Medical School Loans and Bankruptcy

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Markemus

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I was wondering how filing for bankruptcy now would affect my chances of getting student loans for medical school. I am a sophmore, and it will be 2 years before i grad and apply to med school. Do student loans for medical school work like stafford loans? Willing to take any advice you guys have.

Also If I did not file my credit is in the crapper, is that better than filing bankruptcy?

Thanks.:oops:

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I was wondering how filing for bankruptcy now would affect my chances of getting student loans for medical school. I am a sophmore, and it will be 2 years before i grad and apply to med school. Do student loans for medical school work like stafford loans? Willing to take any advice you guys have.

Also If I did not file my credit is in the crapper, is that better than filing bankruptcy?

Thanks.:oops:

I'm pretty sure filing bankruptcy would be a bad thing... but I'm going to move this to the financial aid forum where you can get advice from people that know what they're talking about.
 
I was wondering how filing for bankruptcy now would affect my chances of getting student loans for medical school. I am a sophmore, and it will be 2 years before i grad and apply to med school. Do student loans for medical school work like stafford loans? Willing to take any advice you guys have.

Also If I did not file my credit is in the crapper, is that better than filing bankruptcy?

Thanks.:oops:

I understand your question and I am unsure. I do know that if you currently have school loans and file bankruptcy that they do not fall under normal debt. You will still have to repay them.

I am not aware of anyone who has filed, but I would advise against it. It is truly a last course of action to take. Try a debt management company first. Keep you credit on the up side!

Best of luck to you
 
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I am not aware of anyone who has filed, but I would advise against it. It is truly as last course of action to take. Try a debt management company first. Keep you credit on the up side!

Best of luck to you

Definitely agree that trying to avoid filing is probably the best move. If it's that or default on loans, though, I guess you don't have much of a choice.

What I can say is that Stafford and Perkins loans are not credit-based, so a bankruptcy filing shouldn't affect your ability to get those. In fact, I have a friend who filed bankruptcy a few years ago and is getting his Staffords just fine. However, any bankruptcy filing in the last 5 years will stop you from getting GradPlus loans unless you can get a credit-worthy cosigner, and I'm sure it's the same deal with any private loans. Since pretty much all students at private school or out of state school need to borrow GradPlus or private loans to meet their full cost of attendance, this is definitely something you'll have to figure out if you don't get into your cheap local state school (assuming you have a cheap local state school).

Good luck in making your decision.
 
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Thats kind of what I was afraid of. I am an independant student, and would not be allowed to get a grad plus loan anyway. Does anyone work during med school? Just curious, because it is very hard for me to work during my undergrad, so it seems like that would be a near impossibiliy during med school.

How do loans work with bad credit? Not really bad just a few things from my early teens, no loans, no credit cards. I got sued when I was 19 for driving with no insurance and it is keeping me from getting my license. I would gladly pay but they want 10,000 for a deposit to release the hold.

Probably more info than I would like to give out, but as you guys know, it is really important to figure this stuff out why you have time to "fix" it.

Thanks again.
 
I'm not sure if this is right place to post - I'm rather new at this...

I just got notice from the IRS that I owe them almost $40K (long story how this happened - basically I sold real-estate and used my earnings to pay for post-bac thinking the taxes I paid through my other job would cover it...really dumb move on my part). This is in addition to the $80K I owe in undergrad loans....in addition to about $12K I have in credit card debt.

That is, I'm in $132,000 worth of debt BEFORE I even start med school!

Now that my applications are in for 2009, I'm really starting to freak out about all of this.

Someone has mentioned filing bankruptcy - but I'm terrified that all my hard work to get into med school will just go to waste b/c I won't be able to finance it!

Could someone PLEASE help me figure out how to even start dealing with this mess? Is bankruptcy an option? Who do I go to for help?
 
I'm not sure if this is right place to post - I'm rather new at this...

