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Can you use Chapter 7 or Chapter 13 for student loans?

On Behalf of | Nov 6, 2020 | Bankruptcy

As a student, you can’t help but watch your college debt mount. You’re still paying full price, even though many of your classes are just streaming online, from home. The job market doesn’t seem robust. You’re worried that you’re going to graduate with a debt that you can’t afford. Is bankruptcy an option?

Maybe. It needs to “impose an undue hardship” on you. It also needs to be unlikely that you’ll be able to pay the debt off. If you’re just worried about getting a job after you graduate, that’s not enough. If there’s a reason that you can’t work and never will be able to, and if the hardship impacts you and your family, then you may have a case. 

In short, the government does not want to forgive all of these financial loans just because people want to have less debt or because they’re not earning quite as much as hoped to earn. They only want to forgive the debt in more extreme cases where it is essentially ruining someone’s life. 

As for the question of whether you can use Chapter 7 or Chapter 13, the reality is that you can do either. Chapter 7 liquidates assets to pay off debt — not that student loans come with any real assets. Chapter 13 reorganizes debt to make it possible to pay it off over time. 

What works for you depends on your specific situation. Just be sure you know what is required of you and what legal options you have at your disposal. It’s best to discuss the specifics of your situation with an experienced advocate as soon as you can.