available examples as to how many points a bankruptcy can actually have on your credit rating:

• Ironically, those that have a very high score can have a significant drop, indicating not even a dent, but a train wreck--could be 240 points or more
• Those who are already having problems with their debt may have just a dent--could be as low as 130 points

Even after filing, lenders require at least two years before applying for credit again.  They do this to give the person the time to begin rebuilding their credit.  Don't be a statistic.  Bankruptcy will only tell future lenders that you failed in meeting previous creditors' requirements.  There are better options. 

Debt Consolidation and Settlement Programs And Your Credit Score:

• Debt Consolidation is a combining all of your debt into one lower monthly payment.  You will generally get a smaller monthly payment, lower interest rate, and few if any fees.
• Debt Settlement Programs work with your creditors to settle the balance for less than owed. (Most of the time less than HALF of what you owe!)

Your score is affected, yes.  However, the score is far less affected than if you were to file bankruptcy, or do nothing.  Ten years is a long time to be haunted by bad credit.  In the two years it takes to apply for credit after filing bankruptcy, you can have your credit score back on track with Debt Consolidation and Debt Settlement programs.

For more information on your options, click on the link below or call 1-877-492-4109

photo by: photosteve101

Student loans are a necessary evil for most people.  In order to get a good education after High School, you apply for scholarships, grants, and any other sort of financial aid available. If you are very lucky, you have a college fund set up and ready to pay for that fancy education.  If you are not so lucky, you break down and take out a Student Loan.

Once you graduate, you are usually given a six month grace period to get a job and get on your feet.  After that, you've got to start paying off that debt. 

You should, of course, pay back the debt if you are able to do so. Student loan companies have hardship programs and payment rehabilitation programs available to you if you are struggling.  You can even file for deferment or forbearance to take a break from payments for a short amount of time.  If you have been faced with some unforeseen financial hardship, you may have to file bankruptcy to get you out of debt. But....

Can you file bankruptcy with student loans?

Student loans are difficult, but not impossible, to discharge in bankruptcy.  To do so, you must show that payment of the debt “will impose an undue hardship on you and your dependents.”

Courts use different tests to evaluate whether a particular borrower has shown an undue hardship. A common test is the Brunner test which requires a showing that:

1. The debtor cannot maintain, based on current income and expenses, a “minimal” standard of living for the debtor and the debtor’s dependents if forced to repay the student loans
2. Additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period of the student loans
3. The debtor has made good faith efforts to repay the loans. (Brunner v. New York State Higher Educ. Servs. Corp., 831 F. 2d 395 (2d Cir. 1987).

If you can successfully prove undue hardship, your student loan will be completely canceled. Filing for bankruptcy also automatically protects you from collection actions on all of your debts, at least until the bankruptcy case is resolved or until the creditor gets permission from the court to start collecting again.

Assuming you can discharge your student loan debt by proving hardship, bankruptcy may be a good option for you. It is a good idea to first consult with a lawyer or other professional to understand other pros and cons associated with bankruptcy. For example, a bankruptcy can remain part of your credit history for ten years. There are costs associated with filing for bankruptcy as well as a number of procedural hurdles. There are also limits on how often you can file for bankruptcy.

Whether a student loan is discharged based on hardship is not automatically determined in the bankruptcy process. You must file a petition (called an adversary proceeding) to get a determination. 

If you already filed for bankruptcy, but did not request a determination of undue hardship, you may reopen your bankruptcy case at any time in order to file this proceeding. You should be able to do this without payment of an additional filing fee. 

Bankruptcy with student loans should ALWAYS be a last resort!

If you are struggling with your debt payments but you are not ready to throw in the towel and file bankruptcy, you can get help in other ways. 

Start by creating a budget for yourself.  Once you track your spending for a month, using this Free Budget Spreadsheet, you will be able to see where you can make changes. 

Next, explore other options to reduce your monthly payments.  If you have outstanding debt that is not part of your student loans, there are programs available to help you reduce your monthly payments and interest.  This can help you free up some money to put towards paying off those student loans!

For more information on programs available to you,

click the link  below!

Debt Settlement vs. Bankruptcy?

Choosing between debt settlement and bankruptcy in while facing a huge pile of debt is a tough decision to make. It is important to understand that although both debt settlement and bankruptcy offer Debt Relief, they work very differently. In order to make an informed decision, you need to understand the difference.

The Proccess of Debt Settlement & Bankruptcy:

Debt settlement is a debt reduction program where the creditor accepts a reduced amount from the debtor, in order to settle the account in full. A great Debt Settlement Program can and will settle your debt for 50% or less of your total debt. Once you have completed the Debt Settlement Program, the creditor will report your account to the Credit Bureau as “settled” or “paid”.