I just got notice from the IRS that I owe them almost $40K (long story how this happened - basically I sold real-estate and used my earnings to pay for post-bac thinking the taxes I paid through my other job would cover it...really dumb move on my part). This is in addition to the $80K I owe in undergrad loans....in addition to about $12K I have in credit card debt.

That is, I'm in $132,000 worth of debt BEFORE I even start med school!

Now that my applications are in for 2009, I'm really starting to freak out about all of this.

Someone has mentioned filing bankruptcy - but I'm terrified that all my hard work to get into med school will just go to waste b/c I won't be able to finance it!

Could someone PLEASE help me figure out how to even start dealing with this mess? Is bankruptcy an option? Who do I go to for help?

Bankruptcy won't help you. You can't dischage student loan debt in bankruptcy and I'd be shocked if you could get out of your IRS debt. Honestly, your best bet is to work for a couple of years before medical school, live like a homeless persion, and pay off the IRS and your credit cards. Work more than one job, live on nothing, and get it done. As you said, you made a mistake, and you're going to need to sacrifice to clean up the mess. The undergraduate debt won't keep you from getting student loans for medical school. Good luck.
 
Thanks so much for your reply.

I'm already 27 and have worked too hard thus far just to have any chance of getting in. For the next year I got an incredible opportunity to do research at NIH (paying $28,000 a year :(). Though I have a decent tutoring business, it'll be tough to make a dent in any of my debt. If I get in for 2009, I'm going.

Do you have any idea what the IRS will do when I'm in med school? Would they consider deferring my debt?

Do you know how I could get professional help with this stuff?
 
Best thing to do with the IRS is contact them and see what can be done about setting up a payment arrangement.

One thing I do know is that a bankruptcy on your credit report will pretty much automatically deny you for a gradPLUS loan unless you have a co-signer. I filed for bankruptcy almost 5 years ago for a much smaller amount (less than 20K) and was able to find one lender who accepted my application without a co-signer, but that was only after getting on the horn and basically begging them to look past the bankruptcy and see my credit history since that point (which was good).
 
Best thing to do with the IRS is contact them and see what can be done about setting up a payment arrangement.

One thing I do know is that a bankruptcy on your credit report will pretty much automatically deny you for a gradPLUS loan unless you have a co-signer. I filed for bankruptcy almost 5 years ago for a much smaller amount (less than 20K) and was able to find one lender who accepted my application without a co-signer, but that was only after getting on the horn and basically begging them to look past the bankruptcy and see my credit history since that point (which was good).

Thank you so much for your advice. I just contacted the IRS and am going to try to work with them. I could definitely get a co-signer for my med school loans, so it's nice to hear that would help. Was it hard to file bankruptcy? Do you think my situation warrants looking into it?
 
Thank you so much for your advice. I just contacted the IRS and am going to try to work with them. I could definitely get a co-signer for my med school loans, so it's nice to hear that would help. Was it hard to file bankruptcy? Do you think my situation warrants looking into it?
You have about 80K in student loans: those will not be discharged through bankruptcy.

Your 40K that you owe the IRS *might* be possibly discharged, but you'd have to check with a bankruptcy attorney about that. If not, then you've got 12K in credit card debt, and IMO, it isn't worth it going through the process for that small an amount, when you can work with one of those debt counseling companies to avoid it. The new bankruptcy laws are much stricter AFAIK, and you may end up having to repay that debt anyway.


If I were in your shoes, I would get with a debt counseling company (there are lots of them) to get a handle on your credit card bills and possibly include your tax debt as well. Work out how much you will have to pay per month to cover those bills and take out private loans that will cover that much while you're in school. You're borrowing from Peter to pay Paul, so to speak, but at least your credit report will not look as bad as a bankruptcy. That thing can stay with you for 7-10 years and will make your life hell when it comes to getting credit. I think mine will be on for a total of 8, which ends when i graduate dental school.

The positive aspect of a bankruptcy is that I got in better habits of only spending money that I actually had in my account. if i didn't have it, i didn't spend it.
 
