Stafford Loans, Bankruptcy, & Medicare/Medicaid?

[16846]

If you declare Bankruptcy - Chapter 7 (liquidation of assets) and are able to discharge Stafford Loans by qualifying under the definition of "substantial hardship where payment of student loans would be an undue burden" is it true that you will be ineligible to receive payment for medicare/medicaid patients that you treat as a physician? If so, does this only apply if the loans that were discharged were used to pay for medical school, or does it apply to any Stafford loans that you hold?

The reason I ask is that I am thinking about declaring bankruptcy and the Stafford loans that I have are for grad/undergrad, but not for medical school (I used private loans). If it applies to any Stafford loans, then I have no choice but to try and figure out another way since I want to practice and be able to treat medicare/medicaid patients. If it only applies to Stafford loans that were used to pay for medical school, then bankruptcy is still an option for me.

Any help is greatly appreciated. For any replies, it would be helpful if you could provide links/pointers to the sources you used. Thanks.

Uni

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[mpp]

Stafford loans are not discharged by a Chapter 7 bankruptcy. In the rare instance that they may allow this (and it would likely cost lots of lawyer fees to do so) the student loans must be such a burden that the debtor cannot maintain a minimal standard of living for a significant portion of the repayment period.

I can't imagine any bankruptcy court ruling that a physician will not be able to maintain a minimal standard of living during a repayment period (which will be after medical school and residency) regardless of the amount of Stafford loans (especially when $189,500 is the maximum and interest rates are at an all-time low).

You can apply for deferment while in medical school and hardship deferment and forebearance while in residency if you cannot pay your student loans.

 

[16846]

Stafford loans are not discharged by a Chapter 7 bankruptcy. In the rare instance that they may allow this (and it would likely cost lots of lawyer fees to do so) the student loans must be such a burden that the debtor cannot maintain a minimal standard of living for a significant portion of the repayment period.

I can't imagine any bankruptcy court ruling that a physician will not be able to maintain a minimal standard of living during a repayment period (which will be after medical school and residency) regardless of the amount of Stafford loans (especially when $189,500 is the maximum and interest rates are at an all-time low).

You can apply for deferment while in medical school and hardship deferment and forebearance while in residency if you cannot pay your student loans.

Thanks, but that really didn't answer any of the questions I asked...

 

[mpp]

I guess I was just trying to say that your question is moot since you will not be able to discharge your Stafford loans under bankruptcy.

If, however, you are in default on your student loans then the government can reduce payments made to you for service provided to medicare patients to recoup what you owe on your loan. They can also garnish your wages and will take any income tax refunds owed to you.

 

[tlew12778]

There are a lot of programs that forgive a portion of your student loans. Google it. But I am sure that if you are willing to go to a rural area or if you join the peace corps or maybe even Medicins Sans Frontieres, you can get a part of them forgiven.

Another alternative is to go on an income sensitive repayment plan.

The Income Sensitive Repayment Plan: Your monthly payment is based on your yearly income and your loan amount. As your income rises or falls, so do your payments. Each payment must at least equal the interest accrued (accumulated) on the loan between scheduled payments.

From this site: The Student Guide 2004-2005

Bankruptcy will not discharge your stafford loans. You *might* be able to discharge your private student loans, but you'd have to ask a lawyer about that.