Consolidating student loans bankruptcy
You’ll also likely rack up significant legal and court fees along the way.That said, if you’re defaulting on debt, then your credit score has already taken a hit.Most bankruptcy debtors are unable to discharge their student loans in bankruptcy, that's why creating a viable plan for repaying student loans after bankruptcy is so important.Here's what you need to know: Consider consolidating your student loans under the Direct Loan government plan.However, courts are left with some room to interpret your eligibility. Department of Education’s Federal Student Aid office and are paraphrased below: “The reality is that unless you can show an extreme hardship where you will never work again and have attempted to pay back the loans and cannot, the likelihood is that bankruptcy won’t be an option.Most courts evaluate hardship using The Brunner Test. As a result, the general advice given is that student loans are not dischargeable in bankruptcy.” If you do manage to prove undue hardship and successfully declare bankruptcy on your student loans, they’ll be partially discharged, fully discharged, or restructured.You can’t consolidate private loans in the federal Direct Consolidation Loan program, but some private lenders allow you to consolidate federal and private loans together.The Direct Consolidation Loan program is the right choice if your goal is to simplify the process and keep your options open for the many repayment plans available for federal loans. Your rate is determined by the weighted average of the interest on the loans being consolidated rounded up to the nearest one-eighth of 1%.
Government backed student loans are now offering loan forgiveness after 25 years of repaying the loan and you repayment amount is based on how much money you earn.Ideally, you would qualify for debt consolidation after graduation.However, you also could qualify when you leave school or are enrolled less than half-time.So at this point, bankruptcy may, in fact, provide you with a fresh start. The process certainly isn’t easy — and it doesn’t always work.Here’s what you need to know before going down this path.