If you are one of the 45 million people still to pay off their student loans, good news may be on the way. A recent bi-partisan bill proposal suggests making it easier for former students who struggle with their debt to include it in a bankruptcy filing.
The new proposal recommends allowing people to clear their student debt through bankruptcy after 10 years. The bad news is that this is not the first time politicians have suggested such improvements. Previous proposals have consistently failed to make it into law due to considerable opposition from some quarters.
How can bankruptcy help you deal with student debt right now?
It is technically possible to erase your student loans via a bankruptcy filing under the current laws. Yet, few people succeed due to the rigorous requirements needed to show you that the debt is causing you “undue hardship.”
Regardless of whether the new bill passes, you do have another option. You can use personal bankruptcy to deal with the rest of your debts, putting you in a better position to keep up repayments on your student loan. There are two ways to do this:
- If you file for Chapter 7 bankruptcy, you can erase most of your other outstanding debts. That would leave you with more money free each month to make the student loan payments.
- If you file for a Chapter 13 bankruptcy, you cannot wipe debts. Yet rearranging them may allow you to get back on track with all payments, including money you borrowed to study.
One of the problems with debt is that if you cannot pay it, it gets bigger. Seeking early advice can help you regain control of your debt before it takes control of you.