Student Loans and Bankruptcy

Discharging student loans through a Bankruptcy is very difficult to do.  The U.S. Bankruptcy Code states that a debtor may obtain a discharge of a government-sponsored student loan only if repaying the loan would impose an "undue hardship" on the debtor and his dependents.  That typically means that the debtor cannot repay the loan and maintain a minimal standard of living.  This is an extremely tough standard to meet.  Consequently, it is rare that a student loan is discharged during a Chapter 7 or Chapter 13 Bankruptcy.

Fortunately, your student loan lender is forbidden from taking any legal action against you during the Bankruptcy process.  This prohibition lasts the entire time you are in Bankruptcy.  Interest may continue to accrue and will be tacked-on at the end of your case. In Chapter 13, we advise clients to pay the student loans directly, when extra funds are available, as the interest over 3 to 5 years can be significant.

If your student loan was not in default prior to the Bankruptcy filing (meaning you failed to pay for more than 270 days), the account will usually be re-aged and considered current upon the conclusion of the Bankruptcy case.  This is a good time to negotiate with the lender for a payment plan you can afford.  If the student loan was defaulted prior to the Bankruptcy, the lender may offer a loan rehabilitation program.  Your student loan lender has many repayment options after your Bankruptcy case ends, including the Income Based Repayment Plan, which limits your loan repayment to 15% of your income and offers loan forgiveness after 25 years of repayment (or 10 years for public service employees). 

If you have uncontrollable debts, including student loans, please call the Law Office of Nicholas R. Westbrook at (713) 893-6204 to discuss your options.  There are many ways to deal with student loan debt, and we can help explore your options.  Call for a free legal consultation at one of our many Houston locations.  Mr. Westbrook is a dedicated and experienced Houston Bankruptcy attorney who can assist you during this difficult time.  Stop letting debt ruin your life.