Private Student Loans in Bankruptcy
If you're thinking about filing for personal bankruptcy to help ease your debt burden from private student loans, you probably have a lot of questions about whether bankruptcy might help you and how you should proceed.
To speak with a bankruptcy lawyer right now about your concerns, please fill out this form.
Private Student Loans in Chapter 7 Bankruptcy
Chapter 7 bankruptcy works by offering filers a chance to completely discharge some or all of their unsecured debts (which means debts that are not connected to any property – student loans are unsecured). However, there are several types of debt that are difficult or impossible to discharge in bankruptcy court. Private student loans are one of them.
But Chapter 7 bankruptcy might still offer you relief:
- Discharge other debt: Even if the court rules that your private student loans cannot be discharged in your Chapter 7 case, it might help you out financially. The court could discharge other debts (including medical bills or credit card debt) and thus free up enough of your money each month that you would be able to make payments on your student loans.
- Provide a hardship exemption: In rare cases, the bankruptcy court agrees to discharge student loans in Chapter 7 bankruptcy. In order to apply for this, you must prove that paying your loans would cause you "undue hardship." The definition of that term varies from court to court, but generally means that you would be unable to maintain a basic standard of living if you continued making student loan payments.
Private Student Loans in Chapter 13 Bankruptcy
If you don't think Chapter 7 bankruptcy is right for you, or if you do not pass the qualifying means test to file under Chapter 7 of the U.S. Bankruptcy Code, you may be able to get some debt relief by filing for Chapter 13 bankruptcy. Here's how:
- You set up a repayment plan: Chapter 13 works by letting filers catch up on their past-due debts with the help of a three- to five-year repayment plan. If you stay current on your payments during the three- to five-year period, the court may discharge any remaining unsecured debts.
- You get some breathing room: During the years of your repayment plan, you will be protected by bankruptcy's automatic stay, which prevents collection actions like lawsuits, garnishment, repossession and foreclosure. This gives many filers the peace they need to catch up on debts and move forward.
Connect with a Bankruptcy Lawyer Today
If you'd like to learn more specific information about how filing for Chapter 7 or Chapter 13 bankruptcy might help you with your private student loans, you can speak with a bankruptcy attorney today.