Hey sorry to bother you but I was reading your reply.
You mentioned that you filed for bankruptcy. Was it a hard process
getting loans? Did dental schools look down on you when you were
Interviewing? Thanks.
 
A certified financial planner or financial adviser could help (do not hire anyone who's on commission). I would start by calling Ameriprise. (The first financial planner you talk to might not be able to help. Then you say, "Can you refer me to someone else?" or "Do you know anyone who might be able to help me?" This works.) You can also try fatwallet.com's finance forum as well for ideas to confirm yourself.

Bankruptcy stays on your credit report between 7 and 10 years. Some medical schools do a credit check as part of the admissions process. So maybe, worst case scenario would be a delay in going to medical school? One question is, "If you were to file bankruptcy, could you get loans in 7 to 10 years worst case scenario?" It is probably better not to if you can pay off the debt in less than 7 years. (After a bankruptcy is off your record, ghost credit might haunt your credit report and scare lenders away. I'm not sure if will or not. If you try to discharge a student loan, I'm not sure if the lender itself will keep a record of that and how it would effect future attempts to borrow.)

Bankruptcy probably will NOT include student loans. So you will still have to pay those.

If you consider a credit counseling company, ask around first. I've heard that some credit counseling companies are terrible, take your money, ruin your credit, etc. Make sure that someone has had a good experience with the exact credit counseling company you choose to sign up with.

I've heard that the IRS is one of the few creditors you absolutely have to pay or they can take money from your savings account, garnish your wages, etc. Death and taxes.
 
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I inadvertently stumbled across this older thread, but felt the need to comment given that many have commented throughout the years (it is still relevant) and the thread contains a number of misconceptions and potential pitfalls for those relying on the advice contained herein.

1.) Be weary of debt management companies. Many of them will try to tell you to settle your debts. What they don't tell you is that it will show up as a settlement on your credit report (i.e. marked paid for less than the original principal), adversely affecting your score and affecting the potential for private student loans. Moreover, once the amount of debt exceeds a certain dollar value, then the creditor is required to issue a 1099 and report it to the IRS as income. In short, you can end up increasing your tax liability, potentially creating other problems.

2.) Federal Stafford Loans are not dependent on your credit score and negative items (so as long as you haven't defaulted on a student loan) will have no bearing on these whatsoever.

3.) Federal Grad Plus Loans are dependent on your history. Applicants with an adverse history will be denied. See 34 CFR 685.200(c)(1)(vii)(B). An adverse history includes a delinquency of 90 days or more on any debt, or any default determination within five years to include foreclosure, repossession, tax liens, wage garnishment, chargeoffs, or default on student loan. Bankruptcy discharges within a five year period are also disqualifying. Note, however, that current Department of Education policy does not consider a Chapter 13 bankruptcy as an "adverse credit history" although Chapters 7, 11, 12, and 15 are. If you file for bankruptcy, it may be worth consulting with a Chapter 13 bankruptcy expert. Under Chapter 13, the debtor must make structured payments to creditors in a payment plan that lasts a minimum of three years and a maximum of five years. If you are in a Chapter 13 bankruptcy in medical school (very difficult to do because you must have income to continue the Chapter 13), you can acquire student loans, but must receive court approval to incur any new debt.

If a student does have an "adverse credit history," it is always noteworthy that he or she can have a qualified co-signor (who is able to pass the requirements above) and still receive Grad Plus Loans. In order for this to apply to previously defaulted student loans, the old loan must be rehabilitated. Appeals for "extenuating circumstances" can also be had, but this is a pretty daunting standard. For instance, being laid off from a job or other (non-medical) loss of income usually good enough.


I hope this post is helpful to others in the future. Please note that nothing in this post should be construed as legal advice and it is being provided to aid in your own research of the subject matter. Nothing in this post should be substituted for the advice of competent counsel or other qualified professional(s).
 
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