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Success Online Financial Education Newsletter
Money Management International Improving Lives Through Financial Education
SUCCESS NewsletterMay 30 2013 newsletter
How to handle your student loan debt

students celebrate graduation facing student loan debt

By Jesse Campbell, Copywriter

Across the country, optimistic students are tossing their personalized mortarboards high in the air and embracing the infinite promise of life after college.

It’s a well-deserved celebration of their hard work and investment of time and effort. And maybe, for a moment, it will help them forget that they’re also terrifyingly in debt for a demographic that’s barely begun to live their adult life.

According to a recent survey conducted by Fidelity Investments, approximately 70% of the class of 2013 is graduating with debt – an average of $35,000 worth of debt.

The majority of that debt is student loan debt, with some personal loans and credit card debt mixed in for variety.

Whether you’ve got a job lined up or absolutely no idea what comes next, it’s imperative that graduating students get a handle on their debt as soon as possible – before they risk damaging their long-term financial goals.

How? By taking these three steps.

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Ask the Experts

ask the experts

Q: Can you explain the difference between Chapter 7 and Chapter 13 bankruptcy?

"We are current on all financial obligations but find our monthly debt exceeds our monthly income. Could you explain the difference between a Chapter 7 and Chapter 13 bankruptcy? How will it affect our house, furniture, cars (the only assets we now have)? Help! I'm feeling hopeless!" -Frannie

Dear Frannie,

You are not alone and you will find a solution. Our nonprofit organization counsels thousands of people in your situation each month. I recommend that you visit with one of our trained credit counselors. Credit counselors are not attorneys, but they can help you review your options. With that being said, I will try to answer your questions to the best of my ability.

Chapter 7 bankruptcy is designed for debtors in financial difficulty that do not have the ability to pay their existing debts. A trustee takes possession of all your property but you may claim certain property as exempt from seizure under governing law. The trustee then liquidates your non-exempt property to pay your creditors according to priorities of the Bankruptcy Code. The purpose of filing Chapter 7 is to obtain discharge of your existing debts, however some debts are not dischargeable under the law.

A Chapter 13 bankruptcy is designed for individuals with regular income who are temporarily unable to pay their debts but would like to pay them in installments over a period of time. You file a plan with the court to repay your creditors all or part of the money you owe them, using your future earnings. The court must approve your repayment plan before it can take effect. Under Chapter 13, unlike Chapter 7, you may keep your property, both exempt and non-exempt, as long as you continue to make payments under the plan. After completion of payments under your plan, your debts are discharged except alimony and support payments and long term secured obligations.

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About Money Management International

Money Management International (MMI) is a nonprofit, full-service credit counseling agency, providing confidential financial guidance, financial education, counseling, and debt management assistance to consumers since 1958. MMI helps consumers trim their expenses, develop a spending plan, and repay debts. Counseling is available by appointment in branch offices and 24 hours a day, 7 days a week by telephone and Internet. Services are available in English or Spanish. To learn more, call
866.530.9869 or visit



What to do if you are facing a divorce

There is evidence that couples' financial problems are linked to increased levels of stress, conflict, and marital duress as well as decreased levels of marital satisfaction. Furthermore, money problems are frequently cited as a major reason for divorce.

Ironically, the financial problems that result from divorce may be even more severe. While it may be hard for people involved in an emotionally-draining divorce to clearly think about their money, it is absolutely imperative. One of the most pressing concerns of newly divorced people is determining who is responsible for the repayment of debt.

The first financial action after separation is to pull a copy of your credit reports. You will want to review entries carefully and either close all joint-accounts or change them to individual accounts. Alert your secured lenders of your marital status and instruct them not to allow any changes without your permission. You may also want to “freeze” joint bank accounts or divide any funds into two individual bank accounts.

As preparation for divorce, you and your spouse need to reach a settlement to present to the court. This settlement agreement outlines how your debts and assets will be divided; it also includes plans for spousal and child support. If the judge approves the settlement agreement, he or she issues a divorce decree. If no settlement can be reached, then the judge will issue a divorce decree at trial.

To avoid future money problems, it makes sense to develop a plan to pay off your debts prior to your divorce. Remember, your divorce decree is an agreement between you and your spouse (not your creditors) on how your debts and assets will be divided. The contracts you signed with your creditors cannot be changed by the divorce decree. Whoever signed the original contract with the creditor will still be obligated to pay the debt after the divorce. That means you are still obligated on these debts and the creditors can report the derogatory status of these accounts on your credit bureau file.

As protection, your divorce agreement can include a clause stating that if the assigned debts are not repaid, you would be entitled to indemnification. After the fact, your only recourse may be to file contempt of court charges for failure to abide by the terms of the divorce decree. Keep in mind that still would not relieve you of your obligation on the debts.

Because divorce can be a very complex process, consider hiring a trusted financial advisor for help; be certain to ask about your advisor’s experience with divorce situations.

MMI Debt Management Plan Client Corner
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