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This personal bankruptcy story was posted on the internet in January of 2010 as a blog in a discussion on bankruptcy: “I’m 50 years old. I’m a single mother of a 7 year old son. I own nothing, I have no savings I have a student loan debt of $75,000. I can’t get a job that doesn’t require me to work evenings (I already work 2 nights a week) therefore I have to hire a sitter and pay her more than half my salary. My loans are in forbearance now and I can hardly get by, when they come out I will be on the street just to pay my loans. bankruptcy looks good. I’ll never own anything anyway.”

Maybe the woman in this personal bankruptcy illustration means that her loan is in foreclosure instead of forbearance. Forbearance could mean delay in this case and would mean that the loan companies may have given her a continuance for a while until she could get on her feet. That would be a very unusual and rare move on the loan company or companies’ part if they did. Nevertheless, the tone of the woman sounds very hopeless, and she seems like a prime candidate for bankruptcy protection, especially if her home is being foreclosed on.

There is one thing bankruptcy protection will most likely not help our woman debtor- the student loans.  As of May, 2010, Congress began debating whether to make private student loans eligible for discharge in a bankruptcy. As it now stands, no student loans, federal or private, can be discharged in a bankruptcy proceeding. Private loans, which have flexible terms and higher interest rates than federal student loans, are the source of trouble for many college graduates. Until five years ago, private student loans could be discharged just like other private debt in the event of a bankruptcy, but the bankruptcy laws were changed by Congress that gave the loans protected status. So, in the case of our illustration, the woman may or may not be eligible for relief in the student loan department depending on what happens in the debate.

Regardless of whether or not the woman has to pay back her student loans, filing for bankruptcy protection would still provide her with certain benefits. The moment you file a bankruptcy, a judge will order all collecting actions to cease, an important feature called the automatic stay. The automatic stay, applicable to all types of bankruptcy filings, means that the mere request for bankruptcy protection automatically stops and brings to a cessation certain lawsuits, foreclosures, utility shut-offs, evictions, repossessions, garnishments, attachments, and debt collection harassment. That means all creditors will have to go through a US Bankruptcy Court trustee in order to deal with their debtors, including student loan creditors. Although the student loan debts are likely to get primary status and be paid first, depending on the type of bankruptcy she were to file, the woman’s student loans would be stayed until the US Bankruptcy Court could work a proper reorganization solution for such debts. The reorganization would be based on the woman’s current income.

There are two types of bankruptcies an individual can file- a Chapter 7 or a Chapter 13. A Chapter 7, commonly called liquidation of your assets, is normally the simplest and quickest form of bankruptcy. It is available to individuals, married couples, corporations, and partnerships. A chapter 13 bankruptcy is the second bankruptcy available to individuals and is called a wage earner’s plan. It enables individuals with regular income to develop a plan to repay all or part of their debts. Probably the only one who could properly advise the woman as to which of these bankruptcies might apply in her situation is a bankruptcy lawyer. Most lawyers will provide either a free or low cost consultation to see whether their service is even needed.

Maybe you have incurred large debts through student loans, and you have fallen on hard financial times.  If this is the case, you determine you are in need of relief from the stress associated with debt, and you live in or around the metropolitan area of Dallas, Texas, contact us today. We will help you find a bankruptcy attorney in your area that will help you with any questions you may have on bankruptcy law.

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