San Marcos Student Debt Relief Attorney
Many students have been saddled with overwhelming debt that continues to grow at alarming rates. Though the federal government offered some relief through a temporary payment pause as a result of the COVID-19 pandemic, many are wondering if there is a way to eliminate student loan obligations.
In many cases, student loan debt is unfortunately not dischargeable. In cases of extreme hardship, however, there is a procedure for requesting relief through bankruptcy. At North County Bankruptcy Clinic, we understand that student loan debt can be a serious issue that can limit your ability to keep up with other debts, and we hope the federal government will offer new forms of relief soon. In the meantime, our San Marcos student debt relief lawyer is committed to helping our clients explore all of their legal options.
The Consequences of Ignoring Student Loan Debt
Though the extended repayment pause has offered a much-needed reprieve, punishing interest rates have made it nearly impossible for many students to pay down their total loan debt. An alarmingly high number of borrowers are behind on payments, often due to other financial difficulties.
You may be tempted to ignore your student loan debt, especially if the debt keeps growing or if you are hoping the government will cancel some or all of what you owe. Ignoring your debt is never a good idea, and doing so can result in damaging consequences.
When you are at least 90 days overdue in making a student loan payment, it is considered “delinquent.” Your loan servicer will likely report the delinquency to the credit bureaus, damaging your credit rating. A low credit score can limit your ability to secure employment, housing, and financial opportunities.
Once the debt is 270 days overdue, it becomes “in default.” This means the loan servicer may sell the debt to a collection agency, which will go to extensive (and sometimes abusive) lengths to compel you to pay. Debt collectors may attempt to sue you if you do not pay. If they succeed, they will receive a judgment and can garnish your wages.
If your loan servicer is the federal government, the Department of Education does not have to sue you before garnishing your wages. Even worse, federal student loans have no statute of limitations, meaning they never expire. The government can continue to garnish your wages until your debt is settled.
The bottom line is ignoring your student loan debt is not a practical solution. Our San Marcos student debt relief attorney can analyze your situation and advise on your options for avoiding these outcomes.
You must meet very specific criteria to eliminate student loan debt through bankruptcy, and the reality is most people will not be eligible. Even if you do not qualify for a student loan discharge, bankruptcy may still be able to provide other forms of crucial relief.
To request student loan relief, you must first complete your Chapter 7 or Chapter 13 bankruptcy filing. If you have little to no current income, you will likely qualify for Chapter 7 bankruptcy. If you have reliable income and/or assets you do not wish to lose to liquidation, Chapter 13 bankruptcy may be a better choice.
If you file for Chapter 13, it is important to note that you will not be required to pay your student loan debt in full over the course of your repayment plan. Student loan debt is treated as a non-priority unsecured debt in Chapter 13, and you will have to address secured debts and tax debt first.
Completing a Chapter 7 or Chapter 13 bankruptcy typically entitles you to a discharge of all unsecured debts, including medical bills, credit card debt, unpaid utility bills, and personal loans. However, student loan debt cannot be discharged.
If you wish to eliminate your student loan debt, you will have to request relief under the “undue hardship” exemption at this near-final stage of the bankruptcy process. You must demonstrate to the court that it would be an “undue hardship” for you to be forced to pay the remainder of your student loans.
Many courts will simply evaluate the “totality of your circumstances” when determining whether your student loan debt constitutes an undue hardship. Others will more specifically evaluate the severity of your financial distress, whether that distress is likely to continue, and whether you made a good faith effort to repay your loans. Again, very few debtors will meet these criteria, and the courts are often reluctant to grant discharges.
Our San Marcos student debt relief lawyer can provide an honest assessment of whether you are likely to qualify for this type of relief. If a discharge is not possible, we may be able to help you improve your financial circumstances through the elimination of other types of unsecured debt.