July 18, 2024
Learn About Your Student Loan Bankruptcy Options
Table of Contents
Understanding Student Loans
Bankruptcy and Student Loans
Chapter 7 Bankruptcy
Chapter 13 Bankruptcy
Repayment Plans
Loan Forgiveness Programs
Deferment and Forbearance
Private Student Loans and Bankruptcy

Understanding Student Loans

Student loans are financial aids offered to students to help cover the costs of their education. These loans come in two forms: federal student loans and private student loans. Federal loans are funded by the government and offer various repayment options, while private loans are provided by banks or other financial institutions with stricter terms.

Bankruptcy and Student Loans

Can Student Loans Be Discharged in Bankruptcy?

Unlike other types of debt, student loans are usually not dischargeable in bankruptcy, meaning they cannot be wiped out completely. However, there are options available for borrowers facing financial hardship.

Chapter 7 Bankruptcy

What is Chapter 7 Bankruptcy?

Chapter 7 bankruptcy is a liquidation bankruptcy where the debtor’s non-exempt assets are sold to repay creditors. While student loans are typically not dischargeable in Chapter 7, filing for bankruptcy can help eliminate other debts, freeing up funds to repay student loans.

Chapter 13 Bankruptcy

What is Chapter 13 Bankruptcy?

Chapter 13 bankruptcy is a reorganization bankruptcy that allows debtors to create a repayment plan to pay off their debts over a period of three to five years. This option can help borrowers catch up on overdue payments for student loans while keeping their assets.

Repayment Plans

Income-Driven Repayment Plans

Income-driven repayment plans adjust the monthly payments based on the borrower’s income, making it more manageable for individuals facing financial difficulties. These plans can help prevent default on student loans.

Loan Forgiveness Programs

Public Service Loan Forgiveness

The Public Service Loan Forgiveness program forgives the remaining balance on federal Direct Loans after the borrower has made 120 qualifying payments while working full-time for a qualifying employer, such as the government or a non-profit organization.

Deferment and Forbearance

What are Deferment and Forbearance?

Deferment and forbearance are temporary solutions that allow borrowers to pause or reduce their student loan payments during times of financial hardship. Deferment is usually better as interest does not accrue on subsidized federal loans.

Private Student Loans and Bankruptcy

Private Student Loans and Bankruptcy Options

Private student loans have fewer protections and repayment options compared to federal loans. Borrowers with private loans may have limited options in bankruptcy, but negotiating with the lender or exploring settlement options could provide some relief.

New Guidelines Make It Easier To Discharge Student Loan Debt in Bankruptcy
Table of Contents
Understanding Student Loans
Bankruptcy and Student Loans
Chapter 7 Bankruptcy
Chapter 13 Bankruptcy
Repayment Plans
Loan Forgiveness Programs
Deferment and Forbearance
Private Student Loans and Bankruptcy

Understanding Student Loans

Student loans are financial aids offered to students to help cover the costs of their education. These loans come in two forms: federal student loans and private student loans. Federal loans are funded by the government and offer various repayment options, while private loans are provided by banks or other financial institutions with stricter terms.

Bankruptcy and Student Loans

Can Student Loans Be Discharged in Bankruptcy?

Unlike other types of debt, student loans are usually not dischargeable in bankruptcy, meaning they cannot be wiped out completely. However, there are options available for borrowers facing financial hardship.

Chapter 7 Bankruptcy

What is Chapter 7 Bankruptcy?

Chapter 7 bankruptcy is a liquidation bankruptcy where the debtor’s non-exempt assets are sold to repay creditors. While student loans are typically not dischargeable in Chapter 7, filing for bankruptcy can help eliminate other debts, freeing up funds to repay student loans.

Chapter 13 Bankruptcy

What is Chapter 13 Bankruptcy?

Chapter 13 bankruptcy is a reorganization bankruptcy that allows debtors to create a repayment plan to pay off their debts over a period of three to five years. This option can help borrowers catch up on overdue payments for student loans while keeping their assets.

Repayment Plans

Income-Driven Repayment Plans

Income-driven repayment plans adjust the monthly payments based on the borrower’s income, making it more manageable for individuals facing financial difficulties. These plans can help prevent default on student loans.

Loan Forgiveness Programs

Public Service Loan Forgiveness

The Public Service Loan Forgiveness program forgives the remaining balance on federal Direct Loans after the borrower has made 120 qualifying payments while working full-time for a qualifying employer, such as the government or a non-profit organization.

Deferment and Forbearance

What are Deferment and Forbearance?

Deferment and forbearance are temporary solutions that allow borrowers to pause or reduce their student loan payments during times of financial hardship. Deferment is usually better as interest does not accrue on subsidized federal loans.

Private Student Loans and Bankruptcy

Private Student Loans and Bankruptcy Options

Private student loans have fewer protections and repayment options compared to federal loans. Borrowers with private loans may have limited options in bankruptcy, but negotiating with the lender or exploring settlement options could provide some relief.