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Debt relief can help you avoid defaulting on student loans

It is a cruel irony that many people have found themselves deeply in debt due to their efforts to secure a brighter financial future. Student loan debt is a huge talking point currently, and it is relevant to an ever increasing number of college graduates, including graduates from some of the prestigious universities in Texas. In addition to the financial challenges that looming student loan debts will present to your daily life, you also run the risk of defaulting on your loans, meaning that you fail to meet your payments for nine months. When a student loan enters default, the consequences become serious.

This article explains in detail what could happen if a person defaulted on his or her student loans, and the results of defaulting may surprise you. Did you know that defaulting on a student loan could cost you your tax refund? The IRS receives annual reports from the Department of Education listing individuals whose student loans are in a state of default. Borrowers have a few options to claim their tax refunds, but if no action is taken, you could lose your tax refund.

Another potential consequence comes in the form of wage garnishment. Those whose student loans are in a state of default could be forced to surrender up to 15 percent of their disposable income or up to $217.50 of the debtor’s income and depending on their weekly income. Perhaps that most frightening prospect is that the Department can sue you.

With such severe consequences and few debt relief options, those with serious student loans may wonder if they have any hope. Fortunately, bankruptcy can still provide indirect debt relief to borrowers who are crippled by student loans. A bankruptcy filing can discharge or reorganize some debts so that borrowers can focus as much of their additional expenses as possible on paying off their student loan debts.

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