Those of us who have reached our fifties and sixties didn’t count on this. When we were young, we figured we had about 30 years to work, make some money, and, if we didn’t get rich, at least we would be secure in our financial future. We knew kids were in our future and we also welcomed it.
But we didn’t count on student loans, at least the level of student loans that our kids would need to take out just to get through college or graduate school. When our kids needed our signature, we couldn’t turn them down because we always want the best for them.
Co-signing Made Sense
We wanted them to have the things we didn’t, to be able to do the things we couldn’t. Co-signing the student loans seemed like a no-brainer.
But things didn’t go as planned. In most, but not all cases, our kids made it through school okay. But the amount of money they could owe can be staggering. It is easy to accumulate $50,000.00, $100,000.00, $150,000.00 in loans, and it is not as if all of our kids are making six figures.
Many of them are making enough to get by, but not enough to pay the monthly payments of these massive debts. Since we are co-signed on the loans, when our kid misses a payment, it shows up on our credit report and now our score gets dinged. If that isn’t bad enough, if the collector can’t get the money from our child, they come after us. They can take our tax returns, attach income and assets, and generally make life miserable just when we were thinking of slowing down.
Chapter 13 Can Help
For these situations, you should consider Chapter 13 for either you or your child or both. Under Chapter 13, we can often lower the payments on the loans to a manageable level. I have sometimes gotten the payments down to $150 or $200 per month on six figure student loans. Another feature of Chapter 13 is that only one of you may need to file. For example, if only your child files, the collector cannot come after you as long as your child makes the proper payments in the Chapter 13 bankruptcy.
Chapter 13 cases can last up to five years, so there will be a half-decade of relief. The relief does not get rid of the amount owed and the student loans will continue to accumulate interest, but no penalties or extra fees will be applied during the five years. But five years from now, we can hope that our child will be in a much better financial position so that new arrangements can be made with the lenders. We can also hope that Congress looks at this and passes legislation that will mandate income-based repayments on private loans as they do now with federal loans.
We always have Chapter 13 waiting in the wings. Give Steidl & Steinberg a call and see if this is something that might work for you. Or your kid.