<p>My parents decided yesterday to file for bankruptcy. Does this mean that our EFC will be extremely low? What does it mean in regards to financial aid?</p>
<p>No, it does not mean your EFC will be very low.</p>
<p>The EFC is based mainly on income and also on assets, if assets are high. But mostly on income. Your EFC for 2013-2014 will be based on your parents’ 2012 income. Declaring bankruptcy will not really affect the EFC at all. If their income was very low, then your EFC will be low - but that has nothing to do with the bankruptcy. However if your parents are denied a PLUS loan, you would become eligible for an additional $4,000 in student loans bringing your eligibility as a freshmen up to $9500 instead of $5500.</p>
<p>It will not mean much in regards to financial aid either, except that it will negatively affect your parents ability to take out loans to help pay for any part of your education.</p>
<p>Things like debt and bankruptcy are not taken into account by FAFSA.</p>
<p>Filing bankruptcy has no effect on EFC. Frankly, why would it? Filing doesn’t change income. And actually, if doing so removes debt obligations then that would mean that more money can go towards college, not less money.</p>
<p>Mom2collegekids - it depends on the type of bankruptcy I think. Everyone I know who has filed, while allowed to keep some assets like their home, the court determines how much you can afford to pay monthly towards the discharged debts and your paycheck is garnished in that amount. You have to account for every penny in a budget prior to the court’s decision and they don’t allow much leeway in what they say you can afford to pay. None of the people I know have any extra money.</p>
<p>I know very well about that type of Bankruptcy… chap 13</p>
<p>That’s why I said “if doing do removes debt obligations”. I’m referring to chap 7. So, yes, those who are pursuing the type of bankruptcy that cancels debt, then debt payments for those debts are removed.</p>
<p>However, either way, schools don’t give you a lower EFC because you have a bankruptcy.</p>