Bankruptcy is a court based procedure, which is initiated by the debtor. Consumers are permitted to file personal bankruptcy under Chapter 7 or Chapter 13 of Title 11 of the Federal Bankruptcy Code.

During Chapter 7 Bankruptcy, the court sells off your non-exempt assets and uses the proceeds to pay your creditors. Remaining debts are discharged by the court and you are declared debt-free.

Chapter 13 bankruptcy is a reorganization of your existing debts. The court appointed trustee will set up a repayment plan to help you pay off your debts comfortably within 3-5 years.

Once your bankruptcy is complete, you are relieved of all debts and allowed to rebuild your finances. However, bankruptcy procedures are usually much more complicated compared to debt settlement.

How will Debt Settlement and Bankruptcy effect on your credit score?

Bankruptcy can hurt your credit score by 200-250 points. The total extent of the damage depends on the nature of the other negative remarks you have on your credit report. Bankruptcy remains on your credit report for 7-10 years, which will prevent you from getting credit in the future.

Debt settlement will lower your credit score at first, but as you keep making payments on time, your credit score increases.

So, which option is better?

Debt settlement is preferable to bankruptcy if you are able to make a reduced monthly payment. You should explore all possible debt relief options before you file for bankruptcy.

Debt settlement gives you the following benefits:

• You pay less and get rid of your debts completely!
• You will get out of debt much faster!
• You avoid losing your home and car!
• Debt settlement does not damage your credit score as badly as bankruptcy does!

 

Every day we get asked the same questions over and over again. Here are the answers to some of the questions we get asked most often. 

 

 

What is debt settlement?

Debt settlement (also called debt negotiation) is a process of negotiating with your creditors to pay off your credit cards and other unsecured debt (student loans, auto loans, and home mortgages are secured debts, and don’t qualify) for an amount less than you currently owe, often at a 40-60% savings.

Does debt settlement really work?

Yes it does. Debt settlement works best for people who cannot pay their bills, are behind in their payments, or are considering bankruptcy. It is not designed for consumers who have small amounts of debt or who can still make their payments. It is a more aggressive approach to getting out of debt, and is not right for everyone. But debt settlement is a proven method, that will eliminate your debt quickly and save you money.

How is it different from debt consolidation or credit counseling?

Debt consolidation or credit counseling is a more traditional debt reduction option, which lowers your interest rates, monthly payments, and fees, but does not directly reduce the amount you owe. However, debt consolidation can help you get out of debt faster by lowering your interest rates and helping you pay more each month towards the amount you owe, and pay less in interest.

Will debt settlement ruin my credit score?

A credit report lists your payment history and amount of debt, so debt settlement can lower your credit score. However, many people don’t realize that having a lot of debt also lowers your credit score. And with very high debt, many lenders won’t lend you money (which is one reason to have good credit in the first place) and you may not be able to afford to borrow more money (another reason to have good credit) anyway. So, when considering debt settlement, make sure to compare the benefits (getting out of debt faster & saving lots of money) against the against the drawbacks (lowering your credit score). Getting completely out of debt and getting your life back to normal is probably well worth it.

Can my credit be repaired after I am done with debt settlement?

Yes it can. Once you have elimiated your debt, your account balances will be at zero.  From there you can re-build your credit score by using credit and debt wisely from that point forward.  You also have the right to request than any information be removed from your credit report. All information must be verified correctly, or the credit bureaus must remove it from your credit report. By taking the time to make these requests to the credit bureaus, you should be able to get a few items removed and therefore increase your credit score fast. 

How do I know if a debt settlement company is legitimate and I won't get ripped off?

As with hiring any professional to do work with you, do your homework: ask lots of questions, make sure you feel knowledgeable and comfortable with the process, read the fine print, and check with the Better Business Bureau. Learn more about choosing an honest and reliable debt settlement company before you get started.

If you have more questions, please visit our FAQ page or give us a call 

1-877-492-4109

 

Before you attempt DO IT YOURSELF DEBT SETTLEMENT, you may want to consider what's involved.

After many years of negotiating debts for our clients, I'd have to say for the average person trying to settle debts yourself is too hard.

That's not to say that you may not be able to do it yourself, but you need to understand how the process works and how the collection agents are professionally trained to get as much money out of you as possible.

For this discussion, let's talk about unsecured debts and mainly credit cards.

If you fail to make minimum payments on time, what happens?

1.  Your next statement will show an additional LATE FEE of say $35 added to the balance.  Now your minimum payment is last month's plus this month's plus the $35 late fee, and you can't afford it.

