Most people take on student loans with the hope that they will secure a great education and a job in the years to come. However, these day many people, even senior citizens, are finding themselves bogged down with debt related to student loans. While a bankruptcy filing rarely will allow for a discharge of your student loans, it can help by preventing collection attempts on your student loans while you are in your bankruptcy.
Chapter 13 bankruptcy is a repayment plan, heavily influenced by your income and approved by the bankruptcy court. Once your bankruptcy is filed the automatic stay goes into effect preventing further collection of debts, including student loans, during the pendency of your case.
While the bankruptcy code does allow for the discharge of student loans, the process to secure discharge is a very, very difficult one. Bankruptcy law only allows for the discharge of student loan debt in situations where the repayment of the student loans would create an “undue hardship” for you and your family. In order to satisfy the “undue hardship” standard the bankruptcy court must find that you are only earning enough to pay for “a minimal standard of living” This means you cannot afford things like cable, internet or a cell phone – even without accounting for the payment of your outstanding student loans. In addition to the “undue hardship” standard you must also show that your financial situation is not likely to improve. This process often requires additional filings and court appearances by your bankruptcy attorney and may mean that you will be incurring additional attorney’s costs and fees.
While you not be able to discharge your student loans in a bankruptcy, Miller and Miller does offer a student loan program that aims to help our clients get their loans out of default and set up an income based repayment plan that can lower your monthly payments.
