Are My Student Loans Forgiven If I File for Bankruptcy?

If you are filing for bankruptcy, you are probably wondering what will happen with your student loan debt. First off, declaring bankruptcy will not automatically discharge your student loans. What happens to your student loan debt depends on what kind of bankruptcy you choose to file.

Student Loan Debt Under Chapter 13 Bankruptcy

Chapter 13 bankruptcy does not discharge your student debt. Instead, these debts are typically included in your repayment plan. After filing for Chapter 13, an automatic stay will be granted to you. This means creditors are prohibited from attempting to collect on your student loan debt.

Your student loans are considered “nonpriority secured debt” under a Chapter 13 bankruptcy. You are also not required to pay off the full amount through your repayment plan. However, your student loans will continue to gain interest in your repayment plan.

Student Loan Debt Under Chapter 7 Bankruptcy

Unlike Chapter 13 bankruptcy, Chapter 7 bankruptcy does not have a repayment plan. Instead, any non-exempt assets are liquidated to pay all, or a portion, of you debts. Like with Chapter 13, all collection activity must be stopped by creditors. Your student loan debt can be considered for discharge if you file a Complaint to Determine Dischargeability. This action will get you started on what is known as an adversary proceeding.

If you face extreme financial hardships and can’t contribute towards repaying your debts, the court can decide to discharge your student loans. Although this is a rare occurrence, it does happen in some cases.

Before you file for bankruptcy, you should consult an experienced bankruptcy attorney. A lawyer who is familiar with bankruptcy law can help determine what strategy fits your situation. At the Buchalter Law Group, we help our clients fight back against aggressive creditors and collection agencies. With 35+ years of legal experience, you can count on us to prioritize your interests and walk you through your case.

Contact our Brevard County team of bankruptcy attorneys to learn more about what we can do for you.

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