Can Bankruptcy Help with Student Loans?

Can Bankruptcy Help with Student Loans?

Many people struggle with student loan debt. If you are one of these people and find it difficult to get ahead because of your loan payments, you may have either considered bankruptcy or rejected the idea because someone told you that it's impossible to get rid of student loans in the bankruptcy courts.

Are My Student Loans Nondischargeable?

In most cases, it is not possible to discharge student loan debt in bankruptcy. Furthermore, it doesn't matter whether the student loans came from a private lender or are guaranteed by the federal government.

However, you may be able to qualify for student loan discharge if you can meet two conditions: The first is that you can show the court that making student loan payments is interfering with your ability to enjoy a minimum standard of living. The second is that your current income and financial situation is unlikely to change.

I Can't Meet These Conditions, Can Bankruptcy Still Help Me?

Yes. While you may not qualify for a discharge of your student loan debt, both Chapter 7 and Chapter 13 bankruptcy can still help you. Both types of bankruptcy offer you the benefit of the "automatic stay" against collection efforts. This means that all creditors, including student loan servicers, must cease their phone calls, wage garnishments, and bank levies while your case is active.

If you file for Chapter 7 bankruptcy, you will be able to discharge your other debts, which could potentially make it easier for you to make your student loan payments. If you file for Chapter 13, you will enter into a debt repayment plan that includes payments to your student loan company. Since the court orders and supervises the plan, it will likely be more affordable than what you were trying to pay before.

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