In case you missed the big news, the United States Bankruptcy Court, Middle District of Florida, recently approved a modification program for people struggling with student loan payments. The program allows student loan court modification for the first time, and it’s a landmark decision.
If you are considering this program, here are five things that you need to know about modifying your student loans.
- You must be in the process of filing 7, 11, 12 or 13 bankruptcy. Loan modification can only be considered if you are declaring bankruptcy.
- Any loan repayment plan suggested or offered will work with your budget and terms that are acceptable to lenders. Even though this program was devised to help out with loan payments, you will still need to make payments that are agreeable to both parties. In other words, you won’t get away without paying anything but those payments should be easier to deal with.
- It’s essential that you gather as many documents as you can prior to filing. Literally, anything you have that mentions your student loans should be collected and organized. You’ll want to show how much money you have paid, how much you have to pay, any repayment plans you’ve tried to negotiate, what your current income is, and many other details.
- Creditors have the legal right to delay repayment terms. It’s too early to tell whether or not this will happen regularly, but creditors do have the right to request additional paperwork and extend the length of modifications. This is why it’s imperative that you have all the necessary paperwork in order before you file.
- You must demonstrate that you qualify for bankruptcy protection. This one might be difficult to do on your own because it means that you have to know the bankruptcy process and be eligible to file.