Tuesday, November 25, 2014

School Loans are still hard (if not impossible) to discharge in Bankruptcy

Image courtesy of Stuart Miles at FreeDigitalPhotos.net
With all the talk in Congress about student loan debt and the idea of trying to lift the debt off the struggling former students, very little has been do to actually make it happen. Young people who come in to talk about bankruptcy are usually servicing a big chunk of school debt. While the bankruptcy code allows debtors to discharge school debt if it is causing a hardship, I haven't seen a case where the debt has reached that standard.

Parents need to keep in mind when they take out the school loans, they must meet the same standard to discharge the debt. This can become a real issue as the parents approach retirement age and their children default or fail to pay the loans the parents took or co-signed for. Parents and students need to be mindful of the loans they take.

Recently in Forbes (on-line) was an article that offered points to consider when taking school loans: "The 3 Biggest Mistakes People Make With Student Loans" http://onforb.es/1t3q1cK. It is short and gives some practical advice on school loans.

The 3 biggest mistakes, it states, are:

"Going To College "To Find Yourself"
Using That Student Loan Refund Check For Extracurricular Activities
Not Working To Minimize Student Loan Debt"

I know many parents feel compelled to pay for college as well. I always suggest to my clients that they let their children take the loans, if necessary and then, help pay them if the student successfully makes it through school. I've seen many times when kids who don't have any skin in the game goof off on their parents' money. This way, if the student blows school, it is on them to pay for their mistake.

But the bottom-line here is bad decisions about school loans can haunt a family for decades. Congress has publicly spoken about the issue but nothing has really changed.

Learn more about my firm Medvesky Law Office, LLC at http://www.medveskylaw.com/

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