Individuals and families straddled with debt are struggling to make ends meet as inflation rises alongside stagnating wages and higher unemployment. The 43 million Americans with federal student loan debt anxiously await news of the federal student debt cancellation program, a plan to cancel 10K in federal student loan debt for individuals with annual income below $125K/$250K per household and $20K cancellation for Pell Grant recipients with the same income. With more families forced to tighten their belts, many favor student loan debt relief hoping to reduce their payments.
Fortunately while borrowers wait for a decision on the student debt cancellation program, payments on federal student loan debt remain paused providing a bit of breathing room for cash strapped families. Now is a good time to explore strategies to tackle a difficult financial situation which may include bankruptcy protection.
Generally speaking, student loan debt is not dischargeable under bankruptcy, with very few exceptions. However, individuals and families experiencing financial difficulty, may benefit from eliminating unsecured debt such as credit card or medical debt, making it possible to keep up with rent or mortgage, car payments, and student loan payments when the pause in payments expires.
For those with modest incomes with few assets, Chapter 7 bankruptcy offers filers a relatively clean slate where nonexempt property is liquidated to pay off debt obligations, discharging nearly all remaining debt through the bankruptcy process. If a filer has higher income, and assets they wish to keep, a Chapter 13 repayment plan allows debtors to reorganize debt into affordable payments over a 2 to 5 year period, discharging any remaining unsecured debt at the conclusion of the bankruptcy process.
As individuals and families struggle to meet their financial obligations, proactively considering various options to tackle debt is the first step to solving a difficult financial problem. Bankruptcy protection is one of many solutions individuals and families can explore. If you have questions regarding Illinois Chapter 7 or Chapter 13 bankruptcy, contact the law office of Charles E. Covey for answers today through our website or call us at 309-674-8125.
