Bankruptcy and Student Loans

If you have a student loan, you are not alone. With the costs of college doubling over the last four decades, millions of people have student loan debt well after they graduate. The average student loan debt for a 2020 graduate in Florida is $24,454. The majority of student loans are through the federal government, while a small portion are through private lenders. If you are having financial difficulties and are considering bankruptcy, you will want to know whether your student loans will be discharged. In general, student loans have not normally been discharged as part of bankruptcy proceedings, and a person is still responsible for paying this type of debt.

Type of Student Loans

Students generally may obtain either a federal student loan or a private loan. These types of loans are typically designed to pay for the major costs of education, such as tuition and books, as well as room and board. The bankruptcy code makes it more difficult, but not impossible, to discharge student loan debt in bankruptcy. However, some types of private education loans do not fall under the same category as federal student loans. For instance, some private loans for education where the amount borrowed was higher than the costs of attendance may be discharged in bankruptcy.

Student Loans are Unsecured Debts

Student loan debt is considered non-priority and unsecured debt for bankruptcy. This is the same type of debt as credit cards and medical debts. Student loans are generally not dischargeable in a Chapter 7 bankruptcy. When you file Chapter 13 bankruptcy, there is an immediate stay on the payment of a student loan. However, it is important to note that interest on the loan will continue to accrue. The repayment of your student loan will be included in the payment plan for all your debt. Your payments will be of an amount that you can afford, and the length of repayment may vary based on your ability to pay and the amount of debt you have.

File an Adversary Proceeding

One way that you may be able to include student loans as part of a bankruptcy discharge is by filing an adversary proceeding. An adversary proceeding is a legal process that you can file to show that repayment of the student loan would be an undue hardship on you. It is a lawsuit within the bankruptcy in which you can prove your student debt should be discharged. This is an extra step in the bankruptcy process, but it may be necessary in situations where you are unable to repay a student loan. If granted, a student loan would be discharged along with other debts as part of a Chapter 7 bankruptcy.

Seek Legal Guidance

If you are considering bankruptcy and you have student debt, you will want to consult with a knowledgeable bankruptcy attorney. Your lawyer will review your needs and will guide you through the process. Your attorney will give you some options regarding bankruptcy and how you may be able to handle your student debt. To learn more about bankruptcy, contact us at Adam Law Group at (904) 822-4595 to schedule a consultation.