Nearly 5 Million Americans are in default on student loan payments
A recent Wall Street Journal article discusses the shocking study about student loan payments in default.
“The number of Americans severely behind on payments on federal student loans reached roughly 4.6 million in the third quarter, a doubling from four years ago, despite a historically long stretch of U.S. job creation and steady economic growth.”
Can you believe that? Nearly doubled in just 4 years. This works out to be 22% of all student loans that are in repayment. It is estimated that student loans backed by the government are now at 1.37 Trillion dollars. What will happen in the next 4 years? What is the cause? Economy has been getting better. Unemployment rates have been falling.
Chapter 13 can help. You can get on a repayment plan to pay back a portion over the next 3-5 years, paying anywhere from 10% to 100% based on your budget. You then can pick up repayment at that time. Chapter 7 rarely helps with educational debt. Generally, student loans and educational debts are not discharged in a chapter 7 case. There is a small loophole, whereby you file an adversary objection to them, and can prove an undue hardship. The court could discharge them completely, or put you into a repayment plan based on your current situation. See In Re Brunner.
Talk with a bankruptcy lawyer to day to discuss possible options to see how the bankruptcy code can help you with your student loans and educational debt. Your attorney might have other non-bankruptcy options available too.