Can I get a Student Loan After I Filed Bankruptcy?

Even in Georgia, where there is the HOPE scholarship and access to several public colleges, the cost of a post-high school education is high, especially for debtors who are coming out of bankruptcy, which leads to the question of whether one can obtain a student loan after filing bankruptcy. Often, a debtor who filed bankruptcy did so due a to a job loss or change of circumstances, and obtaining additional education is one way of increasing earning potential and marketability and even changing career paths.

However, there is some good news.

A past bankruptcy has no impact on your eligibility for obtaining federal student aid. Federal aid administrators cannot use a past bankruptcy as evidence of unwillingness to repay student loans provided that there are no loans currently in default that were not discharged in the bankruptcy proceeding. (Generally, federal loans for educational purposes cannot be discharged through bankruptcy unless the debtor shows “undue hardship,” which is a very high bar.) If you do have outstanding student loans that are in default, these must be cleared up before you can receive additional financial aid. If you are in need of financial aid and have defaulted on old loans, the best course is to contact the lender and set up a payment plan. Once you do this, you will be eligible for additional aid. It should also be noted that schools are allowed to consider post-bankruptcy credit-history in their decision-making process.

PLUS loans, which are loans that are offered to parents of students or to graduate students, are a different situation. If a parent applying for a PLUS loan or graduate student applying for a Grad PLUS loan has an adverse credit history, including a bankruptcy within the past five years, he/she may be denied. Usually, a debtor can still get a loan if he/she gets an endorser with strong credit.

Private lenders, on the other hand, can and do consider a past bankruptcy when deciding whether to issue a loan. Many lenders have eligibility criteria that will not allow them to lend money to people who have had a bankruptcy within the past seven to ten years. Nonetheless, a parent’s bankruptcy will have no impact on a child’s eligibility to receive a private loan unless the parent is required to cosign on the loan.

Private loan companies consider some types of former debtors better risks than others. For example, a Chapter 7 bankruptcy is perceived as more adverse than a Chapter 13 bankruptcy, especially if the Chapter 13 filer had a 100% payout plan. Even so, the fact that person who filed a Chapter 13 can refile quickly is also taken into consideration and may have a negative impact.

If you are considering filing for bankruptcy and plan to further your education it is important that you discuss your options with a qualified attorney. For a free consultation please contact the Law Offices of Charles Clapp at (404) 585-0040.

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