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Written by Canterbury Law Group

Does Bankruptcy Affect Students Financial Aid?

As back to school season is here, many parents are wondering if a previous bankruptcy can affect eligibility for education loans. Although it may affect some loans, it does not affect eligibility for certain forms of financial aid.

The Bankruptcy Reform Act of 1994 (P.L. 103-394) amended the US Bankruptcy Code at 11 USC 525(c) to prohibit denial of government student grants and loans based solely on the student’s or borrower’s past or present filing of a bankruptcy petition. The only exception is the Federal PLUS loan.

A child is eligible for federal student loans, such as the Stafford loan, regardless of the parent’s history of bankruptcy. Also, the Stafford loan does not depend on the borrower’s credit history in any way.

A parent’s history of bankruptcy also does not affect the child’s eligibility for federal grants, state grants, scholarships and money from the college, nor student employment programs like Federal Work-Study. The parent may also be eligible for tuition installment plans because these plans are usually structured as a qualified education loans to make them difficult to discharge in bankruptcy.

However, parents are ineligible to borrow from the PLUS loan program for five years from the date of the bankruptcy discharge. By law, PLUS loan borrowers must not have an adverse credit history. The regulations define an adverse credit history as having had a bankruptcy discharge, foreclosure, repossession, tax lien, wage garnishment or default determination in the last five years or a current delinquency on any debt of 90 or more days.

If a child’s parent is denied a PLUS loan because of an adverse credit history, the child becomes eligible for increased unsubsidized Stafford loan limits. Parents with a recent bankruptcy will be ineligible to serve as the borrower or co-signer on most private student loans. The provisions of the Bankruptcy Reform Act of 1994 apply only to federal student loans, not private student loans. Most lenders of private student loans ask about bankruptcy filings in the last 7 or 10 years. It really doesn’t matter whether the filing was under chapter 7, 11 or 13, as the lenders will be wary of lending money to anybody with a recent bankruptcy filing.

The bankruptcy lawyers at Canterbury law Group work attentively with bankruptcy clients to secure their fresh financial freedom. Whether filing as an individual or for your business, the bankruptcy attorneys at Canterbury Law Group are experienced experts in all areas of bankruptcy cases in the Phoenix area. Please call us today to schedule your consultation.

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Written by Canterbury Law Group

Scottsdale Family Law

The attorneys at Canterbury Law Group have vast experience in Scottsdale family law and divorce. Family law issues can be extremely difficult and the end results can be life altering both emotionally and financially for the children and adults involved, so we are dedicated to providing clients with a skilled and passionate legal team when dealing with divorce and other family law disputes. An Arizona divorce can be a very complicated process, which is why you need an attorney from Canterbury Law Group. From filing the petition or responding to a petition until the final hearing, our expert team will prepare an aggressive and thorough case for your Scottsdale divorce.

Canterbury Law Group handles all types of family law matters including:

  • Divorce & Legal Separation
  • Child Custody & Parenting Time
  • Paternity Issues
  • Child & Spousal Support
  • Orders of Protection
  • Emergency Orders
  • Modifications
  • Decree Enforcement
  • Appeals
  • Grandparent Visitation
  • Non-Parent Custody Rights
  • Relocation & Custody Issues
  • Multi-State Legal Representation

When children are involved in your Phoenix family law case, the outcome is even more crucial. Do not waste any of your precious time and efforts. Be sure to begin this legal process with your trusted Scottsdale legal team at Canterbury Law Group. Call us today to schedule your consultation.