What are my bankruptcy options if I have payday loans and student loans?

What are my bankruptcy options if I have payday loans and student loans?

A person has few options available when faced with a large amount of debt. While repaying the debt is the most obvious solution, it is not always a viable one. Bankruptcy is one option for those who cannot afford to repay their debts. Bankruptcy is a legal process where the Federal Bankruptcy Court decides whether to reduce or eliminate the debts, depending on the chapter of bankruptcy filed. Those who are considering bankruptcy are often confused about what debts can and cannot be discharged in bankruptcy.  An experienced attorney at Zellar & Zellar, Attorneys at Law, Inc., can discuss the various bankruptcy options and determine the most advisable solution based on a specific person’s circumstances.

Student Loans

Student loans are one of the biggest sources of debt in the United States. Unfortunately, student loans are not dischargeable in bankruptcy.  However, there are some exceptions, some of which do not require the filing of a bankruptcy case. A person who is permanently disabled can request a Hardship Discharge of their student loans by filing out a packet of information and submitting it to the Student Loan Servicer. Federal student loans obtained from schools that did not meet federal requirements may also be forgiven, by submitting a special packet of information to the Student Loan Servicer. Private student loans may also be discharged in some circumstances. For example, if the student loan was from a school that used fraudulent tactics to lure students, if the money was not used for a proper educational expense or if the school did not offer federal loans, then the private loans may be dischargeable in a bankruptcy proceeding.

In a bankruptcy proceeding, a person who can show that the repayment of their student loans would create an unnecessary hardship, can file an Adversary Proceeding with the Bankruptcy Court, and request that, based on their circumstances, the student loans should be discharged.  The Bankruptcy Court often looks to specific criteria to determine if someone meets the requisite hardship.  If someone is looking to determine if they meet the test for a hardship discharge of their student loan debt, it is recommended that they discuss their circumstances with an experienced attorney, such as those at Zellar & Zellar, Attorneys at Law, Inc.

Payday Loans

Payday loans are another common type of debt. While the amount of a payday loan may be small compared to the amount of most student loans, the high interest rates and unfavorable terms of payday loans make them very difficult to pay off. The good news is that payday loans are dischargeable debts that can be included in a bankruptcy case. Payday loans are treated by bankruptcy courts in the same way as other unsecured loans, such as credit cards. The court is free to rule on payday loan debt as it sees fit without having to follow the strict guidelines that are set for student loans.

Filing for bankruptcy is a serious decision that should be discussed with an attorney.   As with any legal matter, there are always a number of factors that are used to determine which type of bankruptcy is best for a specific person. A person who is interested in learning more about having debt discharged in bankruptcy court should seek legal counsel to assist in making the right decision.  Please contact the attorneys at Zellar & Zellar, Attorneys at Law, Inc., to schedule a free initial consultation to discuss your specific situation.

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