Some people assume that filing for bankruptcy does nothing to help you with student loans. This isn’t always the case. Student loan bankruptcy reform over the years means you have options when it comes to managing overwhelming student loan debt.
But this doesn’t mean your student loan will automatically be discharged like other types of debts.
What should you know about student loan bankruptcy reform and how it helps you erase your student loans?
Understand Bankruptcy and Student Loan Debt
Bankruptcy is a legal process that might help you erase some or all of your debts.
Some types of student loan debt can be discharged in bankruptcy. However, there are certain things you need to know about bankruptcy and student loans before you decide if this is the right solution for you.
Check Your Eligibility
In order to file for bankruptcy and have your student loans discharged, you must meet certain eligibility requirements. Student loan bankruptcy reform has made it easier to qualify for bankruptcy when you have student loan debt, but it’s not treated the same as regular consumer debt like credit cards.
You must pass a means test to show that you cannot afford to repay your debts and that your student loan payments cause undue hardship.
Not all types of student loan debts are handled the same in bankruptcy. The age of the debt and the debt issuer both affect how it’s handled when you file.
Your bankruptcy attorney can help you determine where you fit into the bankruptcy hierarchy.
Choose Chapter 7 or Chapter 13
There are two common types of consumer bankruptcy: Chapter 7 and Chapter 13.
To have student loans discharged in bankruptcy, you must file a Chapter 7 petition. This type of petition allows you to liquidate your assets to pay off your debts. Once that’s done, your debts are discharged.
If you do not have enough assets to pay off your debts, you’ll need to file Chapter 13 instead. Chapter 13 allows you to reorganize your debts and repay them over time. This means you’ll be repaying your student loan, but it’ll be part of your overall Chapter 13 repayment plan.
Await Your Discharge
Once you file for bankruptcy, it can take several months for the discharge process to be completed. This is the case regardless of what type of debt was included in your bankruptcy.
Contact a Bankruptcy Attorney to Learn More about Student Loan Bankruptcy Reform
If you are struggling to repay your student loans, bankruptcy may be a solution worth considering. However, be sure to understand the consequences of bankruptcy and how it could impact your future credit prospects before making a decision.
Whether you’re wondering if student loan bankruptcy reform could mean new opportunities for you or you want to get started with the bankruptcy process, we can help. Contact the Law Offices of Robert M. Geller at 813-254-5696 to schedule a free consultation.