The fact that student loans are usually not discharged in bankruptcy does not mean you cannot do anything at all about your student loan debt.
Most student loans are Federal loans. There are ways to discharge a Federal student loan debt without bankruptcy, and there are ways to get a Federal student loan debt forgiven, either partially or completely. There are several repayment options that could help you to reduce your monthly payment, and you have the freedom to switch from one payment option to another.
You have fewer options with private student loans, but you still have options, such as challenging the validity of the debt, or negotiating a settlement with the lender so that you pay back less than you allegedly owe.
Chapter 7 — Liquidation of Non-Exempt Assets. The point of filing a Chapter 7 bankruptcy petition is to obtain a Court-ordered discharge of your debts. Examples of dischargeable debts include credit card bills, medical bills, and personal loans. Student loans are usually not discharged. However, even if your student loan is not dischargeable, discharging your other debts through Chapter 7 may help you to focus your budget on repaying your student loans.
Most people who file Chapter 7 do not have any non-exempt assets that they end up losing in a Chapter 7 liquidation of assets. If you do have assets, however, and you still file Chapter 7, then expect the Chapter 7 Trustee to liquidate your assets in order to pay dividends to your creditors.
Chapter 13 — Financial Reorganization. There could be some reason as to why Chapter 7 might not be a good idea. Maybe you have assets that you want to keep, which you would lose in a Chapter 7 liquidation of assets. Maybe your income is “too high” for a Chapter 7 case. Or maybe you need a payment plan to handle a student loan, and the lender is demanding more that you can afford.
Chapter 13 gives you a chance to propose a payment Plan that fits within your means in order to handle your debts.
For more information, please contact this office for a free initial consultation.