Are thinking about bankruptcy, or have already filed one, but are still in school or are going back? Are you concerned about getting loans for a child in college or ready to go? Are you worried that the bankruptcy might interfere with that?
Well, you are not alone! However, this situation does require some planning, since it depends on where the loan or financial aid will be coming from, and whether you are the student or the parent. But, in short, you do have options for student loans after bankruptcy.
If You Are the Student
Federal Loans for College. A Stafford Loan from the federal government and the Perkins program are still within reach. These are based on need, along with other factors, and not on your credit rating. They also offer the most diverse selection of repayment plans once you are out of school. However, you cannot be in default on a current student loan that is in repayment.
Federal Loans for Grad (or Professional) School. These loans may be beyond your reach, however. You cannot have an "adverse credit history." This means that you are more than 90 days delinquent on any debt (which you could be even before filing bankruptcy), or in the past 5 years defaulted on a debt, obtained a bankruptcy discharge, foreclosure, repossession, tax lien,wage garnishment, or write-off of a federal student loan. You may still be able to obtain the loan, but you will need a cosigner who does not have an adverse credit history.
Private Loans. Private loans from banks may still be available, to either a student or a parent, but they are based on your credit rating. Thus your bankruptcy could be a problem. However, you might have more success if you filed a chapter 13 where creditors were paid something (especially if they were paid in full), rather than a chapter 7 where debts were just wiped out and no one got paid.
Be aware, though, that even if you get a loan, you might not qualify for enough money or a reasonable interest rate for when you are ready to repay it. In addition, these loans do not have as flexible an array of repayment plans as Direct Loans from the federal government and are just as non-dischargeable in bankruptcy.
Grants and Scholarships. Don't forget about these. There are lots of grants and scholarships available to help with school costs. The best part is, they don't have to be repaid! Thus they can be the best option for you in maintaining your fresh start after bankruptcy by keeping your future expenses to a minimum.
If You Are a Parent
Federal Parent PLUS Loans. Even after your child has obtained everything he or she can with the programs above, you may still need to bridge the gap. This is best done with a federal Parent PLUS loan. Unfortunately, these are credit based. Thus the problem with an "adverse credit history" comes up.
However, that also means that you may still be able to get one if you secure a cosigner without an adverse credit history. This might be possible if you, but not your spouse, filed bankruptcy, and his or her credit is still good.
Even if you are not able to get a Parent PLUS loan, being turned down for one may well result in your child getting an increase in his or her unsubsidized Stafford loan. Therefore applying, even though you will most likely be turned down, is still a good idea.
So What Do I Do?
If you live in southern New Jersey and are thinking about filing bankruptcy, please call my office at 856-432-4113 or contact me through this site for a free consultation to discuss your case.
If you are looking for more information about bankruptcy,then download my free book, Top Questions People Ask About Filing Bankruptcy in New Jersey.