Many Former Students In Dire Financial Straits Reluctantly Contemplate Bankruptcy

Most students attend college with the idea of receiving a high income paying job when they graduate. But, in order to attend the college of their choice, they have to spend thousands of dollars in tuition fees. The cost of tuition is so high, that most of these fees are paid for with borrowed money.

As a result of these loans, the amount of student debt is very high in this country. Unfortunately, many graduating students have found no jobs waiting for them. As a result, without income, they remain unable to repay the funds that they have borrowed. Many, after a while, begin to seriously contemplate bankruptcy as a way to get out from under their debt.

When you file for bankruptcy, you will discover that some debts fall into the non-dischargeable category. This means that the monies owed will not be discharged as the bankruptcy goes forward. And that the filer will still owe those monies to the creditors.

When you file, along with your sources of income, debts, assets, and other details, you will have to list any student loans that you have. Unfortunately for those with student loans, thanks to the Bankruptcy Abuse Prevention and Consumer Protection Act law passed in 2005, these loans are now classified as non-dischargeable.

The law was basically championed through the U.S. Congress by the banks and financial institutions which thought that it was much too easy for the average consumer to file for bankruptcy and rid himself of his debts. As a result, it is much more difficult for consumers to file for bankruptcy under Chapter 7.

Unsurprisingly, since the law passed, the financial companies have benefited by raking in billions of extra profits.

Even though, student loans are considered non-dischargeable in the vast majority of cases, there is one possible loophole that a small number of bankruptcy filers can slip through. If you can prove that repaying the loan will cause undue hardship on you and your dependents, the bankruptcy judge may rule that for an exception and allow you to discharge the debt. This is a very rare occurrence, however, and is not an outcome that you should depend on.

One option that some former students will be able to take advantage of, however, is a loan deferment. A deferment will allow you to temporarily suspend your student loan payments for a number of years. Hopefully, this will allow you to get back on your feet and eventually repay the loan.