One of the most common questions that we receive as bankruptcy lawyers come down to the types of loans that can be discharged and the types of debts that people will be able to handle under a typical bankruptcy. Student loans are a type of debt that many people would suggest cannot be discharged under a typical bankruptcy. The process for discharging these types of debts can be a little more difficult than other types of debt but it may be possible to establish some form of relief from your burden to pay student loans over other types of debt. Here are some answers to your questions about bankruptcy and student loans and how you can work on protecting yourself from garnishment and other issues with student loans.
Student loans are significantly more difficult to discharge than other forms of unsecured debt but it is possible to receive a discharge from your student loans in an advisory precedent. Before you are declaring bankruptcy you need to consider other alternatives and see if there might be other financial options that are better suited to your current situation.
If you’re facing a situation where it’s nearly impossible for you to repay your student loans and even making the payments can be difficult on your lifestyle, you might need to make some adjustments in order to remove some of the debts that you’ve incurred in a student loan. The federal government reserves the right to keep your tax refund and apply it towards federal student loans if you are in default or if you’ve been delinquent with payments.
Your student debt can be just one component of the financial challenges that you’re facing if you’ve had to take out other forms of loans to make payments or to live comfortably. If you’re attempting to discharge other forms of debts alongside a student loan it’s less likely that you will get the discharge that’s required to remove your student loan.
Working on your student loan bankruptcy is not an easy process and it doesn’t guarantee that you’re going to walk away from the situation in a debt-free process. If your credit is facing difficulty, bankruptcy could be a faster way that you could improve your financial health but you may still be stuck with debt in the form of a student loan.
There is no formal bankruptcy type for student loans but some have had success in discharging student loans their bankruptcy in Chapter 7 or Chapter 13 bankruptcies. In order to receive a discharge from a student loan, you need to go through an advisory proceeding. An advisory proceeding needs to highlight your student loans and consider them for discharge as well.
To make sure that your student loans are considered as part of chapter 7 or chapter 13 bankruptcy you’ll need to disclose your assets, debts, expenses, and income all under your bankruptcy application. An impartial trustee will take a look at all of your debts and meet with your creditors to confirm them. It’s also likely that you have to go through some form of credit counseling before the court proceeding will happen and your debts can be discharged.
Under a chapter 7 bankruptcy, your debts will be settled in the form of a liquidation bankruptcy in which your personal possessions and assets will be used to pay down your debts. After your chapter 7 bankruptcy is complete you’ll be able to file for the discharge of your student loan. This usually takes a few months after chapter 7 bankruptcy.
Under chapter 13 bankruptcy you’ll agree to a repayment plan an adjustment of your debts that will involve you slowly paying them off over a period of 3 to 5 years. Bankruptcy courts will determine your new monthly debt payment. Under chapter 13 you may still face a struggle paying your student loan and you likely won’t be able to lower your monthly payment. If you have private student loans it might be possible to change the form of repayment under chapter 13.
Speaking to an experienced bankruptcy attorney can be one of the best steps to take if you’re considering filing for bankruptcy to manage your student loans. Student loans are the only debt that you have in place, you might not have much success in your strategy to remove some of your debts. You might also end up owing more on your loans if you go into a chapter 13 bankruptcy case without including a plan for your student loans. Most of your debts will be legally categorized in chapter 13 with a higher priority on your student loan repayment.
To find out which situation will work best for your needs and to determine the best solution for managing your student loan debt, contact us today to learn more about managing student debt with bankruptcy.