Dealing with Student Loans in Bankruptcy: What You Need to Know

Taking out student loans is a necessary tradition for many young people looking to advance their education and career prospects. Unfortunately, these loans can also become a heavy burden, especially if life takes an unexpected turn.

As a result, we often face clients struggling with student loan debt who are considering filing for bankruptcy. However, even under bankruptcy protection, student loans can be a challenge. In this post, we’ll delve into the complex subject of student loans and bankruptcy and what you need to know.

Not All Student Loans Can Be Discharged

While most forms of debt can be erased by bankruptcy, federal student loans typically cannot. However, there are some exceptions. If you can prove that continuing to pay the student loan will cause undue hardship, you might be able to qualify for a bankruptcy discharge. The “undue hardship” standard is extremely high, requiring proof that you cannot pay the loan now or in the future and that you’ve made good-faith efforts to repay it. Our team at the Financial Relief Law Center can help you build a strong case if you qualify.

Bankruptcy Can Stop Collections and Garnishments

If you’re behind on your student loan payments and are facing collections, wage garnishment, or other legal action, bankruptcy can help. Filing for bankruptcy immediately stops all collection activities, giving you breathing room to assess the situation. What’s more, if you’re able to pay off your other debts through a bankruptcy plan - often with lowered payments – you might be better able to allocate more of your income to your student loan payments.

Student Loans in Chapter 13 Bankruptcy

If you’re not eligible for bankruptcy discharge for your student loans, chapter 13 bankruptcy may be another option. This form of bankruptcy requires you to repay all or a portion of your debts over a period of three to five years. During that time, the court can order your student loan lender to modify your monthly payments in line with what you can reasonably afford. Once your bankruptcy is completed, any remaining balance will be discharged.

Avoid Scams and Fraud

Unfortunately, some companies claim to offer debt relief services that can eliminate or reduce student loan payments. These scams are everywhere, charging hundreds or thousands of dollars for services they cannot provide. Be wary of any company telling you that they will have all your student debt eliminated with no hassle; it is simply too good to be true. Instead, at the Financial Relief Law Center, we’re here to represent you honestly and get you the best possible outcome for your specific situation.

Navigating Student Loans and Bankruptcy with Confidence

Bankruptcy and student loans are complex legal issues that require the guidance of experienced professionals. At the Financial Relief Law Center, our team is dedicated to providing you with the information and support you need to confidently navigate these complexities. We understand the stress and fear that come with financial struggles, and we're committed to helping you find a path forward.

Don't hesitate any longer. Reach out to us online today to schedule a consultation to discuss your case.