Bankruptcy Student Loan

Bankruptcy student loan exemptions are not possible in almost all cases.  The federal Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 did away with almost every way of including student loan obligations in a bankruptcy filing.  The only possible way it might be included is if it is proven that the burden of the student loan poses an undue hardship and the bankruptcy court rules that this is the case.  About the only way to get a student loan obligation discharged is if the school closes and the student couldn't complete his studies.

     Most every bankruptcy student loan has a ten year repayment period, beginning nine months after graduation.  These are the terms the student agreed to when he/she accepted the loan and the loan terms in order to attend school.  Those students with private loans may have different terms but they are the terms that the student agreed to.  Lack of employment after graduation is not a suitable excuse for a discharge.  Graduate students can obtain a deferment on the undergraduate loan obligations while attending graduate school.

Bankruptcy Student Loan Options

     Student loan holders experiencing financial difficulties have other options they can pursue other than bankruptcy filing.  One thing they can do is student loan debt consolidation.  This is a process whereby all of their student loans are consolidated into one lump sum with a one-payment per month payment schedule worked.  This usually results in a total lower monthly payment and one interest rate for the sum of the loans.
The student doesn't have to wait to consolidate until after graduation.  They can consolidate their loan debts at any time.  July 1, 2006 is an important date because of the change in the interest rate.  Holders of student loans who don't consolidate and take advantage of the lower interest rate will face higher payments over the term of their loan.

More bankruptcy Student Loan Options

     Another option for bankruptcy student loan holders who can't repay is forbearance.  This is pretty much a delaying procedure.  Forbearance postpones repayment for a specific period of time under certain circumstances.  The student will probably pay the interest charges during the period of forbearance. Check with your loan provider to see what can be worked out. This lets the loan provider know that your intentions are good and that you are not trying to skip out of your obligations.

     Former students facing financial difficulties because of student loan obligations should seek financial management counseling.  There are options other than Chapter 7 bankruptcy available.  About the only thing bankruptcy will do is wipe out other debts and free those dollars up for repayment of the student loan.  The debt of the student loan itself will not be discharged by a bankruptcy filing.  The financial counseling firm may be able to help with bill consolidation and a payment plan for students having financial difficulty.  They can handle negotiations with creditors and give the student advice of what to do with your bankruptcy student loan.