If you are in financial difficulty and have children that will be starting college in three to five years, then you can't afford to put off bankruptcy any longer. You need to get it behind you so that you can help with your kids' education.There are two reasons why filing now is better than waiting.
Bankruptcy Creates an "Adverse Credit History" for Loans
First, a bankruptcy can cause a problem for you as a parent getting a Parent PLUS loan. A bankruptcy discharge creates an "adverse credit history" for you if it was obtained within the past 5 years.
If you file a chapter 7 at least 5 years before your child goes off to college, that will make things much easier. However, a chapter 13 can require you filing much earlier, as the plan could be anywhere from three to five years long. Add another five years for the adverse credit history and . . .
Current College Costs Not a Deductible Expense in Bankruptcy
Second, the bankruptcy code does not consider college expenses as reasonable and necessary for the support of your children! Means testing does not allow for educational expenses for a child over 18, and even the younger ones have the amount per month capped.
If both of you file, whether it is a chapter 7 or a chapter 13, you cannot include this cost. It is currently unclear, however, as to whether one of you can file and then include the tuition, etc., as an expense of the non-filing spouse.
No matter what, your bankruptcy could still cause a problem if your child is not ready to graduate at the end of the academic year (i.e. you are not looking to take out any further student loans).
So What Do I Do?
What is the solution? File bankruptcy way before your kids go off to higher learning. Do it at least five years in advance. Once you clear your decks financially, getting rid of that crushing credit card and/or medical debt, you will be better able to help your kids.
Also, if you plan to apply for student loans for your children, in your name, (whether a private, state, or federal PLUS loan), you should allow for enough time to rebuild your credit before you do so, in order to increase the likelihood of success.
Can You Help?
If you live in southern New Jersey and are considering filing bankruptcy, please feel free to call me at 856-432-4113 or contact me through this site for a free consultation in my Woodbury office 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.
If you would like more information about student loans, you can download my free book, I Graduated; Now What? A Guide to Dealing with Your Student Loans.
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