Seniors may have greater likelihood of bankruptcy relief for student loans
Image Source: Flickr User Ethan Prater
If you’re age 60 or older and stuck with student loans you can’t afford, bankruptcy may help you ditch this debt. You may have heard that student loans CANNOT be discharged in bankruptcy, but Greensboro NC seniors should know that's not true and that they have a likelier chance of achieving student loan relief through Chapter 7 bankruptcy than other consumers.
Consider these facts about bankruptcy, student loans, and seniors.
#1 99% of Bankruptcy Filers Don’t Try to Have Their Student Loans Discharged
Only 1% of bankruptcy filers who have student loans go through the process of filing an adversary proceeding, which is the extra step necessary to request discharge. It does cost extra money, but it can be well worth the time, effort and cost if it allows you to unload federal student loans you took out for your own education or your children’s schooling.
#2 40% of Those Who Do Request Discharge Get Relief in Bankruptcy
Despite the low number of bankruptcy filers with student loans who ask for relief, the odds of getting discharge are relatively high. A 2012 study showed that 40% of bankruptcy filers who filed adversary proceedings for student loan relief as part of their bankruptcy filing got partial or total discharge of their educational debt.
#3 Chronic Illness or Extremely Low Income Can Trigger Discharge
The measure used to determine whether your student loans should be discharged is the Brunner test. One aspect of this test asks the bankruptcy court to consider whether paying your student loans would cause you “undue hardship.” If you have an ongoing serious illness or low income that won’t increase, these conditions can help prove hardship.
#4 Being Age 60 and Up Can Help You Obtain Discharge
The majority of debtors who are able to discharge student loans in bankruptcy are over age 60 – so if you’re a Greensboro NC senior with student loans you can’t afford, this should give you hope. According to the New York Fed, of senior households with student loans, roughly 12.5% are 90 days delinquent or more. Bankruptcy can offer hope to those struggling with limited income and student loans.
#5 Disability Can Allow Discharge Outside of Bankruptcy
If you have a permanent disability that impacts your ability to earn a living, no matter your age, you may be able to get an administrative discharge by applying directly to the Department of Education without filing bankruptcy and an adversary proceeding. There is an application process, and you can check out the DOE’s website for more information on discharge.
#6 Try Income Based Repayment BEFORE Bankruptcy
One of the other hurdles you must typically face in order to be approved for discharge is to demonstrate the you made “good faith effort” to repay your loans. Income-based repayment (IBR) sets student loan payments based on your income, not the balance owed, and after 20-25 years, the balance can be discharged. Payments can be as low as $0 depending on your income.
The upside to discharge via bankruptcy is that the balance discharged will NOT be tax deductible. Discharge of balances owed through IBR does trigger an income tax impact. However, that can still be much more affordable than paying the full balance on your student loans. To find out more about IBR options, check out the FedLoan website or your loan servicer’s website.
If you’re a Greensboro consumer and want to know about debt relief through North Carolina bankruptcy, contact the Law Offices of Joh T. Orcutt. Call +1-919-646-2654 now for a free consultation at one of our convenient locations in Raleigh, Durham, Fayetteville, Wilson, Greensboro, Garner or Wilmington.