Should someone file Chapter 7 or Chapter 13 for student loan debt?

Question

I know a student with student loan debt, both federal and private student loans.  She has tried to get loans consolidated, but no one will help her.  I co-signed for the private loans.  I have been told she should file bankruptcy and I would then also have to file.  I know there are two types, Chapter 7 and Chapter 13.  She should qualify for Chapter 7.  My spouse does not think bankruptcy is a good idea, he says "NO".  I would qualify for Chapter 13. I don't want to file but can't pay her student loans either, and it was not suppose to turn out this way.  She does work; she just does not make enough money.  What can you recommend?

Austin Hirschhorn · Answer

Student loan debt is not dischargeable in bankruptcy so the filing of bankruptcy will not give the filer a discharge from that obligation.  The answer is for the debtor to earn more money or work out a long term payment plan for the student loan debt.  If the private loans are not true student loans under the federal regulations they might be dischargeable in a bankruptcy proceeding but without seeing the loan documentation it is not possible for me to make a recommendation.

Diane Drain · Answer

Normally bankruptcy will  not release either of you of the obligation to pay the student loan(s).  You might pursue other remedies, such as working with the student loan companies.  Check out the Ford program, plus the other available programs.  For the most part those do not forgive the loan(s), they merely give more time to pay them.

William C. Gosnell · Answer

Chapter 13 60 month payment plan. Chapter 7 will not help.

S Hunter · Answer

Generally student loans are not dischargable in a bankruptcy. There are certain circumstances where it can be done but it is dependent upon the facts. There are several loan repayment programs out there. If she is having trouble she should call her congressman or senator's office for help. A great program for her may be the income based repayment plan which is based upon ability to pay. In some cases a student's payment is $0.

Eric Lewis · Answer

Bankruptcy is not a good option to address student loans unless you are disabled and have no income whatsoever for the foreseable future, among other things.  Try to work out something with the student loan lender.

Meredith P. Ezzell · Answer

Unfortunately, neither federal nor private student loans are currently dischargeable in either Chapter 7 or Chapter 13 bankruptcy.  You should contact your congressman and senator to encourage them to support recent efforts to change this with regards to private student loans.

Ethelyn Boak · Answer

Under current bankruptcy law, bankruptcy will not erase student loans, public or private, unless the person with the loans can show it would cause "undue hardship" to repay them. Undue hardship is subject to interpretation, but inability to earn enough money is probably not considered an undue hardship under current law.

Javed Ellahie · Answer

A bankruptcy filing will not discharge the Student loan unless you can demonstrate severe hardship to the Judge. You could try obtaining deferrals or other work outs from the lenders.

Cary Smalley · Answer

Generally student loans cannot be discharged in bankruptcy.

Todd Whiteley · Answer

Student loans ARE NOT generally dischargeable debts in a bankruptcy case. It doesn't matter whether a person files chapter 7 or chapter 13.  This statement is true in the majority of bankruptcy cases, but like most things in bankruptcy,  exceptions exist.  Student loans may be discharged in bankruptcy when the debtor can show that being required to pay the student loan debt would create an"undue hardship" for the debtor.  The unfortunate irony is that your friend may qualify under an "undue hardship" standard, but you may not.  If you intend to file bankruptcy only to discharge student loan debt, you will want to compare the "undue hardship" standards against your circumstances.  No sense in filing bankruptcy if it doesn't discharge your student loan debt.  You might want to contact the student loan lender and settle the debt.  Note:  Since Student Loan debt recently surpassed Credit Card debt nationally, there is a lot of activity in Washington D.C. seeking to make student loan debt dischargeable through bankruptcy.  NACBA (National Association of Consumer Bankruptcy Attorneys) is one of the groups trying to get this change passed.

Steven Alpers · Answer

You should consider filing.  Discuss the issue with a lawyer.  The effect on your credit may not be worth it depending how much you have agreed to pay.

Jeremy Shephard · Answer

Under your fact scenario, I would not recommend filing bankruptcy. Bankruptcy is not going to help either of you. It is extremely difficult to discharge (ie: get rid of) student loan debt and I'm not sure you would be able to meet the guidelines.   She could file a Chapter 13 bankruptcy to reduce the payments temporarily during the time of a bankruptcy. I would recommend she look further into the consolidation options before going the Chapter 13 route.

