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Student Loans and Bankruptcy

The problem of student loan debt is nationwide and it is affecting more and more people each year.  In fact, it is becoming somewhat of an epidemic in our country.  Many people plagued with these debts are looking towards bankruptcy as an option.  However, student loans are not dischargeable.  Collection for student loans can nevertheless be stopped for up to 60 months during a plan developed in Chapter 13 bankruptcy.  As such, bankruptcy is not a permanent solution to student loan debt, but it can be a helpful tool to give you time to save money and get back on your feet.

Chapter 13 Bankruptcy

Chapter 13 bankruptcy is only available for certain people.  Eligibility is based on whether or not your income is regular and substantial enough to pay down debts.  Chapter 13 bankruptcy requires a plan that provides for a person’s income to repay some or part of the debt during the plan.  Additionally, in order to be eligible, you must not have debts over a certain amount.  In determining eligibility, an experienced bankruptcy attorney can be of great service.

Once you have determined eligibility, you must get credit counseling from an approved agency before filing for bankruptcy.  A list of approved agencies can be found here.  Once you have filed for bankruptcy, you will have a repayment plan as part of your paperwork.  The plan will be a detailed account of how much you will pay and how you will pay on each of your debts.  While there is no specific form for this plan, many courts have created a form to use in that jurisdiction.

Under Chapter 13 Bankruptcy, some debts must be paid in full, which are known as “priority debts.”  These often include things like child support, alimony, wages owed to employees, and some tax obligations.  After your money has been allotted to priority and secured debts, it may then be disbursed to other, unsecured debts.

After Chapter 13 Bankruptcy

Once the Chapter 13 bankruptcy plan is completed, the student loan payments will resume.  Ideally, once you have completed your plan, your situation will have changed enough that you are then able to resume making payments on your loans.  Sixty months, however, is not always enough time to guarantee a change in circumstances substantial enough to ensure someone is capable of making payments.  If that is the case, there is another option: filing a second bankruptcy claim.

Your Case

If you or someone you know is considering bankruptcy, either based on student loan debts or otherwise, do not hesitate to contact a bankruptcy attorney.  An experienced attorney can help you navigate the complicated system to get the best result.  Our attorneys are experienced in bankruptcy law.  Call us or contact our office to learn more and to see how we might be able to help you assert your rights and file for bankruptcy.

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