Foreclosures, Timothy Kingcade Posts

Chapter 13 Bankruptcy Buys Time for Borrowers Struggling with Student Loan Debt

For many, student loan debt is a burden that can wreak havoc on a borrower’s financial situation. Reports show that recent graduates with a bachelor’s degree accumulate an average of $35,000 in both federal and private student loan debt. In an effort to get a better handle on their financial predicament, some are turning to bankruptcy.

After obtaining a master’s degree in intelligence and global security, a Leetsdale man struggled to make ends meet. With $80,000 worth of student loan debt, the 29-year-old decided to file for bankruptcy to help manage his financial situation. In a similar case, a Bradenton, FL woman accumulated $223,000 in student loan debt after obtaining her bachelor’s degree in dental hygiene. With interest rates and fees, the 43- year-old calculated that she would be paying the loan back for the rest of her life.

College funding expert, Mark Kantrowitz explains a simple rule of thumb: your total student loan debt at graduation should be less than your annual starting salary. If it is more, you can expect to encounter serious financial problems as you try to pay down the debt.  Filing for Chapter 13 bankruptcy can help.

While a Chapter 13 bankruptcy cannot discharge student loan debt, the debt can be reorganized and placed on an income based repayment plan, which can reduce the monthly payments substantially. After filing for Chapter 13 bankruptcy, the Leetsdale man’s student loan payments went from $1,000 to $200 a month, while the woman in Bradenton was able to consolidate her debts into a smaller single payment.

However, with a Chapter 13 bankruptcy, the reorganization only lasts for five years. After that, all payments revert back to their normal amounts. Chapter 13 serves to force an income-based repayment plan for five years, which in many cases allows borrowers enough time to get back on their feet. It seems that private student loans are causing borrowers to turn to Chapter 13 bankruptcy as an option because of higher interest rates and limited flexibility.

According to the Consumer Financial Protection Bureau, the cost of both private and public college degrees has skyrocketed and national student loan debt has ballooned to $1.2 trillion. Unfortunately, college graduate salaries have barely increased by comparison. Oftentimes, college graduates are stuck with high monthly payments, low wages, and the agonizing decision of whether to pay their student loans or buy groceries.  Despite the tough circumstances that tend to hinder graduates from qualifying for home mortgages, or properly saving for retirement, many are still fighting to conquer the student loan debt crisis.

For borrowers who are struggling with student loan debt, relief options are available. Many student loan borrowers are unaware that they have rights and repayment options available to them, such as postponement of loan payments, reduction of payments or even a complete discharge of the debt. It is important you contact an experienced Miami bankruptcy attorney who can advise you of all of your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade & Garcia, P.A. has been helping people from all walks of life build a better tomorrow. Our attorneys’ help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade & Garcia website at