Granger Law Firm LLC

Can I include student loans in bankruptcy?

The answer is yes, and no. Currently student loans are not dischargable through bankruptcy pursuant to 11 U.S.C. Section 523. In very rare circumstances, student loans can be discharged if the person is disabled and can show they will not be able to hold any sort of job for the remainder of their lives. Even in this circumstance, getting a student loan discharged is unlikely and can be a very long and expensive process. See below for other options.

Chapter 7:
Your student loans will be listed in your Chapter 7 bankruptcy as a debt you owe. However the student loans cannot be discharged. The filing of a Chapter 7 bankruptcy will stop collection activity from the student loan companies for only a short time. After the case is completed, you will need to work with the Student Loan company to obtain a forebearence, deferral or repayment plan.

Chapter 13:
A chapter 13 bankruptcy is the only tool we currently have to relieve the pressure of student loans on an individual. The student loans are put into a repayment plan over 5 years. You will likely pay cents on the dollar during that time period (although this is dependent upon income and assets), which substantially reduces the monthly payment. You cannot be garnished or pursued by the student loan companies during that time. The student loans will not be discharged when the 5 year repayment plan is over, so you will need to begin paying them again. Many clients use the Chapter 13 bankruptcy as a tool to maintain student loans while they find a higher pay job or move up in the current job over the 5 year repayment period.
See the Article from NBC Business below about possible ways to deal with student loan debt.
http://www.nbcnews.com/business/drowning-student-loan-debt-heres-help-979738

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