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The effects of bankruptcy on student loans

When facing serious financial problems, bankruptcy may seem like your best option. But will filing for bankruptcy provide any relief from your student loan debt?

In Wisconsin, as in other states, student loan debt is extremely difficult to discharge through bankruptcy. However, there are options that will help alleviate some of the stress of dealing with excessive loans. When considering filing for bankruptcy, it is advisable to seek advice from an experienced debt relief attorney.

Eligibility for future student loans

Whether or not filing for bankruptcy affects your eligibility for future student loans or financial aid depends on the type of loan program you apply for and they type of bankruptcy that was filed.

In general, bankruptcy should not have any impact on your eligibility to receive federal financial aid, even if you have had student loans previously discharged by filing bankruptcy. However, if you have outstanding student loans that were not included in any bankruptcy filings and you are delinquent on the payments, you will not eligible to receive additional funds until you are current with your payments.

If you are considering applying for a private student loan, you may have a problem. Usually, private lenders will not approve a loan if you have filed bankruptcy in the last seven to ten years unless you have a cosigner with excellent credit.

Some lenders may be willing to approve a private loan if you offer to secure it with some kind of collateral and can provide proof that you are not a bad risk.

Discharging student debt

Typically, qualified student loans funded and guaranteed by a non-profit organization or governmental entity cannot be discharged through bankruptcy. An exception can occur if a judge rules that repaying the debt would create an excessive hardship on the debtor.

Factors that must be present to be granted a discharge of the debt are that you cannot make the loan payments and maintain a reasonable standard of living during the majority of the life of the loan and that you have previously made good faith efforts to repay the loan.

Bankruptcy options

Rarely are student loans discharged through Chapter 7 bankruptcy however, you may be able to negotiate with your lender to get a more affordable monthly repayment plan.

Another option you have is to file for Chapter 13 bankruptcy. This strategy will reorganize all of your debts, including student loans and credit cards, and structure a payment plan that suits your level of income and living expenses.

Excessive debt can be extremely overwhelming and leave you in a state of constant stress. Contact a local debt relief attorney today and receive the help you need to get your finances in order. 

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