Filing Chapter 13 Bankruptcy if Student Loans are not Discharged

Student loans are protected from bankruptcy filing and you cannot file bankruptcy on them. If bankruptcy appears to be in your future, you should call your lenders and try to arrange lowering your payments.

What is Chapter 13?

Chapter 13 bankruptcy is a reorganization of debt. What this type of bankruptcy will do is set up a budget for the debtor to repay debts in 3 to 5 years. Student loans do not qualify for Chapter 13 bankruptcy. If you have student loans, you must make payment arrangements with the lender. In most cases lender with work with you to reduce or even defer payments for a period of time until your income increases.

There is a way

There is a way to discharge student loans while filing Chapter 13 bankruptcy. You must prove it will be a great hardship to pay this debt. It is very difficult to do, but is worthwhile if you can. There are 3 important things the court will consider for filing for hardship.

Income: You must prove that paying off your student loan will cause you to not be able to support your family.

Duration: You must prove that your financial situation will continue for longer than the life of the loan.

Good faith: You must have made an effort to pay student loans before deciding to file for bankruptcy.

If you do not prove hardship

If you cannot prove financial hardship, then you must repay your student loans and they will not be included in Chapter 13 bankruptcy. On top of the budgeted repayment from the court, you will have to make payments on your student loans. If you have several student loans, look into a loan consolidation as soon as you possibly can.

Things to Consider

There are some things to watch out for.

  • The income based repayment program has some faults and hidden consequences at the end. Even if you do repay under the Chapter 13 assigned budget, your student loans will continue to grow with interest. At the end of 20 years, if you still owe anything, you will owe income taxes on top of the student loan.
  • Filing Chapter 13 bankruptcy, or any other chapter for that matter will stay on your credit report for 10 years.
  • Filing for bankruptcy costs money so be sure you can afford to pay the fees involved.
  • Not everyone will qualify for a Chapter 13 bankruptcy. There are income guidelines which must be met.
  • Private student loans are now treated the same as government loans.

Before you file any Chapter of bankruptcy you need to seek advice from a competent professional. There are certain rights that you have under bankruptcy law and this is not something just anyone should go into without knowing what to expect. In any case, also exercise all of your options before moving forward so you don’t inadvertently give away your rights.


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