Student Loans: The Reason for Bankruptcy but They Can’t Be Discharged!

Student loan debtors are often staring at a long road ahead after graduation—and even if they do find that perfect job, it can be extremely challenging to make a payment to student loan servicers for what may be $400 a month or more. In fact, many borrowers in the 20- to 30-year-old range are strapped down with student loan payments equivalent to a mortgage or vehicle payment, and indeed they may already have such other loans to deal with, along with all the essential bills that must be paid.

As the conversation regarding the student loan debt crisis continues, from you and your peers to financial analysts and government officials, many argue that students of all ages who borrow should be aware of the ramifications of taking out student loans. In theory, this is easy to say, but rising freshman (probably still in their teens) and other young adults may not have any idea how difficult it will be to manage a household budget later. The situation is exacerbated by weak counseling programs initially and upon graduation. Overall, a lack of understanding about finances could spell disaster for students exiting college—as well as the entire US economy overall, with a $1.6 trillion cumulative debt.

Bankruptcy laws were created to help people escape insurmountable issues with debt when their income has diminished, ceased to exist, or their situation otherwise has become untenable with no way to pay creditors. The good news is that you don’t have to remain mired in debt; however, the bad news is that most likely you will be stuck with that student loan—unless you are one of the rare few who can look forward to forgiveness or cancellation of debt.

If you are filing for bankruptcy, be aware that it is virtually impossible to have debts regarding student loans discharged. Obtaining a hardship discharge of student loans in bankruptcy court is an extremely difficult challenge for most, and a long, uphill legal battle that is rarely successful. A Chapter 13 case with payments over three to five years can provide relief from collection action by student loan creditors during the bankruptcy plan. A portion of the student loans may be paid in some cases, but at the end of the case, the student loans are still owed. However, Chapter 13 can help discharge many other debts, which ultimately can help with making payments on student loans.

You probably have many questions about bankruptcy, including which type of bankruptcy will work best for you,  how much you will have to sacrifice (very little in many cases), and whether you will have to go to court. Speak with a skilled bankruptcy attorney from the offices of H. Lehman Franklin, P.C. Call now to learn more at 912-764-9616, or contact us online.