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Finance

What Happens to Student Loans in Chapter 13 Bankruptcy?

You’re buried in student loan debt and looking for a way to get through it. Filing bankruptcy might stop the creditors from harassing you and help reduce your payments, but it won’t necessarily eliminate that debt. 

Student loans can’t be discharged without proving undue hardship.

Like credit cards and medical bills, student loans are nondischargeable debts. That means your student loans can’t be discharged entirely unless you can prove the debt and payments cause an “undue hardship” on you. The court must also agree that the loan repayment is a hardship. 

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Proving undue hardship is difficult but not impossible. According to the Student Loan Borrower Assistance arm of the National Consumer Law Center (NCLC), there have been several cases where borrowers were able to get their student loan discharged. 

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In January 2020, Forbes reported on a Navy veteran who was able to have his $220,000 student debt discharged when the bankruptcy courts found that it caused undue hardship on his $37,600 annual salary.  

“You should assume the lawyer is not knowledgeable in this area if he tells you that student loans cannot be discharged in bankruptcy. The truth is that you can discharge your student loans if you can prove undue hardship,” the NCLC website reads. 

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According to data on the website Educationdata.org, only 6.8 percent of applicants for federal student loan forgiveness have had the remainder of their student loan payments discharged.

View more information: https://marketrealist.com/p/what-happens-to-student-loans-in-chapter-13/

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