Most consumers are aware elimination of federal student loans is nearly impossible when filing bankruptcy. However, this does not mean you cannot get some relief when you opt to file Chapter 7 or Chapter 13 bankruptcy. What many consumers do not know is the reason for this is because Congress changed the laws eliminating this possibility. Currently, there are an estimated 44 million Americans who owe student loan debt. In the aggregate, nationwide there is more than $1.5 trillion in outstanding student loans. One in four adults owe an average of slightly more than $37,000 in student loans.
Student Loan Debt Changes
While it is not common, there are some instances where student loan debt may be discharged in bankruptcy. Part of the challenge is this process requires an adversary proceeding be filed with the bankruptcy court. This process would require your bankruptcy attorney to demonstrate repayment of loans would cause an undue hardship. The possible outcomes include complete elimination of debt, modification of loans to lower interest rates which therefore lowers payments, or elimination of part of the debt.
When Adversary Proceedings Fail
In the event filing an adversary proceeding does not make a change, those who owe student loan debt may benefit from filing Chapter 13 instead of Chapter 7. This is particularly true if most of their debt consists of student loans. This is because a typical Chapter 13 plan lasts for five years, and the payments are based on income. It is worth noting filing Chapter 13 will not stop interest from accumulating but using this option may give you the benefit of paying less on your loans for a period of time.
If you are feeling overwhelmed by student loan debt, contact us and let us help you explore your options. Contact the Law Offices of James C. Shields, a Torrance bankruptcy law firm today by fill out our online free case evaluation form or by telephone at 310-540-6792.
