Defaulted student loans can cause a borrower to live in constant fear of wage garnishments, tax refund interception and collection calls. Student loan repayment can be deferred or put in forbearance, but eventually those options run out.
When this happens and you do not have the ability to keep up with the payment demands, bankruptcy can often offer some relief.
Check the Math
Before considering bankruptcy you should validate your student loans. Check the math on the fees and interests applied and make sure no errors were made in the calculation process. Confirm the distribution dates and make sure that the interest was applied accurately.
Once you are confident the amount you owe is accurate, consider whether or not you have the ability to settle the debt.
How Much Can I Settle My Student Loans For?
Student loans know that they are in a good position to collect on such a debt. They are well aware that their recovery rates on these defaulted student loans are high. The US Department of Education reports recovery rates from 110.6% – 122.1% in the President’s 2011 Fiscal Year Budget.
Because of this they will not typically reduce the amount owed much upon a settlement offer. Approximately 10% is what you can reasonably expect to save by paying the entire debt owed in one lump-sum payment.
When considering a reasonable settlement amount, you should know exactly what the loan was purchased for upon default. The chances of settling the debt for any amount less than this are very slim.
What is Uncollectable Mean?
Getting this kind of settlement proposal approved would most likely involve proving that you are basically “uncollectable.” Uncollectable would mean that you do not have any current or future disposable income.
You can always schedule a free initial consultation with our firm to see what other legal remedies may be available to you in solving your student loan problems.