Student Loans & Chapter Seven Bankruptcies

Will a Student Loan be Discharged in Bankruptcy?

I filed a chapter 7 a few months ago; can pay all my bills except the overwhelming student loan debt I have?

Do I have any options for relieving the debt or at least the interest on the student loans??

Daniel

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Of course you can pay whatever bills you want, subject to certain rules concerning preferential transfers. If you treat your creditors equally, they have no reason to complain.

If you’ve filed for Chapter Seven solely to get out from under your student loan debt, you’ve been badly advised. It is highly unlikely your student loan debt will be discharged.

You can either dismiss the Chapter Seven or convert it to a Chapter Thirteen. That way you can work out a repayment schedule that may cover your student loan debt – it won’t be discharged, but maybe you can change the repayment terms somewhat. Consult a qualified bankruptcy attorney to see what your options are.

I don’t know if defaulted on your student loan debt or not. If you’ve kept your payments up, contact SallieMae and see if you can work out better terms.

If you haven’t, that and the bankruptcy filing will probably prevent them from helping you. See Student Loan Repayment Options: Student Loan Repayment Problems: and More Student Loan Repayment Problems for more information on what options you might have left.

In December 2005, The United States Supreme Court unanimously ruled that the Social Security Department can reduce your old age social security payments by a certain percent - in this case 15% - for those who have defaulted on their student loans. The money is used to defray the outstanding student loan balance.

In this case the pensioner argued that he was disabled and it would be a hardship to lose a portion of his retirement payments.

The Supreme Court did not agree. So for those who have ignored repaying their guaranteed student loans, the day of reckoning may still lie ahead.

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