A common question that our team has been asked is can you discharge student loan debt by filing Chapter 13 Bankruptcy? The answer to his question is generally “no”. Student loans will fall under the category of a “non-dis-chargeable debt” 99% of the time. There are very rare instances where the student loan debt may qualify as an “undue hardship”. However, it is extremely difficult to prove this scenario. Usually “undue hardship” is only granted in the case of a severely life-altering situation. Due to this fact, you will most likely have to pay back your student loan debt in full. Even after you complete your bankruptcy plan.
How are Student Loans Treated Through a Chapter 13 Bankruptcy?
During the process of a Chapter 13 Bankruptcy, student loans identify the same as credit card debt and medical bills. Commonly know as“non-priority, unsecured debts.” As a result, you must pay the debts off in full during your Chapter 13 Bankruptcy repayment plan. As you begin to pay down your debt, your student loan provider will receive the prorated share amount of the monthly payments that you are making in your bankruptcy plan. Your monthly income, and overall expenses determine the amount you are paying to unsecured creditors.
Due to this fact, a Chapter 13 Bankruptcy may either help or hurt you depending on your financial standing. If you have unresolved student loan debt after Chapter 13 Bankruptcy, you must continue paying off the student loan debt. Additionally, certain States and jurisdictions will not allow debtors to pay student loans outside of bankruptcy. Due to the fact that it may violate certain laws and practices. Which would result in unfair discrimination against other unsecured creditors.
Can a Chapter 13 Bankruptcy Help Your Situation with Student Loan Debt?
As stated above, the student loan debt you possess is unable to be discharged. Due to the fact it is a type of “non-dis-chargeable” debt. Therefore it will not be able to be absolved in a Chapter 13 Bankruptcy plan.
The “Automatic Stay”
What is an “automatic stay”?
An automatic stay is a rule put into place to prevent nearly all creditors (including student loan lending institutions) from exerting efforts to collect debts. Subsequently, you’ll be able to live your life without harassment from creditors for a period of up to five years. This allows you to continue with your daily life, without the harassment of creditors’ phone calls and letters.
Delaying Student Loan Payments
Due to the protection enabled during the “automatic stay” process, you’ll be able to successfully delay your student loan payments on a regular basis. However, you’ll still need to make student loan payments according to your Chapter 13 Bankruptcy plan.
If you happen to have little, to no extra disposable income to allocate towards your student loan debt, after paying your specified monthly structured payment. You may be able to avoid paying anything towards your student loan during your bankruptcy plan. However, there are consequences in delaying your student loan payments. First of all, you can begin to accumulate potentially large amounts of interest. All in all, depending on the size of your student loans, you must still pay the loan amount back in full.
Reducing Monthly Obligations
One of the best benefits of a Chapter 13 Bankruptcy plan is only paying back what you can afford. You’re able to effectively reduce your monthly obligations, and live life on much better terms, with less stress. While you concentrate on rebuilding yourself financially. As the waiting period for a Chapter 13 Bankruptcy is typically five years, you are more than likely to achieve greater financial success over the course of time. While developing the ability to eliminate debt as each year passes. All in all, a Chapter 13 Bankruptcy can be extremely positive when utilized in proper conjunction with your student loan debt.
Choosing Peoples Bank Mortgage for Your Mortgage After Bankruptcy
When you select Peoples Bank Mortgage for your mortgage after bankruptcy solutions, you’ll find our client care to be top-notch. Along with our processes to be effective and efficient. With our overall quality of work to be among the highest in the industry. We want to see you succeed in all facets of your life. If we can even be a small factor in your overall success, we’ll be more than happy.
Feel free to contact us to learn more about the options you have available. We’ll be sure to respond to your inquiry as soon as possible and we look forward to hearing from you!
Published (May 11th, 2018)
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