Differences Between Bankruptcy and the SAVE Forgiveness Plan

by Luke Homen

There are many differences between discharging a student loan through bankruptcy and the SAVE forgiveness program. The SAVE program’s future is up in the air, and you’ll need enough evidence to prove your bankruptcy case. Convenient Bankruptcy helps clients whose finances are overwhelmed by student loan payments. We’ll discuss their approaches so you can get a feel for each and decide if either is the correct option for you.

Oklahoma student loan lawyers Luke Homen, Alex Sullivan, Colin Barrett and Hannah Davis help clients manage student loan debts, including through bankruptcy and forgiveness plans. Call our Convenient Bankruptcy student loan attorneys at 405-296-0059 if you need assistance.

What is the SAVE Forgiveness Plan?

A federal court ruling in July prevents the US Department of Education (DOE) from implementing sections of the Saving on a Valuable Education (SAVE) Plan, including its monthly payment formula and loan forgiveness, according to the DOE.

The SAVE plan originally included the following:

• Payments are limited to 10% of your discretionary income
• Reduced interest charges
• Loan forgiveness after as few as ten years of payments, depending on the amount you owe

Borrowers can apply for SAVE, though the court stopped some SAVE provisions, including loan forgiveness. The DOE states it’ll take several months to update the systems of services and contractors to reflect the injunction. SAVE terms are subject to the outcome of ongoing litigation and potential changes by the incoming Trump administration.

The DOE states it’s preparing a plan to open the Pay As You Earn (PAYE) and Income Contingent Repayment (ICR) plans for new enrollees who may leave the SAVE plan and use a different one so they can earn credit toward loan forgiveness.

Switching plans has drawbacks. You may have higher monthly payments than SAVE, and unpaid interest can accrue if you voluntarily switch in and out of some repayment plans.

Bankruptcy and Student Loan Discharge

You can end your student loan obligations by filing for bankruptcy protection and establishing paying them would be an “undue hardship.” The process includes the following:

• File for Chapter 7 or Chapter 13 They have different rules on the assets you may keep and the obligations you must pay. Talk to one of our student loan attorneys so you’ll understand which chapter is your best option
• File an adversary proceeding against the Department of Education. This is like a lawsuit filed in bankruptcy court. You must establish that repayment would be an undue hardship for you and your dependents. The DOE and other creditors may challenge your filing

Hardship can be established by proving the following elements:

• You can’t maintain a minimal standard of living while repaying your loans
• This situation will last for at least much of your loan repayment period. You’re not facing a temporary setback that will likely be resolved soon
• You made good-faith efforts to pay your loans before filing for bankruptcy protection

Your student debts may be partially or completely discharged if you’re successful. If your student loan isn’t discharged, if bankruptcy court discharges your other obligations, it should make repaying student loans easier.

Why You Should Hire a Convenient Bankruptcy Student Loan Lawyer

Our attorneys provide student loan-focused legal advice and representation, helping you navigate loan repayment plans and laws. Though federal laws and regulations are uniform nationwide, Oklahoma has its own laws covering private student loans.

Our services may make sense for you under the following circumstances:

• There may be an essential disagreement between you and your loan servicer or lender concerning your loan’s status, or you’re incorrectly assessed charges
• You’re behind in student loan payments or are in default. We may negotiate with your lender and help you develop a manageable alternative
• You’re considering bankruptcy. As you can see, student loan debt can be discharged partially or totally under the right circumstances. We can discuss your options and gather evidence to prove your case

If you think you need help, give student loan Convenient Bankruptcy a call.

Trust the Student Loan Attorneys at Convenient Bankruptcy

If repaying student loans looks increasingly difficult or impossible, you should consider a program like SAVE. If you can prove undue hardship, a bankruptcy discharge may be possible.

The student loan Convenient Bankruptcy team can discuss your options and the next steps you should take. Are you ready to discuss student loan forgiveness or discharge with our student loan lawyers? If so, call our law firm at 405-296-0059 or complete our online contact form today.