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Terry L.
Terry L., Attorney
Category: Bankruptcy Law
Satisfied Customers: 2889
Experience:  Better Business Bureau. 18yrs bankruptcy experience. Chicago Bar Assoc. American Bankruptcy Institute member.
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Is there a way to reduce/eliminate the intrest I am paying

Resolved Question:

Is there a way to reduce/eliminate the intrest I am paying on my student loans. I am paying $300 a month just on intrest alone. I need some advice on how to proceed. If push comes to shove, can I file for bankruptcy as a means of eliminating this debt?
Submitted: 8 years ago.
Category: Bankruptcy Law
Expert:  Terry L. replied 8 years ago.
Chapter 7 normally does not do anything for student loans, absent severe undue hardship. If you are working or are able to work, you probably would not succeed in getting them discharged.

Chapter 13 can pay them down, interest free. With a chapter 13 you can pay them over the next 5 years, consolidating them with your other debts. If your chapter 13 plan, pays only a certain percentage of the debt back, the remaining balance of the student loans will accrue interest and you would pay that unpaid balance back after the case was over. The portion paid thru the case, normally is paid without any interest accruing on that portion.

Your other option is to consolidate your student loan, often locking in a lower interest rate. Otherwise, you can take out an unsecured loan, and pay down the student loans if the unsecured loan interest rate would be cheaper.

The US Department of education has several derferrment and forebearance programs that you could look into as well, based on your individual situation.
Customer: replied 8 years ago.
I am not sure I understand how Chapter 13 works. It is a little confusing. Could you elaborate a little more on this?
Expert:  Terry L. replied 8 years ago.
Chapter 13 will consolidate your debts.
Lets say you have $10,000 in credit cards & the $38,000 in SL's
if you do a 10% repayment plan, your payment to the court would be roughly $88 for 5 years. The credit cards would be discharged, but only 10% of the student loans would be, and you would need to pay the other 90% when you are done.

For a chapter 13 to be approved, you must show the court that you have the payment available, after paying your normal monthly expenses.
Customer: replied 8 years ago.

Am I to understand that my credit card debt would be forgiven and 10% of my student loan debt woudl also be forgiven as well? Is the $88 court cost a one time cost or is it monthly? Last of all, what do you mean by, "when you are done" ? Is this after five years or after the court ruling?

Expert:  Terry L. replied 8 years ago.
The $88 would be your monthly payment to the trustee, who divides the payment between creditors according to the chapter 13 plan terms. This goes to your creditors, so you are paying them roughly 10%. The court filing fee is $274. Your attorney will charge a fee as well.
The other 90% of the credit card debt is eliminated, yes.
You are paying back 10% to the student loans, and the other 90%+interest would remain after the case is done 5 years later.
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