Arizonans note: Bankruptcy won’t eliminate student loan debt
On behalf of Ellett Law Offices , P.C. posted in 1. Personal Bankruptcy on Wednesday, May 16, 2012
So many students across the nation, Arizona included, are forced to take out loans in order to handle the ever-growing financial burden of higher education. Unfortunately, later in life, many of these individuals find themselves in financial difficulty when student loan debt gets buried under other, accumulated debts and expenses.
For these individuals, bankruptcy may be the best option to eliminate debt and relieve themselves of financial burdens so they may start anew. What many of these individuals find, though, is that student loans are usually non-dischargeable in bankruptcy.
Currently, interest rates on federal student loans are set at 3.4 percent and are scheduled to double to 6.8 percent. The president and other federal officials are seeking to head off this scheduled doubling, which would save more than 7 million new borrowers of these loans nearly $1,000 a year. However, this doesn’t help the nearly 37 million Americans who already have student loan debts.
All of these existing debts are bringing individuals in Arizona and elsewhere to bankruptcy without offering them the ability to escape the loans that brought them there in the first place.
Reasons for why regulations were changed to make student loans non-dischargeable include bankruptcy abuse schemes that attempted to eliminate loans without evidence that the individuals seeking help were in true financial trouble. Yet, studies reveal that this sort of abuse was rarely practiced, so advocates of reform say it is unlikely such a practice would surface with a change to current legislation.
With no all-encompassing change is on the federal horizon, it is important for debtors to be fully aware of all of their rights concerning their debt and all the methods they may have at hand to manage and eliminate debts when they become too far reaching.
Source: WTOP, “Even after bankruptcy, trapped by student debt,” Justin Pope, Associated Press, April 25, 2012
Tags: debt, personal bankruptcy, student debt