Kentucky Bankruptcy and Student Loans

Our Louisville bankruptcy lawyers continue to assist a record number of clients who want to free themselves from insurmountable debt caused by predatory lending, job loss, unexpected medical bills and bad real estate debt.

Those considering bankruptcy in Kentucky may also be struggling to pay student loans. As we reported recently on our Kentucky Bankruptcy Lawyers Blog, it’s easy enough for high school seniors and young college students to get in over their head — predatory lenders make it so by doing all they can to rope them into taking on debt via student loans, credit cards and car payments with high interest payments.
Sometimes the very colleges they attend get in on the act. Because student loans are one of the few debts that can be difficult or impossible to jettison via bankruptcy protections, students continue to struggle with loans long after graduation. For-profit colleges have a poor track record of piling debt on students that will take years or decades to repay. The Lexington Herald-Leader recently reported concern over the student default rate in Kentucky.

The report opened with the case of a middle-aged couple who had nearly $70,000 in loans for a pair of uncompleted associate degrees. As many as one-third of students at a Daymar College campus defaulted on loans due in the last three years. In all, 35 of 81 Kentucky schools eligible to participate in federal student loan programs had default rates higher than the national average of 13.8 percent. Daymar is being sued in U.S. Court by 140 current and former students.

In general, student loans are one of the few debts that cannot be discharged through bankruptcy (in most cases). But that’s not to say bankruptcy won’t assist someone struggling with student loans. By ridding yourself of credit card debt, bad mortgage debt, and other unsecured debt, a consumer can more readily pay down student loan debt and rid themselves of that burden altogether.

Chapter 7 Bankruptcy will permit those who pass a debt-to-income ratio test to eliminate most debts entirely. Others, including those who have large assets they want to keep, can file a repayment plan through Chapter 13 bankruptcy. Certain assets, including most retirement funds, remain protected from seizure throughout the process.

In other cases, when a consumer’s rights were violated, there may be additional legal remedies. Kentucky Attorney General Jack Conway is among the attorneys general in 17 states who are investigating whether for-profit schools have violated consumer protections. Aside from the high default rates, other clues that something is amiss include student complaints, inadequate educational accreditation and deceptive marketing practices.

The average Kentucky college student graduates with $19,112 in student loans.

If you need to speak to a Kentucky bankruptcy attorney or Louisville foreclosure defense firm, contact the Schwartz Bankruptcy Law Center at 866-270-4495 for a free and confidential consultation to discuss your rights.

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