Student loan debt impacting borrowers, cosigners

February 08, 2013

Student loan debt impacting borrowers, cosigners

Article provided by Patrick J. Conway, Attorney at Law Visit us at http://www.patrickconwaylaw.com/

Receiving a college degree used to be one of the most crucial steps toward obtaining a well-paying job. After graduating, there would be many opportunities for work in a chosen field. When the economy collapsed and employment was difficult to find, many graduates were left with student loan payments that they were unable to afford.

When these individuals considered the options that would allow them to regain their financial footing, many were surprised to find out that bankruptcy was not an option. Student loans are not dischargeable under bankruptcy, except in cases of severe financial hardship.

This was a standard that was very difficult for borrowers to meet. Borrowers needed to show that they had tried to make payments on the loans, but despite their best efforts, were unable to do so.

They also had to demonstrate that if required to pay back student loans, they would be not have any money left to meet very minimal standards of living. Additionally, the financial situation would need to be unlikely to change. So, those struggling to find work would not necessarily fit into this category, because they potentially could land a job at any time.

While bankruptcy would not discharge the student loans, they give the debtor valuable time. Once a person files for bankruptcy, the automatic stay goes into effect. This means that any collection actions against the individual have to stop until the bankruptcy process is complete. This time, along with the money funds freed up due to the debts discharged under bankruptcy, may make it easier for borrowers to repay their student loan debts.

Many students did not have sufficient credit histories before applying for student loans, and they needed cosigners. If the students were then unable to repay the loans, the cosigners (usually parents or grandparents) promised to be held responsible for their debts.

Because so many people default on their student loans, the lending companies are pursuing the cosigners for amounts that are owed on the loans. This has led to many cosigners experiencing financial problems, and has resulted in cosigners having to file for bankruptcy protection.

If you are having difficulties repaying your bills, it is important to speak to an experienced bankruptcy attorney as soon as possible. Whether or not you to decide to file for bankruptcy protection, you need to know the options that are available for you. If you wait too long to discuss your situation, it can take much longer to rebuild your financial future.