Debt Collectors Cashing In on Student Loans is a great article from Sunday’s New York Times dealing with the issue of student loans that are in default. Unfortunately, it is almost impossible to discharge student loans in bankruptcy under the current laws.
However, if one of these aggressive collection agencies is making life difficult by garnishing your pay or taking other action to collect the debt, a Chapter 13 bankruptcy can stop that collection action for up to five years. While you are in the Chapter 13 the collection action would stop. The Chapter 13 would allow you to reorganize and discharge most of your debts. Generally the unsecured creditors are only paid a fraction of what is owed and there is no interest. At the end of the Chapter 13 your debts are discharged and hopefully you are then in a better position to take on the student loans.
If you would like to find out more about how a bankruptcy can stop collection action just call Dixon & Johnston, P.C. at 618.207.3770 to schedule a free consultation.