Barbara A. Fontaine · Answer

Are these student loans with government assurance?  If you just used a credit card or borrowed on your own name then these are just loans.  But if they are government guaranteed, as are most student loans, then bankruptcy is no help at all.  Have her try to get some help from the originator of the loans to lessenthe amount per month and have a certain number of years, not forever, for repayment.? I think there is a new program to help.  Your husband is right. It cannot help her but could really mess you up.

Harry Roth · Answer

Neither.  In general student loans are non-dischargeable.  Unless you, or your daughter, have other financial issues besides the student loans, bankruptcy is not going to help.  If she files bankruptcy to get rid of other debts, the student loan debt will remain.  Ditto for you, whether it is a7 or a 13.  You being married complicates matters for you.  I recommend that your daughter apply for a deferment on her student loan payments.  I also recommend that, while the loans are deferred she make whatever payments she can pay anyway, so that at least the problem is not getting worse.  Your daughter is at the beginning of her working life and her wages will likely increase in the future.  She will be better able to pay her student loans then.    It is small comfort, I know, but you are not the only one with this problem.  A whole generation of young people are graduating with very high student loan debt and finding that the jobs they can get just don't pay enough to live and still pay the student loans.  While you can only deal with the system as it is now, the more pressure on Congress to fix this problem the better.

Marc Stern · Answer

Bankruptcy is probably not an answer, at least now.  Since you are in Washington, you may have a defense because your husband did not consent to the loans, however, this is something completely different.  I would recommend that you spend time calling your Senator and Congressional Representative about the student loan mess and the need to provide some relief.  Until Congress changes the law, there is no good answer.  For the same reason, your friend should seek Congressional help in dealing with the student loan bureaucracy.    There are 2 reasons for this. 1) There is a federal bureaucracy to deal with this and legislative oversight can produce beneficial results.  2)  Even if your friend does not get a direct result, the fact that she called and complained will have an effect.  Sorry, there are no good answers.

Daniel James Wilson · Answer

I am sorry, but you are in a real bind.  Student loans are VERY rarely dischargeable.  The standard is hardship.  A recent case involved a student loan debtor who was very limited in her capacity to work because she had MS.  She was also caring for her handicapped mother.  Hardship discharges for student loans are very rare.  I recently filed a Ch 13 for a client for the sole purpose of putting the issue off for five years.  The solution will be political.  I advise you to call around and talk to an experienced Ch 13 attorney.

George Gingo · Answer

Neither.  It doesn't work on student loans.

Loren Zahn · Answer

Student loans are generally not dischargeable, so it is unlikely that either chapter will be of benefit to you, unless you have other debt which is dischargeable that eliminating would assist you in paying the student loans.

Charles Schneider · Answer

Filing a chapter 7 or 13 bankruptcy does not discharge a student loan unless the debtor files a lawsuit within the bankruptcy and successfully proves that he/she would suffer an undue hardship if made to pay the debt. That's a high burden of proof. A chapter 13 however can consolidate the debt and protect the co-signor if there is a 100% payment with interest of the student loan.

John Brennan · Answer

Student loans are generally not dischargeable in bankruptcy.  I have to look at the specifics and your guarantee provisions.

Theodore Araujo · Answer

The student loan would be listed in either your Bankruptcy Petition or your child's.  However, the student loans are very likely NOT Dischargeable, i.e., private or not it is very unlikely that you can get rid of them in bankruptcy.  When you guaranteed the loans, or co-signed, you created a liability equal to that of your child.  Even if she filed bankruptcy and got rid of the liability for the student loans you would still be liable.  This is a complicated topic and needs a detailed financial review, but in NY it is almost impossible to discharge student loans in bankruptcy under what we call the "Brunner" test, especially given the fact that the student loan repayment plans include the "Ford" plan that would allow your child to make payments based on their income.

Edward Olson · Answer

In general, student loans are not dischargeable in bankruptcy.  There is an exception for "hardship" cases.. but that is very hard to prove.      You need to hire an attorney soon.  You are most likely going to end up in ligation or at least settlement negotiations on these loans.

Robert De Groot · Answer

Student loans have been largely considered as non-dischargeable for many years. The filing of a chapter 7 or 13 will not help. Student loans must be paid and one must jump through a number of hoops, which most people simply cannot do, in order to get them discharged.

Stuart Nachbar · Answer

Filing either chapter 7 or chapter 13 will not help as student loans are not dischargeable.

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Should someone file Chapter 7 or Chapter 13 for student loan debt?

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