Can bankruptcy help with student loans?

On Behalf of | Sep 20, 2022 | Bankruptcy Law |

College is an easy way for students to build up tons of debt. Besides student loan debt, college students are often offered free credit cards to pay for books, food, rent and supplies. Credit card companies realize that students have many needs and often go into high -paying jobs after college, which may help pay off their debt.

Some college graduates don’t land high-paying jobs the minute they step off college grounds. They may leave college with more debt than they realize and no way to pay it off. So, what options do graduates have to pay for their debt?

Here’s what you should know:

Chapter 7 and 13 bankruptcy have limits

One of the many options people have to wipe away debt is bankruptcy. There are two common types of bankruptcy: Chapter 7 and Chapter 13 bankruptcy.

Chapter 7 bankruptcy focuses on wiping away debt by liquidating assets. This may cause someone’s credit score to take a hit, but can also deter creditors from collecting payments and sending out debt collectors. After some time, most or all of someone’s debt will be wiped.

Chapter 13 bankruptcy is used to help finance debt. In other words, instead of liquidating assets, a repayment program is made to help pay off debt. It doesn’t wipe away debt but instead focuses on an easier payment plan.

It should be noted that Chapter 7 and Chapter 13 bankruptcy doesn’t pay off student loan debt. Chapter 7 and Chapter 13 bankruptcy may only focus on debts such as utilities, rent, credit cards, car payments and medical expenses.

Depending on the loans, government relief programs may be able to clear some of a grad student’s loan debt away. However, there’s likely a clear distinction that other forms of debt accumulated during school won’t be affected by government debt relief programs – you may still need to apply for bankruptcy.

If you want to know more options to wipe away debt, you may need to reach out for legal help.

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