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Filing Bankruptcy & Student Loans

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What Happens To Student Loan Debt When You File For Bankruptcy?

If you’ve decided to file bankruptcy for a fresh start with your finances, you may be wondering how your case will affect your student loan debts. The truth is, student loans and bankruptcy are a complicated pair. While it’s best to discuss your specific debts with an experienced bankruptcy lawyer, here is a quick rundown about what happens to student loans when you file for bankruptcy.

Can I File Bankruptcy To Get Rid Of Student Loans?

Many unsecured debts spanning credit card debt, medical bills, personal loans, and more can be discharged through bankruptcy. Unfortunately, student loans are a special case of unsecured debt where they cannot be automatically discharged. The only way to possibly get your student loan debt erased is through an adversary hearing — a completely separate lawsuit from bankruptcy that is often expensive and rarely successful.

While bankruptcies don’t clear student loans, Chapter 7 and Chapter 13 bankruptcy each give you some options to either take a break from your payments or better manage your student loan debt. If your loans are considered in either Chapter 7 or 13, payments will not be collected for the duration of the bankruptcy period. You can use this time to get your other affairs in order and prepare for the repayment period to resume.

Types of Bankruptcy Filings & the Impact on Student Loan Debt

Student Loans & Chapter 7 Bankruptcy

Even though your student loan debt will not be discharged through Chapter 7 bankruptcy, here’s how filing can still offer you some breathing room on your repayments.

  •  The automatic stay that goes into place prohibits creditors from making any collection efforts while your case is open – this includes student loan lenders.
  • You are not required to make repayments toward your student loans until after your case is closed (but interest does still accrue).

Student Loans & Chapter 13 Bankruptcy

If you have decided to file Chapter 13 bankruptcy, you will find your student loan debts are more manageable while your case remains open. Here are the upsides regarding student loans that filing a Chapter 13 bankruptcy offer:

  • The automatic stay applies in Chapter 13 bankruptcy as well, meaning your student debt lender cannot make collection efforts.
  • Student debts can be a part of your three- to five-year payment plan, making it easier to repay the outstanding debt. Interest will still accrue here as well. 
  • You can also choose to keep making payments towards your student loan debts outside your Chapter 13 bankruptcy payment plan while your other debts are more manageable within the plan.

What To Do Once Your Bankruptcy Is Completed

Once your bankruptcy case is complete, you will find yourself in a much more stable financial situation. This puts you in a better position to start or finish paying off your student loans again. Your debts may have been sold to new lenders, so it’s necessary to find out where your student loan debts are located in order to start the repayments again. 

Turns out, having these student loan debts remaining is actually a great way to help build back up your credit following bankruptcy as long as you keep up with the payments.


Still Have Questions About Student Loan Bankruptcy?
Contact Barbara B. Braziel

If you have all of a sudden lost control of your finances, the Law Offices of Barbara B. Braziel are here for you. We have guided hundreds of clients in the same situation as you through the bankruptcy process while answering any and all questions about handling student loan debt alongside bankruptcy cases. Get in touch with us today to schedule your free consultation.

The post Filing Bankruptcy & Student Loans appeared first on Braziel Law.

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