While student loans are generally not dischargeable in bankruptcy, the filing of a Chapter 13 bankruptcy can assist greatly in managing payments on student loans. For this reason, if you have a legitimate need for filing a Chapter 13 bankruptcy, consider that while student loans in bankruptcy are not dischargeable, they will be affected.
Active Plan Collection Attempts
So long as your Chapter 13 plan payments are current, the automatic stay prevents creditors—including those for student loans—from attempts at collecting. You will not receive bills for student loans, phone calls, or threats for wage garnishment or bank account levy.
Student Loans In Bankruptcy
While student loans are not discharged in bankruptcy, a Chapter 13 bankruptcy can assist in managing student loan payments. Your student loan payments will be included in your Chapter 13 payment, and they will be adjusted according to your disposable income when you file. Typically, this means that the student loan payments are lowered for the duration of the Chapter 13 plan.
In summary, student loans survive bankruptcy, but a Chapter 13 bankruptcy puts an end to collections attempts and typically lowers your effective student loan payment through the plan, so long as the plan is active. For most clients, these are meaningful changes in addition to the other relief provided by filing bankruptcy.
If you have any questions or would like to speak to an attorney about bankruptcy in general, please call me at 704.749.7747. The call is free and I’m happy to help.