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What Does it Mean to Default on Your Student Loans?

For graduates in the process of repaying student loans, it is extremely important to understand the consequences of defaulting on their loans. To default means you have failed to make payments on your student loan as scheduled according to the terms of your promissory note, which is the binding legal document you signed when you initially took out your loan. If you are struggling to repay your student loans and other forms of debt, such as a mortgage or car loan, filing for bankruptcy may be a good option for you. Consult our reputable bankruptcy lawyers at Oklahoma Legal Center today to discuss Chapter 7 and Chapter 13 bankruptcy, and to determine what steps you can take to relieve your overwhelming debt.

Understanding Loan Delinquency

In most cases, your student loan becomes delinquent the first day after you fail to make a scheduled payment, and the delinquency will continue until all payments are made to bring your student loan current. If your loan is delinquent for 90 days or more, it is likely that your loan servicer will report the delinquency to the three major credit bureaus. It is important to note that a negative credit rating can make it extremely difficult for you to borrow money, to buy a house or a car, to get homeowner’s insurance, to get approval to rent an apartment, or even to sign up for a cellphone plan.

Possible Consequences of Student Loan Default

According to student loan information provided by the government, if you default on your student loans, “Your school, the financial institution that made or owns your loan, your loan guarantor, and the federal government all can take action to recover the money you owe.” Once your loan is in default, there are a number of serious consequences you may face, including the following:

  • The entire unpaid balance of your loan and any interest is due immediately
  • You lose eligibility for additional federal student aid
  • You lose eligibility for deferment, forbearance and repayment plans
  • Your employer can garnish your wages and send the money to the federal government
  • The loan holder can take legal action against you
  • It will take years to recover from default and reestablish your credit

Our Reputable Bankruptcy Lawyers Can Help

The consequences of student loan default can be severe and long-lasting. If you are having trouble making payments on your student loans, you may consider filing for bankruptcy. Although student loans are not currently dischargeable in bankruptcy, filing for Chapter 7 or Chapter 13 bankruptcy in Oklahoma, can help you discharge other debts or organize them into a manageable repayment plan, which can help you more easily manage your student loan payments each month. Contact our knowledgeable bankruptcy attorneys at Oklahoma Legal Center today to discuss what option is best for your financial situation.

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