If you have been paying your student loans for any significant period of time you may be eligible for the new Income Driven Repayment Adjustment. This allows a borrower who was not previously in an Income Driven Repayment (IDR) program to receive credit towards such a program. This can help borrowers who have been paying their student loans for 20-25 years receive forgiveness under the IDR program. Sounds exceptional, however there are many borrowers that have been paying their student loans for over 10 years that have not received credit towards the program and have no prospect of paying off their student loans off in the next 20 years as a result of the payment program they are in. This helps to give borrowers credit they deserve towards the IDR program. The time is limited to qualify for the one time adjustment so act fast! If you are unsure of how to qualify contact your student loan servicer!

Many fear that after filing Bankruptcy they will not have credit. In general when you receive a Discharge in Bankruptcy your debts are considered ‘Discharged’ and creditors can no longer attempt to collect the debt. A Discharge serves to substantially improve your debt-to-income ratio because you have no more outstanding liabilities – simply put, you have more money in your budget because you have no debt to service and interest to pay. So how do you rebuild your credit after receiving your discharge in Bankruptcy? First, begin by establishing a payment history with a new creditor such as a credit card. Second, simply let time pass – each month that passes will serve to improve your credit. Most of my clients have better credit eight months after receiving their discharge than before they filed for bankruptcy. Ask me how a bankruptcy can help to improve your credit today!

Many people ask me what the differences are between Bankruptcy and Debt Consolidation.

Debt Consolidation entails getting a loan from a bank which is large enough to pay off your existing debts – thereby ‘Consolidating’ your debt into one loan and one payment. This requires that the consumer applying for the loan have good enough credit to obtain the loan.  Debt consolidation can be an advantage as most debt consolidation loans have a lower interest rate making it less expensive to pay the debt off over time.  A debt consolidation loan does not eliminate interest and so it may still take a significant amount of time to pay off the debt.

Bankruptcy allows a consumer to ‘Discharge’ their debts in order to obtain a fresh start.  There are primarily two chapters that consumers use when filing bankruptcy – Chapter 7 and Chapter 13.  A consumer does not have to have good credit to file a bankruptcy.  In most Chapter 7 cases there are no payments – this is dependent upon your assets and household income.  A Chapter 13 bankruptcy includes a payment plan where the payment is normally related to your household income or assets.  A Chapter 13 plan can also be used to save a home or car that is in arrears.   For many consumers a bankruptcy allows them to obtain a discharge of their debts and improve credit immediately without having to pay their entire outstanding debt.  Another advantage that bankruptcy has vs. debt consolidation:  bankruptcy can stop a garnishment or lawsuit.

If you are considering either debt consolidation or bankruptcy consult with a professional to help you compare each given your current situation.