Student loan debt can make your finances feel impossible to manage, especially when credit card bills, medical costs or personal loans keep growing. You can still file for bankruptcy if you have student loans. Bankruptcy may help you eliminate or manage other qualifying debts, even if some or all of your student loan balance remains.
How student loans work in bankruptcy
Student loans do not usually disappear when you file Chapter 7 or Chapter 13. To seek a discharge of student loan debt, you generally must take an extra step called an adversary proceeding. This is a separate lawsuit filed within your debt relief case.
You must show that repaying the loan would create an undue hardship. The court may review your income, necessary living costs, health concerns, work history and expected future finances. Depending on the facts, the court may discharge all of your student loan debt or only part of it.
What Chapter 13 may offer
Chapter 13 does not automatically erase student loan debt. Instead, it creates a court-approved payment plan that usually lasts three to five years. During that time, the bankruptcy process can help you deal with other debts and may pause many collection efforts.
A Chapter 13 plan may help you manage your overall budget by addressing eligible credit card balances, medical bills and personal loans. You may make payments toward student loans during the plan, but the loan balance and interest can continue to grow. Any remaining student loan debt may still be due after the case ends unless the court grants a discharge.
Questions to consider before filing
Your full financial picture matters when you decide whether bankruptcy can help. Consider the following issues before you move forward:
- Whether your student loan debt is federal or private
- Whether your monthly income covers your necessary household expenses
- Whether you have other debts, including medical bills, credit cards and personal loans
- Whether Chapter 7 or Chapter 13 better fits your goals
- Whether your circumstances may support a full or partial student loan discharge
Reviewing these details can help you identify what bankruptcy may and may not solve.
A path toward relief
Student loans do not prevent you from seeking bankruptcy relief in Andover. A bankruptcy case may give you room to address other debts, protect your income from certain collection actions and build a more workable financial plan. Speaking with a bankruptcy attorney can also help you understand your options based on your income, expenses and the debts you carry.