What Happens to Student Loans in Chapter 13 Bankruptcy?

You are buried in student loan debt and looking for a way out. Filing bankruptcy can keep creditors from harassing you and help you lower your payments, but it won’t necessarily eliminate that debt.

Student loans cannot be canceled without proving undue hardship.

Like credit cards and medical bills, student loans are non-dischargeable debt. This means that your student loans cannot be fully repaid unless you can prove that the debt and payments are causing you “undue hardship.” The court must also agree that repayment of the loan is a hardship.

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Proving undue hardship is difficult but not impossible. According to the National Consumer Law Center (NCLC) Student Loan Assistance Branch, there have been several instances where borrowers have been able to get their student loan discharged.

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In January 2020, Forbes reported on a Navy veteran who was able to recover his student debt of $ 220,000 when bankruptcy courts found it was causing undue hardship to his annual salary of $ 37,600.

“You should assume that the lawyer is not well informed in this area if he tells you that student loans cannot be discharged in bankruptcy. The truth is, you can pay off your student loans if you can prove that you are in undue hardship, ” CLB Website bed.

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Based on site data Educationdata.org, only 6.8 percent of federal student loan waiver applicants had the rest of their student loan payments paid.

At the end of your bankruptcy period, you will need to start making the initial payments again to repay the loan and the interest accrued during the bankruptcy. If you are still unable to make the payments, you can try to get the loan balance released at that time. However, you will still have to prove that it is undue hardship.

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