The Confusing Question: Student Loan Bankruptcy Is Right Or Not?

November 20, 2020

The Confusing Question: Student Loan Bankruptcy Is Right Or Not?

Bankruptcy is not the answer…or is it? A big step that will transform your life and set you on the road to financial success is filing for bankruptcy. However, just because you’re struggling with finances at the moment does not answer the question, “Does bankruptcy clear student loans?” Here are many ways to determine if you are correct about bankruptcy. Always seek advice from a bankruptcy attorney before moving forward. A skilled bankruptcy lawyer will assist you in deciding the right course of action.

Bankruptcy Is Not The Answer…Or Is It
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Understand the Different Bankruptcy Options

There are three different forms of bankruptcy for people. They are broken down into Chapters 7, 11 and 13, respectively. Under Chapter 7, it is possible to cancel any if not all of the debts, usually in a three to six-month timeframe. Chapter 13 requires you to use your existing salary to make interest contributions for a defined period of time (often three to five years) depending on your willingness to pay. For individuals whose loans surpass the legislative debt caps of Chapter 13, Chapter 11 is available.

Alternatives to Bankruptcy

You can avoid bankruptcy. Perhaps you’re just considering it because of all of the creditors’ harassing phone calls. You can deal with creditors, however with the aid of a bankruptcy solicitor. This would improve creditors’ odds of negotiating with you. It is easier for them to earn anything than zero, after all.

For you as well a debt counselling option might be easier. If you have the funds to pay back loans, however, you’re trying to handle them, you should get on board with financial advice. For a particular payment schedule, a debt counselling program will set you up. If you’re still late or miss a bill, though, Chapter 13 bankruptcy, though debt counselling does not, gives you protection from collectors.

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What is the “7-Years” Waiting Period?

The “7-year rule applies to the amount of time that a person must be out of school before bankruptcy can cancel consumer proposal student loans. At least seven years will have elapsed before the official date of the conclusion of your studies if you apply for bankruptcy. This day applies to the last day you were enrolled as a child, not the last day you went to kindergarten.

You should call the National Student Loan Center to find out what the precise end-of-study deadline is. When you figure out when your study completion date is, actually add seven years to the date, and that is when it is possible to tackle the consumer proposal student loans via bankruptcy. When you have been out of school for over seven years, if you apply for bankruptcy or if you apply a consumer proposal to your lender, your student loan debt will be forgiven under the Act. Your student debt would not be immediately forgiven by bankruptcy if it has been longer than seven years since you completed a post-secondary education institution.

Dealing With Debt

There are still solutions open to you to make your debt more affordable if your consumer proposal and student loans debt is less than 7 years old. Next, you should call the consumer proposal and student loans office to discuss a payment plan that is different. You may get lowered compensation or an extended grace time based on the family income and other factors. Usually, once you graduate, you will have a grace period of six months, and after that, annual contributions are based on paying off the debt in around nine years. A customer initiative can also be considered by you. A consumer proposal is a legally binding deal and agreement to settle the debt of the creditors. For certain entities, one of the difficult aspects of paying down student loan debt is handling other debt associated with it. You can also clear other loans by bankruptcy, even though the student debt can not be forgiven unless it is less than seven years old. If you have other major debts, so bankruptcy can still be a practical solution for you.

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ShreyaWitten by Shreya Shreya has expertise in writing engaging content for the readers and has a deep interest in unique applications of technology in various domains. She has worked closely on projects with Neil Patel Digital, Hindustan Times, News 18 and Shiksha.
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