Bankruptcy and its affect on student loan debt

Sometimes New Yorkers get into costly situations — such as a divorce — that wipes out a large portion of their finances and assets. They may turn to bankruptcy to wipe out debt and obtain a fresh financial start. But what happens when parents file for bankruptcy while paying on their child’s student loans? Bankruptcy often wipes out credit card debt, car loans and personal loans, but it usually does not do anything with student loan debt. Even if the debt is listed in the bankruptcy proceedings, it won’t get erased unless a complaint is made against the lender during the bankruptcy filing. It’s very rare that this happens because it is very expensive for someone to do. So unless this step is taken, the parent is still on the hook to repay the debt. This means that the lender can still collect the unpaid balance through various means, such as wage garnishment, Social Security or through tax refunds. In addition, even if the child signed off on the student loan, the parent can still be held liable even in bankruptcy. For those struggling with debt, bankruptcy can be a viable option. However, it doesn’t get rid of all debts…. Continue reading

Refinancing after a Chapter 13 bankruptcy

Many New Yorkers may file for Chapter 13 bankruptcy in order to pay back overwhelming debt through manageable payments. In order to free up some extra cash to pay off these debts, consumers may consider refinancing their home. Is this even possible after a Chapter 13bankruptcy? It all has to do with timing. For a homeowner with a recent bankruptcy, refinancing may be next to impossible. However, there is the Home Affordable Modification Program, which allows homeowners to refinance while in the middle of a Chapter 13 bankruptcy. The request must be submitted to the lender of the current mortgage. The chances of approval are greater a year or two down the line. For a Federal Housing Administration mortgage, the bankruptcy must have been finalized for at least one year. The homeowner must have paid all payments on time during that period. In addition, he or she must get permission from the court before refinancing. For conventional refinancing, the wait time is extended to two years. If the bankruptcy is dismissed, the wait time is four years. While a bankruptcy does offer a fresh financial start, it does come with some challenges when trying to refinance a loan or apply… Continue reading

Why Chapter 13 can be frustrating for those seeking new credit

When New Yorkers take on debt to the point where making monthly payments becomes too overwhelming, they may file for Chapter 13 bankruptcy. This type of bankruptcy allows consumers to reduce credit card debt by making manageable payments over a five-year period. But when it comes to rebuilding credit, it can be a Catch-22. Consumers need to apply for new credit cards in order to rebuild credit, but at the same time, lenders are scared to extend credit to those who are going through bankruptcy. Although approval is possible early on in a Chapter 13 bankruptcy, sometimes the most useful tip is to wait it out. Debt eventually declines as consumers pay it off. This results in a higher FICO score, which makes consumers more attractive to lenders. This takes time, though. Approval for a new line of credit won’t happen overnight. There will be rejection, so it’s important to take everything in stride. For those who want to try securing credit right away, a secured credit card may be the way to go. A consumer puts down a certain amount of money — typically several hundred dollars — as collateral and this determines the card’s credit limit. So if… Continue reading

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