Student Loans and Bankruptcy
Student loan payments can become difficult to manage when combined with credit card debt, medical expenses, housing costs, and other financial obligations. While student loans are generally more difficult to discharge in bankruptcy than many other types of debt, bankruptcy may still provide options depending on your circumstances.
A bankruptcy attorney in Chicago can help you understand how student loans are treated in Chapter 7 and Chapter 13 and whether bankruptcy may provide relief from your other debts.
Can Student Loans Be Discharged in Bankruptcy?
Student loans are generally not automatically discharged through bankruptcy. In many cases, a borrower seeking to discharge student loan debt must take additional legal steps and demonstrate that repayment would cause an undue hardship.
Whether a student loan may qualify for discharge depends on the type of loan, applicable law, and the borrower’s individual financial circumstances.
Student Loans and Chapter 7 Bankruptcy
Chapter 7 bankruptcy may allow qualifying individuals to discharge certain unsecured debts, such as credit card balances and medical bills.
Even when student loans remain after Chapter 7, eliminating other qualifying debts may reduce overall financial pressure and make remaining obligations easier to manage.
Discharging student loan debt itself generally requires additional proceedings and is not guaranteed.
Student Loans and Chapter 13 Bankruptcy
Under Chapter 13 bankruptcy, eligible individuals generally make payments toward their debts through a court-approved repayment plan.
Student loans may be included in the bankruptcy case, but they are typically not automatically discharged when the repayment plan ends. Any remaining student loan balance may continue to be owed unless the debt qualifies for discharge.
Private and Federal Student Loans
Federal and private student loans can involve different repayment programs, protections, and legal considerations.
Depending on the type of loan and your circumstances, options outside bankruptcy may also be available. It can be helpful to review both bankruptcy and non-bankruptcy alternatives before deciding how to address student loan debt.
When to Explore Bankruptcy Options
You may want to learn more about bankruptcy if student loan payments are only one part of a larger financial problem involving:
- Credit card debt
- Medical bills
- Personal loans
- Collection accounts
- Wage garnishment
- Past-due mortgage payments
- Foreclosure concerns
- Other overwhelming financial obligations
Even if your student loans cannot be discharged, bankruptcy may provide relief from other qualifying debts.
Explore Your Student Loan and Bankruptcy Options
If student loans and other debts have become difficult to manage, understanding your options can help you make a more informed financial decision.
Consider speaking with a Chicago bankruptcy attorney about Chapter 7, Chapter 13, student loan debt, and how bankruptcy may apply to your overall financial situation.
