Social Question

faye's avatar

Can people claim bankruptcy to get out of paying student loans back?

Asked by faye (17750 points ) November 1st, 2009

i just read a thread about someone asking for debt counselling because of student loans. some 10 years ago our premier “forgave” a big portion of student. loans. [ sigh] This was before my children got into it. some kids will owe for years upon years. and, if possible, is it ethical?

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18 Answers

missingbite's avatar

The short answer is maybe. It will depend on what kind of bankruptcy you claim. New bankruptcy laws make it harder to get rid of the principle loan but will forgive the interest, late payments, and so on. Chapter 7 or 13 or 11? It can get very confusing.

Psychedelic_Zebra's avatar

My wife did almost 15 years ago, it was a Chapter 13 debt consolidation. We paid them off after they settled in court what they would accept. It’s tricky, expensive, and you have to be albe to show you can make the monthly payments, but it can be done. Check with a bankruptcy lawyer.

tinyfaery's avatar

Not federal Direct student loans. You cannot discharge these loans in bankruptcy except under dire circumstances

RedPowerLady's avatar

Just here to confirm that what @tinyfaery said is correct. I looked into it awhile back. You can though defer the loans indefinitely but you have to keep filling out the paperwork annually to do so. My mother however got on disability at some point in her life and told the Student Loan people she would never be able to pay them back, they haven’t bothered her.

dpworkin's avatar

In New York State, if you agree to use your education to work for an ameliorative State agency, they will forgive ½ of your debt. That can be rather considerable.

nikipedia's avatar

@pdworkin: Wish I’d known that when I graduated…I still owe NYS thousands.

faye's avatar

any canadians on here? and what about the ethics of it? it might be something for my poor daughter.

RedPowerLady's avatar

Here is a good website that may help you out. Canadian website I mean.
http://www.student-loan-bankruptcy.ca/
and another http://www.ehow.com/how_2247098_fix-canada-student-loan-debt.html

I don’t personally have an issue with the ethics of it as I believe higher education should be free in the first place.

casheroo's avatar

@pdworkin I don’t know much about it, but I know NYS is the most evil collection people ever. We paid a collection agency off in full amount in 2007, and they’ve recently started harassing us for more money…apparently their student loans never ever die. They will confiscate our tax refund apparently. I hate them. And my husband for ever going to a college in NY. lol

rooeytoo's avatar

A good bankruptcy lawyer can get you out of practically anything.

No it is not ethical, a debt is a debt and if I want to be able to look at myself in the mirror if I incurred them, I repay them.

galileogirl's avatar

@Psychedelic_Zebra Today’s students are suffering the consequences of earlier generations avoided paying off the low interest loans provided by or insured by the government. Your wife might think about that when your kids are paying credit card rates on their college loans. They will probably pay for 20 years.

Psychedelic_Zebra's avatar

@galileogirl—We don’t have kids, and we paid our debt fair and square. The IL Student Loan Comission went to court, met the judge, met with our lawyer, set up an amount they would settle for, everyone agreed that it was fair, the judge chose a trustee and we paid it off over a period of five years. We didn’t do anything unethical.

The Student Loan Commission neglected to add the interest to the amount we paid, which allowed them to snatch my income tax refund one year after we were supposedly free and clear. My Congressional District Representative made it possible for the ISLC to do that legally. I never voted for that Democrat ever again.

I don’t much care for your tone, it sounds as if you are insinuating that we did something wrong. You come across as a bit judgmental, considering you have very little evidence to go on.

galileogirl's avatar

None the less. as a single mother, I managed to make it through, working 20 hrs/wk in college and managed to pay back school loans and cc loans that were 40% of my 1st post college salary within 5 years. I don’t much care about what anybody thinks about my “tone” especially a 2 income childless couple who managed to get themselves in such a mess.

RedPowerLady's avatar

Wow harsh. Everyone has different circumstances. Just because one person was able to pay their debt under harsh circumstances doesn’t mean that the circumstances of the other person would allow this to happen. Maybe they had a horrible medical bill that took up all of their income. You really don’t know.

I think being judgmental when it comes to money is a pointless endeavor. Or even when it comes to values regarding money.

I also think all that anger could be better directed at making higher education free or at least making tuition reasonable as it keeps skyrocketing.

galileogirl's avatar

Still saying refusal to pay govt subsidized loans in the past led to the high cost of loans for current students. Now that’s harsh!

RedPowerLady's avatar

Instead of judging others for their actions perhaps we should work on solving the problem of today. It’s great to understand where the problem came from but it doesn’t mean people who had circumstances unknown to you or I should be judged for them. Especially in regards to money. Money is so unequivocally unimportant (well important for survival but not so much more than that).

rooeytoo's avatar

I don’t want to pay for anyones college education. I paid for my own. It was proportionately expensive when I went. The students who were paying their own way were generally more dedicated to learning and less to partying, they had a vested interest.

It makes no sense to me that the kid who decides to become a plumber should pay for the kid who decides to go to college and major in ancient history. Because when something is funded by the government that is who is paying the bill, the people who are in the work force paying their taxes and repaying their loans.

It is such a cyclical thing, the more I pay in taxes to fund other peoples life choices, the more help I need to finance my own life. I have no problem with my taxes being used to finance those who are unable to support themselves, but their has to be a limit to how much of other’s life choices I am required to finance through my work.

tinyfaery's avatar

I have no problem paying for others to go to college. It might benefit me and/or the world some day.

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