Three Facts Everyone Needs to Know About Bankruptcy and Student Loans

Student debt is one of the most pervasive forms of debt in the country. When the average college graduate enters the working world with $28,400 in debt, there’s no doubting that having this much debt can be crippling to many people.

But student loans are a unique type of debt — and as a result, there are unique rules that apply to student debt when it comes to bankruptcy law. For some extra help with filing bankruptcy, here are three of the most important things you need to know about the role of student debt in a bankruptcy:

Unfortunately, student debt can’t be discharged in a bankruptcy

If you were hoping to get rid of all your debt by seeking bankruptcy help from a Chapter 7 bankruptcy attorney, you may be disappointed to learn that there are a few types of debt that can’t be discharged during a bankruptcy. Student loans are one of these debts. There are certain cases in which you can discharge your student debt, but this involves proving that you suffer from “undue hardship,” which is extremely difficult to prove and rarely allowed.

You can most likely get approved for a student loan after filing bankruptcy

Not everyone goes to college straight out of high school. And if you have filed bankruptcy with a Chapter 7 bankruptcy attorney and are now looking to go back to school, you’re likely wondering if you’ll be able to get financial assistance through a student loan. While a bankruptcy filing stays on your credit report for 10 years after your debt is discharged, you’re protected by federal law to be eligible for a student loan.

With Chapter 13 bankruptcy, student debt’s role becomes more complicated

One big difference between Chapter 7 and 13 bankruptcy is the role of student debt. Unlike Chapter 7 bankruptcies, a Chapter 13 bankruptcy involves the establishment of a debt repayment plan. And in a Chapter 13 bankruptcy, your student loans will be considered nonpriority unsecured debts, meaning you aren’t required to pay them off entirely over the course of your debt repayment period. In addition, a Chapter 13 bankruptcy might even delay your student loan payments, helping you get back on your feet financially before you have to make payments again.

Have any other questions for us regarding bankruptcy and student loans? Ask us anything and feel free to share your thoughts in the comments below.

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