Bankruptcy can increase your student debt!

Bankruptcy is designed to decrease your debt when you have become financially unable to keep up with it all. In some cases, like credit card debt, the whole debt will be wiped out. In other cases it will be reduced, often significantly. (For details, click here to Our Feature Article on Bankruptcy.

However, student debt is different. Student debt cannot be eliminated or diminished by bankruptcy. In fact, under one common form of bankruptcy, Chapter 13, student debt can actually be increased!

In Chapter 13, you are expected to pay back something on all your debts. How much is determined by the courts. And, according to the Wall Street Journal, the bankruptcy court often temporarily lowers the payments you must make on student debt to provide more money for your other creditors, like your credit card lenders.

Lowering payments may sound good; but in this case it isn’t. Anything you do not pay on your student debt is simply accumulated, with interest, thus raising the total amount owed. You could add thousands of dollars to your student debt, all of which will have to be paid back when you come out of chapter 13.

Only Congress can fix this. Send your Congressional Reps an email!

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