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Is Chapter 13 the solution for your student loan debt?

Student loan debt can follow Floridians and other Americans for decades past graduation. It’s not unusual to rack up hundreds of thousands worth of debt, including interest. Private companies’ student loans have higher interest than those obtained through the government. Private loan companies can also be more aggressive about collecting their money.

Of course, for people who pursue a graduate degree, the debt burden is even higher. President Obama famously noted that it took the first couple some 25 years to pay off their law school loans. During that time, he noted they should have been saving for their daughters’ education.

Those who advocate for student loan reforms note that the increasing mountain of loan debt not only impacts individual family’s economic status, but that of the country because people have less disposable income.

Of course, the Obamas were luckier than most people. Even with a graduate degree, many people just don’t earn enough to support themselves and keep up with student loan payments.

Increasingly, particularly for those who have private student loans, Chapter 13 bankruptcy is becoming the solution for helping to get out from under student loan debt. A Chapter 13 filing can also stop a loan company from taking legal action for nonpayment, which they are increasingly doing.

Although student loan debt can’t be discharged completely, by filing for Chapter 13, you can reorganize your debt and work out a repayment plan based on your income. This can reduce the amount of the payments on the student loan as well as other debts for five years, which is the maximum length of the repayment plan. After that, the payments revert to their previous amounts.

However, it gives people time to build up some savings and/or equity in their home. During that time, their income may also increase. Therefore, they may be in a better position to keep up with their payments or even pay off the debt after the five years is over.

If you feel like you’re trapped under a mountain of student loan debt, you’re not alone. An experienced Florida bankruptcy lawyer can advise you of the best course of action for your particular circumstances — whether it’s filing Chapter 13, working out an agreement with the loan company or some combination of solutions.

Source: Pittsburgh Post-Gazette, “Student loan debtors using Chapter 13 bankruptcy to buy time on payments,” Tim Grant, accessed Dec. 21, 2015

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