Bankruptcy may be the best choice if you are struggling financially.
However, if you want to apply for financial aid, then bankruptcy can make things more complicated.
The following is a list of ways that bankruptcy can affect your financial aid.
Financial Aid From School
Bankruptcy will not affect the scholarships and loans that you get from your school. You may also be able to get a federal loan through your school even if you have filed for bankruptcy.
However, the school may still decide to look at your credit when you apply for a loan. They want to assess your ability to pay back the loan.
You can get funding from school through a private lender. However, it is important to note that private lenders have separate requirements from the federal government.
It is a good idea to talk to the school administrator before you apply for a private loan if you have filed for bankruptcy. It is nearly impossible for you to get a private loan with a bankruptcy on your record because it causes your credit score to drop several points. However, you may still be able to get a private loan with a cosigner.
Parent PLUS Loan
If your parents have filed for bankruptcy then that will not affect your ability to get financial aid through the school. However, they may not be able to get the Parent PLUS loan. One of the requirements for a Parent PLUS loan is to have a good credit history.
Can You Discharge Loans in Bankruptcy?
It is important to familiarize with bankruptcy law before you file for bankruptcy. You may not be able to discharge federal loans in bankruptcy. On the other hand, you may be able to get your private loans discharged if you file for bankruptcy.
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If you get a loan from a non-profit organization, then you may not be able to get it discharged in bankruptcy. However, you can go to court and try to prove that paying the loan back will create a hardship. The judge may rule in your favor and decide that you do not need to pay back the loan.
Bankruptcy can change every aspect of your life, including how you get financial aid. It shouldn’t affect the grant and scholarships that you get from school. However, it can affect your ability to get a private loan.
Your parents will not be able to get a Parent PLUS loan if they have filed for bankruptcy. Furthermore, it is hard to discharge student loans in bankruptcy.
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