After looking at some sites geared towards helping people file for bankruptcy, I found that declaring bankruptcy on student loans is nigh impossible. Could you refinance your student loan and then declare bankruptcy as easily as any other debt though?
You could certainly refinance your student loan by other borrowings. It may be tough to find a lender that will refi your student loan if your finances indicate that you are close to bankruptcy.
Generally student loans have a lower rate of interest then other unsecured borrowings. What explanation would you give a lender if he asked why you wanted to do it?
What you propose to do is fraud. If you got caught, the new loan would not be discharged and criminal prosecution could be instituted against you.
Lot’s of mindfields. Be careful
oops. minefields not mindfields. sorry
Basically, yes. You can refinance your student loan and proceed with normal banckruptcy proceedings.
I don’t have personal experience in this area, but a friend of mine who I roomed with did.
He got in way over his head, to the tune of $35,000-40,000.00 dollars in debt.
What he did was contact the school loaning company and re-negotiate their payment plan. If I remember correctly, he got a waver for nearly two years while he corrected his debt financing. He basically told them he couldn’t pay but was willing to when he could. He declared bankruptcy but was still obligated to repay the student loans. As you might already know, student loans are not covered under bankruptcy protection.
Again, only remembering his situation, he eventually negotiated a payment plan with the lender that worked out best for both parties.
His advice to me during this time, tell them you want to pay, but can’t. From the sounds of it, they’re pretty resonable in setting up payment plans.
If by refinance you mean pay it off then yes. You borrow money from your father, pay off the student loan and then default on your father by declaring bankruptcy. The fact that he lent you the money to pay off a student loan is immaterial.
Sailor-
I think were on the same page, but I’m not sure.
Are your advising the O.P. to get the money from their parents to re-pay the student loan, then default on said loan, so the parents can take a deduction from a bad loan?
That’s one way to deal with it, creating a deduction for your parents by defaulting on personal loans. How that helps you, I don’t know. I have no clue about deductions, but understand it may be more desirable than the alternative.
What I was getting at in my post was what my roommate did when I knew him (I talked with my defaulting friend on the phone a minute ago, the things I do for the board). He used a the forbearance method. In that case, you deal strictly with the bank and tell them you can’t make payments for a certain amount of time. You essentially fill out some paperwork that says why and submit it. They say, O.K., we’ll give you ‘x’ amount of time to start paying on it. Like I mentioned earlier, he managed to stretch it out to two years before making loan re-payments.
In talking to him, he said he contacted the lenders and the school for the paperwork.
Again, this had no effect on his backruptcy proceedings, they don’t even consider student loans.
I know that I can postpone my payments and make graduated payments and such. I may have to do that depending upon what kind of employment I get. Just curious about my options. I doubt I’d want to commit fraud if that’s what it would be. Certainly my student loans would qualify me for bankruptcy if they weren’t student loans though.
I am a bit miffed that I had to pay for education that’s basically mandatory. Now I’ve graduated, and so far nobody’s offered me the kind of job that’s going to pay off my debts in time. I think I could extend my payments for as long as 30 years, but the interest that I would wind up paying is pretty offensive. Frankly, I wouldn’t feel morally wrong for defaulting on my loans, and I might be willing to face the credit problems that would ensue. Just wouldn’t want to try something that would get me prosecuted.
Thanks for the leg work CnoteChris.
M3-
It’s not fraud. It’s bending the rules. If everyone does it, why not you. Take advantage of the loopholes in the system.
You are in no way committing fraud. If you’re willing to pay back the loans, but can’t at the moment, then their’s no intent to defraud anyone. You can’t be prosecuted. You just can’t pay them back at the moment.
According to my friend, they do not increase the amount of interest you pay even if you stretch it out any number of years. They simply default it to the next year and add a year on to your overall re-payment plan. No added interest.
Bottom line: Don’t let them scare you. You have more rights than they do. Use them to your advantage. Pay when you can and tell them your plans. They’ll bitch and moan, but they’ll get paid. That’s what they want. Don’t let them send you into thinking your this and that, do what you can and be happy. You’ve done nothing illegal.
m3
With my original response, I had taken the OP to mean that you were contemplating paying off the student loan with money borrowed from an independent entity.
Other posters have addressed options of restructuring your debt with the current holder of the debt. You can certainly do this. As for borrowing from a family member, that turns more into a tax issue. If that family member’s claim of a loss stood up to IRS scrutiny, it would be handled as any other capital loss.
CnoteChris is 100% correct, that if all you are doing is restructuring with the current debt holder, there is nothing illegal or unethical in your actions.
My original statement regarding fraud was regarding borrowing new money to pay off nondischarable debt with the intention of having the new borrowings being discharged in bankruptcy.
Hope this clears up my original post