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Bankruptcy
Bankruptcy occurs when you have more debts than you are able to pay. Declaring bankruptcy is a way to hold off collection agencies and legal proceedings against you. However, bankruptcy does NOT relieve you of your student loan debt.
| If you declare bankruptcy… | Then… |
|---|---|
| Before you get a loan | It is best to speak with your financial aid office, as this issue is very complex. Federal loans—In general, a bankruptcy does not affect your eligibility for a federal student loan. Alternative (private) loans—Bankruptcy may affect your eligibility for an alternative loan. Speak with the lender first, before you apply. |
| While you have a loan | Generally, both federal and alternative student loans are not subject to discharge during bankruptcy. You must pay back any balance that remains on the loan, with interest. |
Helpful Tips
- If you have student loans and file for bankruptcy, you may want to contact an attorney who specializes in bankruptcy.
- Only if you file an undue hardship petition with the bankruptcy court will your loans be considered for discharge. The courts rarely approve such requests.