2.  You will now most likely get a DEMAND LETTER that says your account is now DELIENQUENT and demand 3 payments plus 2 late fees. Of course by now, you really cannot afford to pay.

3.  The PHONE CALLS START! Your account is transferred to the creditors internal RECOVERY DEPARTMENT or basically their collections department.

The caller may be nice or very demanding, depending on the company.

You can and should explain your circumstances, but they are usually not very sympathetic!

4. At this point (about 3-4 months delinquent) the creditor is not ready to accept a settlement for less than the entire amount including late fees and additional interest.

Oh, by-the-way, your interest rate has been increased.  There is small print on the back of the application you signed that basically states that if you fail to make payments on time, they can INCREASE YOUR INTEREST RATE.

Although the Credit Card Act of 2009 limited the UNIVERSAL DEFAULT method of increasing rates, creditors can still:

• Increase rates
• Charge late fees
• Charge over-the-limit fees
• Charge annual fees

5.  Just before the account is set to CHARGE OFF, you may get a letter from the creditor offering a settlement. 

The settlement offer may let you have 3 OPTIONS:

1. Pay 65% of the amount due by the end of the month
2. Pay 75% of the amount due over 6 months
3. Pay 85% of the amount due over 12 months

You do the math! Not gonna happen!

SO NOW WHAT???

This is where "Do it yourself debt settlement" gets hard.

By now, you have been getting phone calls several times a day and possibly even at work!

The creditors may even be calling your friends and family!

There are legal ways to stop the calls.   FREE INFORMATION

The account has now been CHARGED OFF and sent to a collection agency. 

Now you starting getting calls and letters from the COLLECTION AGENCY, even though you sent out letters to the original creditor!

If the collectin agency finds out that you have a job, they may decide to FILE A COMPLAINT in your local courthouse.

You will now receive a SUMMONS that states the situation and that you have 20 or 30 days to "answer" or "contest" that you owe the debt.  But, since you owe the debt, that would be a waste of time and money (yes, is costs to file an "answer").

If you call the collection agency or attorney for the creditor, you may be able to negotiate an agreement whereby they stop legal action and if you repay 100% of the debt plus attorney fees and court costs!

If not, they will set a court date and win a JUDGMENT by DEFAULT.

With the default judgment, they can apply for a WRIT OF GARNISHMENT that your employer has no choice but to honor.

In most states, the amount that a creditor can garnish is 25% of your net (after tax) income.

Let's say you earn $$3,000 per month and 30% is withheld for taxes, etc. That leaves $2,100 after-tax income.

At 25% of $2,100, they would deduct $525 each month until the entire debt is repaid!  COULD YOU SURVIVE ON $1,575?

Not hardly, so you would probably end up agreeing to a STIPULATED AGREEMENT that would let you repay the entire amount at maybe $200/month at a reduced interest rate (each state is different).

Can a Debt Settlement Company do any better?

In most cases, yes.  Do It Yourself Debt Settlement takes a lot of time and if you are not trained in dealing with collectors and attorneys, you may end up paying too much or possibly being forced into bankruptcy.

Why not explore your options by requesting a

FREE CONSULTAION

Or Simply Give us a Call

1-877-492-4109

photo by: Henrique Vincente

Need help putting a stop to collection calls?  Try this:

Although it is OK and may be advisable to speak with the collector at least once, don't forget that these are trained professionals whose only job is to get money out of you!

Briefly explain your circumstances, but don't be surprised when they seem like they don't care...THEY DON'T!

Ask the collector for a mailing address or fax number.  You probably won't get it as they know you are going to mail or fax a written request for them to stop calling.

According to the FDCPA, once you have mailed or faxed such a letter, they collector may only contact you one more time or they are in violation of Federal laws from the FTC.

In the letter, simply state that at this time, financial circumstances beyond your control make it impossible to pay anything on this debt.

It is also a good idea to state that if things do not improve, you are going to seek bankruptcy protection from creditors.

Make a copy of the letter for your records and mail or fax. 

Although it will cost a little, it is better to send the letter by registered mail so that you have proof that it was received.

As long as your account is still with the original creditor (Visa, Master Card, Citi, etc.) it may take a few weeks for the creditor to process and as a result, you may still get calls.

The best advice is to ignore the calls. 

If you have caller ID (and if you don't, you need to get it), don't answer any calls from callers you don't know.

If you can turn your ringer off and let all calls go to voice mail, then you can screen your calls. DO NOT RETURN ANY CALLS TO A COLLCECTOR, REGARDLESS OF WHAT THEY SAY!

If you would like more information on how to stop collector calls, request  the FREE GUIDE.