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Bankruptcy and student loan eligibility

Individuals in New Hampshire who have declared bankruptcy may wonder whether they are eligible for student loans. The law protects people from discrimination due to bankruptcy for federal student loans.

Individuals may be able to obtain loans from other institutions as well. Whether filing Chapter 7 or Chapter 13 bankruptcy, many individuals have been able to get loans within a short time afterward. While offers such as mortgages, credit cards, auto loans and more may carry higher interest rates, it is possible for an individual to begin rebuilding their credit long before the bankruptcies are removed from reports seven to 10 years later.

Individuals will find that as they begin making monthly payments, their credit score will start to rise once more. Their credit to debt ratio will also rise with the discharged debts off the credit report, and this may make look better to lenders than a person who is struggling under a large debt load.

Private lenders may have different requirements from federal loans, but individuals should not assume they would be turned down. The best approach is to meet with a financial aid adviser at the school the individual is interested in and discuss the specific circumstances.

Individuals who are considering bankruptcy may have other inaccurate ideas about how the bankruptcy could affect their lives in the present and the future. For example, individuals may be allowed to keep some assets such as their home and a vehicle. Retirement accounts are generally protected. Furthermore, filing for bankruptcy is not a sign that an individual is irresponsible. Overwhelming debt may happen as a result of job loss, medical problems, divorce or other unexpected circumstances. For many individuals, bankruptcy may actually be a responsible step toward restoring their financial future.

Source: FOX Business, "Will a Bankruptcy Stop Me From Getting Student Loans?," Karin Price Mueller, Jan. 21, 2015

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