Student Loans

Changes might be coming for Student Loans in Bankruptcy

Published on: September 15, 2021 | Frank Coxwell

For a long time now, student loans have been pretty much prohibited from being discharged through bankruptcy. That could change by the looks of this proposal. The S.2598 – FRESH START Through Bankruptcy Act has been recently referred to committee.

Why is it so hard, if not impossible, for people to get rid of student loans through bankruptcy now?

Due to a 1976 law, student loans are not allowed to be treated like other forms of debt (ie: credit cards or car loans). This comes from a federal commission on bankruptcy laws that heard testimony claiming the discharge of student loans could damage federal student loan programs. Congress was concerned that students could borrow thousands from the federal government, then graduate, then file bankruptcy, and never repay their student loan debt.

How can you get student loan debt information?

Published on: September 27, 2014 | Frank Coxwell

Student loans are not usually wiped out in bankruptcy like other debts (although bankruptcy can provide assistance). But the court still requires that you list your student loan debt in the bankruptcy, since this is a debt that you owe. This can be difficult, especially while they were in forbearance, if you have not kept track of your loans

For federal student loans, you can locate all of your lenders and student loan debt on The Department of Education website. It’s called the “National Student Loan Data System”. Go to www.nslds.ed.gov and click the “Financial Aid Review” button, and just follow the instructions. This will give you a print out of all your student lenders and their contact information.

For private student loans, you can’t go to a single website that has information about all of your private student loans. However, private student lenders may be reporting your loans to the credit bureaus and you can locate their names by requesting a free credit report at www.annualcreditreport.com.

Help for Student Loans

Published on: January 25, 2014 | Frank Coxwell

If you are having trouble paying back your student loan debt, the Department of Education has options that will give you more protection from debt collectors collecting on federal education loans. These regulations should make it easier for you to get your federal student loans out of default.

These rules do not apply to private student loans, only to loans made or guaranteed by the federal government. For example, if you are in default you can”rehabilitate” loans by making nine “reasonable and affordable” on-time payments during a period of 10 consecutive months. You must agree in writing to make these 9 voluntary payments (as determined by your loan holder) within 20 days of the due date. This will allow you to get out of default and become eligible for further federal student aid or other repayment programs. Keep in mind that Student Loan Rehabilitation is a 1-time opportunity only. It cannot be repeated.

Some private debt collectors who were collecting on federal loans fail to offer payments that borrowers can afford; instead offering payments based on a percentage of the borrower’s total debt. Such payments mean increased commissions for the collection agencies, but are unworkable for borrowers. Some debt collectors try to also demand minimum monthly payments without telling people about the more affordable alternatives, even though the laws of federal student aid does not require those minimum payments. In 2014, the Department of Education really cracked down on these practices.

Can I get my Chapter 13 Plan payments lowered?

Published on: December 7, 2012 | Frank Coxwell

Possibly, but first you need to understand that a Chapter 13 plan is not based on your income. It does not fluctuate depending upon how much you make. The Chapter 13 plan amount depends upon what you plan on keeping and/or what creditors you plan on paying through the bankruptcy. For example, if you are paying for only your home through your plan, the amount of the payments will be based upon the mortgage amount then that amount spread out over the life of the plan to catch up your back notes. This amount won’t change unless your mortgage note happens to change.

However, if you are paying for several things – such as a student loan, a vehicle, a home, and a furniture note – through your Chapter 13 plan, the payments could become lower if you decide to stop paying toward the student loan or decide to surrender a vehicle, or the home, etc.

Since a Chapter 13 plan is dependent upon who you plan to pay and what you plan to keep – you can decide to change (with some exceptions) who you are paying and/or what you are keeping in order to lower the note.

How many times can you file bankruptcy?

Published on: November 29, 2012 | Frank Coxwell

Although there is not a limit on the number of bankruptcy cases you can file and no limit to the amount of time in between filings, there are limits to when you are eligible to receive a proper “discharge”. So why would you want to file a bankruptcy case if you know you cannot receive a discharge? There are several reasons why this strategy may be utilized. For example, say that you recently filed a chapter 7 bankruptcy and wiped out your unsecured debt but you have student loan or tax debt that is non-dischargeable. You could turn around and file a chapter 13 bankruptcy in order to be protected from garnishments, lawsuits, levies, etc relating to the student loans or tax debts for up to 5 yrs even though you would not receive a discharge.

Here are the time frames that must occur between filings for discharge eligibility (Note: the time is counted from date filed to date filed):

8 years between Chapter 7’s. -727(a)(8)

Can filing a Chapter 13 protect the co-signer of my student loan?

Published on: July 12, 2012 | Frank Coxwell

I get countless calls from people asking what they can do to about their parents or grandparents who co-signed for them on a student loan and are now facing garnishment, loss of their tax refunds, or even seizure of their bank accounts because they co-signed and the loans have not been paid.

This is a common tactic for debt collection on student loans. If the student isn’t working – they will go right after anyone who co-signed for the loan. And they have broad powers – there is no notice required – they can garnish, etc without warning unlike collection of normal debt where there must be a lawsuit filed and judgment obtained first, etc.

It’s pretty well known you cannot wipe out student loans through bankruptcy, but if you file a Chapter 13 bankruptcy, you can stop all action – against you AND against anyone that co-signed for your student loan. Chapter 13 bankruptcy protects the debtor and co-debtor. Both do not have to file – just one. If the co-debtor files it protects the main debtor and vice versa. For example – mother co-signed for son’s student loan. Mother files Chapter 13 bankruptcy (maybe even for other reasons) – it protects the son regarding the student loan they both signed for. Or son files Chapter 13 bankruptcy – it protects the mother.

What is a “substantial or undue hardship” when it comes to student loans?

Published on: May 23, 2012 | Frank Coxwell

A debtor must establish a substantial or undue hardship in order to receive a discharge (debt wiped out) of student loan debt in a Chapter 7 or Chapter 13 bankruptcy. Undue hardship typically means that you cannot maintain a minimally adequate standard of living and repay the loan. The rule, found in a New York bankruptcy case called Brunner vs New York Higher Education Services Corp., sets out a 3 part road map for discharging student loans in Chapter 7 bankruptcy.

You must prove that you cannot maintain, based upon current income and expenses, a minimal standard of living for yourself and your dependents if forced to repay the loan.
Additional circumstances must exist indicating that the state of affairs is likely to persist for a significant portion of the repayment period; and
You must have made a good faith effort at repayment.

The definition of student loans now includes private student loans as well as the federally-guaranteed ones and most bankruptcy courts take a hard line on this test, making it extremely difficult to discharge a student loan in bankruptcy, but, in rare cases, possible.

Can bankruptcy help with student loans?

Published on: May 23, 2012 | Frank Coxwell

Yes and no. Student loans cannot be discharged in a Chapter 7 or Chapter 13 bankruptcy (unless you can establish substantial hardship). Changes to the US Bankruptcy Code in 2005 even made private student loans non-dischargeable. BUT – a Chapter 13 does allow you to decrease or stabilize the repayment of your student loan debt for a 3-5 yr period. In a Chapter 13 bankruptcy, you can decide how much you can afford to pay monthly towards this debt rather than being at the mercy of possible garnishment, seizure of your tax refund, and bank account funds. If you are facing hardship due to student loan debt, consult an experienced bankruptcy attorney to fully understand all options and strategies available to you as soon as possible. You may not need to take action immediately, but you need to know what options are available so that you can take action quickly if and when it is needed.