Most of us will never consider that students could go bankrupt. However, the connection between student loan debt and bankruptcy is far greater than many people believe. It’s a complicated relationship, with crippling student loan defaults wreaking havoc on finances even a decade after graduation.
Statistics indicate that debts incurred in the pursuit of a university education, rather than debts incurred in the workplace, are becoming a major cause of bankruptcy. This reality, if nothing else, highlights the value of managing and paying off college debt. Click here for more https://www.brightbankruptcy.com/steps-to-prevent-foreclosure-and-save-your-property/
Although certain individuals may be able to consider bankruptcy as a means of finally paying off their debts, student loans are not covered by any bankruptcy plan. So, even though a court decision reduces debt, it remains a significant contributor to the poor financial condition. So, what are the options?
Bankruptcy and Student Debt
So, what’s the link between student loan debt and filing for bankruptcy? The best way to explain it is in one word: complicated. For example, if a 30-year-old files bankruptcy with $200,000 in debts, including $50,000 in college loan balances, the case would only deal with $150,000 in debt.
The explanation given is that lenders give students a lot of breaks, mostly for three or four years before they have to start paying back their loans. That means the borrowers have had plenty of time to plan for paying off their student loans. So, why are they wasting their money?
It is likely, however, to get the debt forgiven. The borrower commits 10% of their salary for 10 years, with the remainder written off. This is known as the 10-10 Norm. It ensures that your student loans will be forgiven for a fraction of the original amount owed, but at a cost, since it will have a negative impact on your credit history. Even then, it has a smaller effect than bankruptcy.