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How bankruptcy can help your tax or student loan debts

On Behalf of | Nov 28, 2017 | Blog

Many types of debts can be discharged or reduced in bankruptcies. For example, your credit card debts and medical debts can be cleared in many cases.

However, as you may be aware, there is little hope that your student loan debts, certain tax debts and other types of debts such as child support obligations will get discharged. Does that mean you should not bother to try for bankruptcy if some or most of your debt is of a kind that is nondischargeable? The answer depends on your particular situation, but in some circumstances, bankruptcy can still make a lot of sense.

Freeing up more money

It can be frustrating to see your medical bills and credit card bills cleared but continue to be stuck with student loan debt. However, once these other debts have been erased or reorganized, depending on the type of bankruptcy, you do have more funds with which to attack your nondischargeable debts.

Furthermore, student loan officials and tax authorities may be willing to work with you on debt repayment plans. For example, you could explore the graduated student loan repayment plan or the revised pay-as-you-earn plan, which results in loan forgiveness after 20 or 25 years if the loan is not paid off.

Reducing stress in your life

Bankruptcy also freezes the legal ability of creditors to contact you, which can make for a great stress reliever. Depending on your preferences and situation, you may also be able to keep your house and/or car, which can be a load off your mind.

If you are unsure whether bankruptcy is right for your situation, it never hurts to get in touch with an attorney for a free consultation. Bring late notices, pay stubs, overdue bills, credit card statements and other important documentation. Whether your debt load is relatively minor or heavy, you may find some solutions to your financial troubles through these meetings.