Many people want to know what happens to their student loans if they file for personal bankruptcy. You may have heard that although they are not usually discharged, student loans can be discharged if you can show a special “hardship.” While that may be true, it is nearly impossible for you prove the type of hardship that is necessary to discharge a student loan. Unemployment is not a reason. Disability is not a reason. So, you say, if those are not reasons, what are some reasons? The answer, unfortunately, is that we are not aware of any. We are up front and honest with your client’s and tell them that there student loans cannot be discharged, it’s as simple as that.
The Good News
Most other unsecured debts, such as credit cards, medical bills, repossessions, evictions, etc., are dischargeable in bankruptcy. Most of client’s say the same thing, which is “well, as long as I can get rid of those debts, I can afford to pay my student loans.” And we say “exactly.”
There is one bit of good news regarding student loans. While a bankruptcy is pending, the student loan companies cannot collect money from you. So, during a Chapter 7, which is usually about a 4 month process, you do get relief for those 4 months. A Chapter 13 is different. You will be making a payment through the bankruptcy court to pay back your secured debts and you will usually agree to pay your student loans “outside the plan.”
Contact Us Today
If you have questions about bankruptcy or student loans or any debts at all, call us today for your free consultation.