Last week I talked about financial hemorrhaging and how I am seeing more and more clients unable to stop the bleeding.
These wounds are being suffered in the ongoing battle between student loan debt collectors and helpless borrowers.
This battle has reached crisis level and there is no end in immediate sight.
To make matters worse, the field is unfair and the battle is being fought on unequal terms.
Borrowers have few options available to resolve their student loan debt issues. Additionally, student loan debt is almost never dischargeable in bankruptcy.
Most borrowers incurred excessive student loan debt as students with little or no financial education. As a result, they become cannon fodder for student loan collectors.
While this battle is one sided now, borrowers can raise their shield and defend themselves with the hope that reinforcements will eventually arrive.
Establishing a Student Loan Defense
So when that hail of arrows comes raining down on you, raise your shield!
It is true that there are few, if any options available for student loan borrowers to reduce or eliminate their debt. On the other hand, it is absolutely false that there is nothing you can do.
The first step is contacting a lawyer familiar with student loan matters.
The next step is working with that lawyer to determine the best battle plan based on your situation. For Federal student loans, you can most likely enter into Forbearance, Deferment or Income Based Repayment.
For private student loans, your options are limited but you can protect yourself.
Perhaps the best shield against the private student loan attack is chapter 13 bankruptcy.
Raising Your Shield
Chapter 13 bankruptcy can be used as a shield to essentially “defer” repayment on Federal and private student loans.
Chapter 13 bankruptcy allows you to repay your debt using a 3 to 5 year repayment plan. In most cases, your plan payment is based on your monthly disposable income.
The filing of any bankruptcy petition invokes the automatic stay. This puts a complete stop to all collection activity and in chapter 13, even protects cosigners.
So, if you are in a heated battle with a student loan collector and unable to meet their intrusive demands, chapter 13 essentially pushes off your obligation for 5 years. Your required monthly student loan payments are supplemented with your monthly chapter 13 plan payment.
Your student loan debts are now getting paid through the bankruptcy plan at a reduced rate.
It is important to understand that while in bankruptcy, interest is still accruing on your student loans, so depending on the plan payment, the overall amount owed on these loans could increase during the bankruptcy process.
So, while your weapons are primitive and the odds are stacked against you, you are not defenseless.
An experienced attorney can lead you into battle and make the most of the defenses available to you. Raise your shield and ride the storm. .
Image courtesy of Dale Gillard (Flickr).