Located in Long Beach, California, Catherine Christiansen is a noted bankruptcy attorney. At the Christiansen Law Office, she helps all types of clients settle their debts and get back on their feet. Here, she explains why student loans cannot be dissolved during a bankruptcy case.
Student loans as a general rule do not disappear if a person files for bankruptcy. That is a tricky topic, but for the most part people should not take out student loans assuming they can eventually file for bankruptcy and get those loans dismissed.
Student loans actually fall into a special category because that is the way Congress intended it. And it is this special categorization that makes them so hard to get rid of.
Unless you are someone who has an extreme hardship — such as if you are suffering from a physical handicap that prevents you from working, or if you are surviving on far below the median level income in the United States and because of that it doesn’t look like you will ever in your lifetime be able to pay these loans off — you will never be excused from your student loan debt by the courts.
Being excused from that social type debt, if it were even possible which if often times is not, involves a special procedure that goes above and beyond just filing a standard bankruptcy petition with the court.
To work toward getting a student loan dismissed, a person would have to bring his evidence to court — evidence showing that he cannot work and will never be able to pay the loan back, like I just described — and then the court will have to decide whether or not to grant that order to discharge your loan and taxes. If a court refuses to grant this, which is the most likely case, then those debts from your undergraduate or graduate schooling are going to survive until you pay them off.
In a Chapter 13 bankruptcy, student loans are paid off at the same percentage as all other unsecured creditors. So what that means is that those debts are seen as unsecured as opposed to secured loans such as when the creditor can take away the property (things like homes or cars). Because there is no way to take back the education that someone has crammed in his head, student loans are seen by the court as an unsecured debt in a Chapter 13 bankruptcy.
If you are having trouble paying back student loans, though, all is not necessarily lost. It is definitely worthwhile to visit a bankruptcy attorney if you are struggling to pay any loans or debts, even if getting those loans completely discharged does not appear to be an option. The reason I say that is because there are many other things a bankruptcy attorney can do for a client, and ways that hecan help beyond just filing for a straightforward bankruptcy. If nothing else, anyone struggling to pay back student loans should contact an attorney simply to find out if he does qualify for any other types of bankruptcy options that might be a good solution.
After all, bankruptcy is not always just a complete forgiveness of debt. There are repayment plans that can stop creditors from harassing you and creating a lot of stress in your life, which can ruin your health and cause even more problems in the long term.
I don’t know if a lot of the public is aware of this, but when someone is in the military reserves, for example, a common problem tends to come up. If he is the main wage earner and he is sent overseas to serve, then the income of that household is greatly reduced. A lot of our military personnel in California enter into Chapter 13 because of that. Once they return home and are off duty, they then will end up filing for Chapter 13 bankruptcy simply as a way to catch up on paying back their secured debts — things like their home, their vehicles, and other property items that fall into that category.
Military personnel are hardly alone in this, though, A lot of other people are going through hardships right now, too, that are making it difficult to pay back their debts. These people need to be able to catch up on the defaults on their home, so that they don’t lose it.
Even though people are not usually able to get their student loans dismissed, there are still many things that a bankruptcy attorney can do to remedy the financial trouble you are in, which could in turn make it easier to pay back your student loan debts in the right way.
This article is for informational purposes only. You should not rely on this article as a legal opinion on any specific facts or circumstances, and you should not act upon this information without seeking professional counsel. Publication of this article and your receipt of this article does not create an attorney-client relationship.
