Are you struggling to pay your student loan payments each month? Have you missed payments and now worry about mounting interest and fees? Attending university at Kansas State, the University of Kansas, Washburn University, Emporia State or a technical or community college such as Flint Hills Technical College or Barton Community College almost always requires taking on student debt. And there is no guarantee of employment in your chosen field.
Even with a college or advanced degree and a full-time job, it still can be near impossible to pay your household expenses and have enough left to cover student loan payments. If you face this challenge, you are not alone. Student loans are the "largest pool of non-housing debt held by Americans," according to public policy nonprofit Demos.
Student loan debt, as a rule, is not subject to a discharge in bankruptcy. However, there are solutions to address student loan debt. One of those may be bankruptcy as a means to manage the student loan debt together with your other debt obligations. Whether a student loan can be discharged is subject to the facts in your case. You are unique and you will need a unique solution to your financial situation.
Four initial options
Short of bankruptcy, you may be eligible for other kinds of student loan relief. For example:
- Your loans may be eligible for forbearance or deferral. That means, that payments can be delayed for a period of time, allowing you to catch up on or otherwise manage other debts.
- You may be eligible for an income-driven repayment plan that could reduce your monthly student loan payments based on your income level, especially for federal loans but it will never eliminate your payment.
- Certain kinds of employment can qualify you for student loan debt forgiveness. If your employer is a government entity or a tax-exempt nonprofit, your federal loans might qualify for the public service loan forgiveness program. Examples of qualifying employers include AmeriCorps, Peace Corps, other government organizations (including tribal) at any level and even certain nonprofits that are not tax exempt that provide public services. This can be extremely beneficial and a real financial boost to your income when you consider there is little tax consequence for this extra benefit.
- You may be eligible to consolidate or refinance loans to reduce the interest rate and lower the monthly payment. But be cautious - consider timing issues and that these option may only be available to you one time.
However, these options may not be the solution for you. Student loans may only be part of your financial puzzle. If these options cannot offer relief, a lawyer can review your circumstances and advise you of alternative plans which may include seeking a discharge of the debt for an undue hardship in bankruptcy.
What is an undue hardship and how can you prove it?
The U.S. Bankruptcy Courts in Kansas apply the "Brunner" test to determine whether student loan payments create an undue hardship on you and your dependants. The test asks:
- Can you meet a minimal standard of living if forced to pay student loan payments?
- Will the difficult circumstances impacting your ability to pay continue?
- Did you try to make payments in good faith?
Some factors the court might look at to determine undue hardship include earning capacity, disability, mental illness and age.
A Chapter 13 payment plan where you agree to make a minimum of 36 monthly payments which may be extended to make your budget work is another option for student loans. The Chapter 13 payment plan is created by you and your attorney and submitted to the Bankruptcy Court. Once you file the bankruptcy petition, collection efforts by all creditors must stop. Reduced payments often can provide you the breathing room needed to stabilize your financial situation. And you may be able to show undue hardship to completely deal with the weight of student loans.
Don't wait - help is only a phone call away
Your situation is unique. You need a plan that meets your needs. You don't need a general solution to a specific issue. One size does not fit all.
Your first step toward taking control of your financial situation and creating some freedom is to contact us so we can help you plan the best strategy. If you are struggling with your finances and your student loan debt, call Wiechman & Gasper, P.A. now. Calling yesterday would have been better. Calling today is best and tomorrow might be too late. Pick up your phone and call 785-379-6642 to schedule a free initial consultation.