The topic of bankruptcy and student loans can be difficult to generalize since every individual’s debt circumstance can be different. For this reason individuals should always seek the advice of a professional bankruptcy attorney who can guide them in the correct direction for their personal needs. However, below is an explanation of how (typically) student loans are handled in bankruptcy, and some answers to common questions regarding student loans and bankruptcy.
Will Bankruptcy Remove My Student Loan Debt
Q: Can I discharged my student loans through bankruptcy
A:Having student loans discharged in bankruptcy is very rare. To successfully discharge your student loans through bankruptcy, you would have to be able to prove an undue hardship. Having too much debt, not making enough money, or being unemployed does not qualify as an undue hardship. An undue hardship, for example, would be something such as a person being injured or disabled so severely that they will never be able to work again in their life.
It is extremely difficult for the average person to discharge federal or private student loans through bankruptcy. Even if a bankruptcy court rules in your favor to eliminate or discharge other overwhelming debt, in most cases, the judge will incorporate your student loans into your debt repayment plan under Chapter 13 bankruptcy. Any balance remaining after the payment plan ends will still be due. However, if you think you may be able to prove an undue hardship, it would be in your best interest to contact a qualified bankruptcy attorney for professional legal advice.
It is important to remember that each bankruptcy case is subject to individual terms. Not all student loans are created or treated equal, so individuals will need to examine the rules that apply specifically to their student loan debt. Federal student loan debt, private student loan debt, and gap student loan debt (loans acquired from a bank) are all treated differently when bankruptcy is concerned.
Even though your student loans may not be discharge in bankruptcy, there are other options to help ease the burden of student loan debt. For federal student loans there are several different repayment plans, including income contingent repayment plans. For private student loans, you may be able to consolidate your current private student loans to help lower your monthly student loan payments. For more information on student loan debt relief view our Student Loan Debt Help section.
Chapter 7 And Chapter 13 Bankruptcy
Q: When it comes to student loans, what is the difference between Chapter 7 and Chapter 13 bankruptcy?
A: Most individuals either file Chapter 7 or Chapter 13 bankruptcy, and depending on which you have filed your bankruptcy and student loan situation may differ:
Student Loans and Bankruptcy (Chapter 7):
Chapter 7 is what most people think of when they think of “bankruptcy.” This is a liquidation bankruptcy, which will result in the discharge or elimination of all debts. Without proving that your student loans impose an undue hardship, you will not be able to discharge the student loans within this type of bankruptcy. In this type of bankruptcy you will have to file a separate motion with the bankruptcy court and go before a judge to give your explanation as to why your student loans pose an undue hardship for you and/or your family. This is very difficult to prove, and fairly rare to be granted.
Student Loans and Bankruptcy (Chapter 13):
Chapter 13 is referred to and reorganization bankruptcy. In this type of bankruptcy one will receive a reorganization of their debts along with a payment plan provided by the bankruptcy court. In some cases if the payment plan is met for a specified number of years, all debts remaining after the payment plan term is fulfilled will be forgiven. You can include your private student loans and federal student loans in the reorganization, however be aware that this often will make little difference if your debt I primarily comprised of student loans. If your debt on the other hand, is mostly comprised of other forms of debt, this type of bankruptcy could free up some money for you making it easier to make your student loan payments.
Can I Still Get Federal Financial Aid If I Have Filed Bankruptcy
Q: Can someone who has filed bankruptcy apply for and get Federal Financial Aid for college?
A: The topic of college financial aid and bankruptcy can be difficult to generalize, because each situation can be very different. Typically, if the applicant does not have student loans in default or have any delinquencies on any student loans, previous bankruptcies should not refrain a student from being eligible for federal student loans for college (Bankruptcy Reform Act of 1994). As for private student loans and/or school run loan programs, a bankruptcy will generally have a direct impact on eligibility for securing those type of loans. Private student loans are based on credit, which is why a previous bankruptcy will likely have a negative effect on a student’s ability to be approved for this type of student loan.
If you have filed a bankruptcy and are in need of college financial aid, it would be highly beneficial to speak with the financial aid advisor at your school (or school you plan to attend). There are financing options available for those who have filed bankruptcy in the past, and your schools financial aid advisor will have the ability to provide help and resources for your specific situation.
Private Student Loans And Bankruptcy Law
Q: I have several years worth of private student loans, and am curious to know what the private student loans bankruptcy law is?
A: Though it is rather difficult to afford the costs of college without the help of private student loans, here is the problem with private student loan debt: private student loan debt is one of the most constricting forms of debt, and typically private student loans can not be discharged in bankruptcy. As for private student loans and bankruptcy law, you would need to consult a qualified bankruptcy attorney for your specific case and circumstances. Private student loan discharge via bankruptcy is not likely, however it is not impossible. Student loans can sometimes be discharged in bankruptcy if you can prove that repaying the student loans will impose an undue hardship on you and your dependents, however this is very difficult to prove. Recently, there has been two new bills introduced to congress that are now attempting to restructure the way in which private student loan debt is handled in bankruptcy.