Student loans in Bankruptcy
Many people are currently struggling to pay their student loan payments and may be wondering if bankruptcy can help them. They may have heard that bankruptcy cannot get rid of student loans and think there is no way for them to get relief from student loan garnishments. While bankruptcy generally will not eliminate your student loan debt, it can help you deal with your student loans in a less direct way.
For people who are unable to set up an income-based repayment plan, or are being garnished by their student loans, bankruptcy can offer a temporary relief from the pressures of student loan payments. While in an active bankruptcy, you do not need to pay on your student loans. The loans still accrue interest, and they will still be there when the case closes, but student loans cannot garnish you while you are in a case. Any garnishment that is active at the time of filing a bankruptcy case must also stop and cannot resume until the case closes. In a Chapter 7 bankruptcy, this may only be six months of time, but in a Chapter 13, the relief can last up to five years.
A Chapter 13 can allow people several years free of student loan payments, or at payments that are much lower. While in the Chapter 13, individuals may also be able to pay on their student loans if they choose. This can be a huge benefit for people who went into default and want to rehabilitate their loans. Without an ongoing garnishment, making the income-based payments can be much easier. Once the case ends, the individual is in good standing with their student loan again, and no longer must worry about losing their tax refund or be garnished due to default when the case ends.
While bankruptcy generally will not eliminate your student loan debt, in some instances it may lessen your financial burden temporarily or buy you time to get back on track with payments. For some people, this is exactly the relief they need.
Kansas Bankruptcy Attorneys