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New Jersey retirees may need to consider bankruptcy

On Behalf of | Aug 15, 2012 | Debt Management |

Traditionally, student loan debt has been a problem that younger or middle-aged Americans had to worry about. Now, however, a growing number of retired New Jersey citizens find themselves having to confront student debt head-on. Many of them may have taken out the student loans to help children or other dependent family members cover college tuition, while some took on the loans for themselves to attend college later in life. Whatever their reasons, the government is now becoming more aggressive in seeking re-payment for those loans, even if it means taking a bite out of retiree Social Security benefits and even if it could cause some to seek the protection of the bankruptcy court.

According to Treasury Department statistics, the government has sharply increased the number of Social Security checks they are cutting into due to student loan debt. The number in 2000 was an extremely low six cases. That number rose dramatically to 60,000 cases in 2007, only to jump again in 2011 and 2012. Cases from January to early August of this year numbered at approximately 115,000.

Many retirees are already struggling to make ends meet on the modest amount of benefits they receive. Having their Social Security checks reduced by up to 15 percent often forces them to make difficult choices like giving up the medications they are supposed to be taking. One woman reported that she had to stop taking her pain medication after having her monthly check cut by nearly $180. A car accident which disabled her years ago makes her unable to work and, unfortunately, she has fallen behind on her student loan debt.

Such student loan debt is typically non-dischargeable in bankruptcy, to make matters worse for many of these retirees. Of course, some New Jersey retirees may discover other potential benefits to filing for bankruptcy in their own situations. Bankruptcy can provide a fresh financial start for many, even in those cases where student loans are not dischargeable.

Source: MSN Money, “Grandma’s new worry: Student debt- MSN Money,” Annamaria Andriotis, Aug. 7, 2012

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