Across the United States, an increasing amount of young people are graduating from universities heavily indebted with student loans. The total student debt in the country right now stands at an astonishing $1.5 trillion and the figure continues to rise rapidly. The current bankruptcy laws make it extremely difficult, if not impossible, to discharge your student loan debt.
However, that doesn’t mean filing for bankruptcy still won’t be worthwhile if you are struggling with repayments. Here is how to manage your student loan debts using Chapter 13 bankruptcy.
Benefit of Chapter 13
When you filed for bankruptcy, the court will immediately grant an automatic stay period that extends until the completion of the bankruptcy process. During the automatic stay period, all debt collection activity, including that of your student loan debt is prohibited, meaning you will not be harassed by your lenders to make regular repayments on your outstanding debt.
Instead, the court will create a new repayment plan for the duration of the bankruptcy (usually 3 to 5 years) based on your ability to afford. Since student loans are considered non-priority unsecured debts, you will not be required to repay the debt in full by the end of the duration.
Depending on your circumstances, the actual amount you would need to pay monthly could be significantly lesser. If the court determines that you have little or no disposable income than you probably won’t be required to pay any amount towards your student loan debts throughout the stay period.
A Word of Caution
Keep in mind that interest will still continue to accumulate on your student loans during the duration of the bankruptcy. In some cases, this could translate to a considerable amount you’ll have to pay back once the automatic stay period expires.
Another thing to be aware of is that the court’s meaning of “what you can afford” may differ from your own. It is not unheard of for filers to be given a plan which may heavily compromise their lifestyle. The aid of a seasoned attorney is vital to make sure the outcome is more in your favor.
If you fail to repay your creditors on your student loan debts, the consequences could be terrible. It could severely hurt your credit score, you could be subject to a lawsuit, or have your wage garnished. Filing for Chapter 13 Bankruptcy can make repayments on your student loan debts much more manageable and help you avoid such predicaments.