With the difficult job market, some Arizona residents may have gone back to university to increase their skill set. However, they may be in the same boat as other college graduates who are not only finding it difficult to find a job these days, but are also struggling with their student loans.
Whereas filing for Chapter 7 bankruptcy can wipe out most bills and ease financial burdens for those affected by the housing and job market, it cannot wipe out student loans unless 'undue hardship' is demonstrated. In cases where a college graduate with student loan debt has passed away, a co-signing family member may not only have to deal with the grief of losing a loved one, but also with harassment from debt collection agencies.
In order to make the law clearer and to curb collector's abusive practices, the Federal Trade Commission issued guidelines in 2011 regarding who can be contacted for debt collection after a debtor's death. Other than immediate family members, debt collection agencies may not contact any other relative and doing so may be a violation of the Fair Debt Collection Practices Act of 1996.
However, where family members have co-signed a loan agreement and are legally obliged to pay off the private student load, they may consider filing for bankruptcy to deal with their debt. Even though the filer has to demonstrate 'undue hardship', people do go through with the trial and are in some cases able to meet this standard.
Filing for bankruptcy not only clears most debts, it also puts an end to the relentless creditor harassment and wage garnishment. It allows family members to get on with the grieving process without concern for their financial health.
Source: ABC News, "Graduates, parents riddled with student debt turn to bankruptcy," Susanna Kim, Dec. 21, 2012
