Do you feel like you are drowning in student loan debt? You are not alone. Many St. Louis bankruptcy debtors are in default on their student loan obligations. In fact, the rate of default increases every year. It can be hard to make minimum payment on student loan debt when you are already struggling to pay rent, health insurance, and car payments.
Unlike credit card and medical debt, student loan debt is typically non-dischargeable in St. Louis Chapter 7 or St. Louis Chapter 13 bankruptcies. When you fall behind on student loan payments, the account will likely be turned over to a collection agency and you will start getting calls from bill collectors. In addition, you can be sued, your wages can be garnished, and the creditor can also take future tax refunds to offset the balance owed.
It is almost impossible to get student loans discharged by filing for St. Louis bankruptcy relief. In order to do so, a debtor must be able to prove serious undue hardship. Such hardship is difficult to prove and is focused mostly on your future ability to repay. Judges in the Eastern District of Missouri bankruptcy court encourage debtors to look into income based repayment options since most debtors are not eligible for student loan discharge.
So what can you do when you find yourself in default on student loan obligations and bankruptcy cannot help? Options are limited when you find yourself in this situation, but they do exist. If you are behind in payments, ask your lender about rehabilitation. The rehabilitation period varies depending on the type of loan, but if you are a Direct Loan borrower, you must make at least nine (9) full payments of an agreement amount within twenty (20) days of the due date over a ten (10) month period of time. Payments received through wage garnishment do not count toward the nine (9) required payments. If you complete this rehabilitation period, your loan will no longer be considered to be in default, and your credit report will be updated accordingly. Once a loan is rehabilitated, wage garnishment will cease and the IRS will no longer send your tax refunds to the lender.