There are two basic types of student loans- government and private. Can you receive either type of student loan after filing for bankruptcy?
The long answer to the question is that government loans are based on need rather than credit, whereas, a private loan is usually given based on credit. That means, theoretically, once you file a bankruptcy and it goes on your credit report, you may have a harder time getting a private student loan than a government student loan.
Prior to 2005, government student loans were the only loans that could not be discharged in a bankruptcy, but the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 changed how private student loans were handled in bankruptcy cases.
Today, both private and government student loans enjoy an exemption against bankruptcy discharge except in the event of proving undue hardship. Undue hardship is very hard to prove in a bankruptcy court. That means it is somewhat easier today to collect student debts, especially if the loans cannot be discharged by filing bankruptcy.
As a result, private student loan institutions are more likely to loan you money after having a bankruptcy on your credit report than they were prior to 2005. Because of your poor credit from filing bankruptcy, the catch in securing private student loans today is that the lending institution may require higher interest rates to get the loan. In addition, lenders are more likely to offer adjustable interest rates. Both of these situations make it very difficult for many debtors to pay off their loans, especially if they do not get the high paying job that might be expected after graduating.
The government, on the other hand, wants you to improve your economic opportunities so you will pay taxes one day. It is more willing to grant you a student loan for such things as tuition and school expenses. Nevertheless, there are limits on the amount of government loans you can receive. Since the government basis for giving a loan is based on need, interest rates are fixed rates that remain the same for all debtors, regardless of whether you have filed a bankruptcy or not.
Can you receive either type of student loan after filing for bankruptcy? The answer is obviously, yes. The only thing you need to consider about a student loan after you have filed bankruptcy is whether or not you can afford the loan.
Student loans can no longer be discharged by filing bankruptcy unless you can prove undue hardship. Maybe government loans may still be a good thing after filing for bankruptcy, but private loans may have interest and costs that grow faster than your salary.
If you feel you have an undue hardship case that keeps you from paying your loans, contact us today, and we will help you find a bankruptcy lawyer in your area who can help answer any questions you might have about bankruptcy laws.
If you live in or around the metropolitan area of Gary, Indiana, contact us here today at www.betterbankruptcy.com .We will help you find a bankruptcy attorney in your area that will help you with any questions you may have on bankruptcy law.
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