Student loans are generally an unsecured debt that is non-dischargeable in a bankruptcy case. This means that under chapter 7 fresh start bankruptcy, a student loan must be listed however it is not eliminated. There are some circumstances where a student loan may be discharged however that involves an extreme hardship case and I’ve never seen that happen in 23 years of practice.
If you want to get some breathing room with regard to your student loans, you can file a chapter 13 and pay less than what’s owed over a 60 month period. Please keep in mind that you’re going to owe the remainder of what has not been paid plus interest at the completion of your 60 month case. Now, at first this might seem like not a great idea. However, by reorganizing the debt over 60 months at less than its full amount, you are allowing yourself some breathing room for the next five years. Hopefully at the end of five years, you’ll be in a better position to make either a full payment for a higher payment than what they were getting through your chapter 13.
Another option for student loans is a non-bankruptcy consolidation. There are new governmental programs that are providing for relief or consolidation of student loans in certain circumstances. In fact there are some programs whereby after 10 years the remainder of the student loan will be eliminated in specific cases. Consult with a professional to determine whether or not you qualify for these financial programs.
If you are someone who is struggling with student loans and you are not able to make your payments, explore both the chapter 7 and chapter 13 varieties. You will likely find that chapter 13 is going to be your only option. However, that option might grant you some relief at least for the next five years.
