Because of changes to Bankruptcy Code in 2005, you rarely can discharge your student loan debts via Chapter 7 bankruptcy. By rarely, as with any legal form, there are some ways around this law. You can in fact appeal for a undue hardship exemption, which in effect shows this debt puts too much of a burden on you. These laws can be very complex, and it's very hard to get an accepted undue hardship appeal. In cases where you have a disability or something else making it so you cannot work, you can sometimes get the undue hardship. However, if you are capable of working, you quite often have to pay the student loan.
This isn't meant to say you have no options; you do. You can in fact file Chapter 13 bankruptcy in order to pay the debts in installments. We will now go over the key points you need to know in successfully filing Chapter 13, how you can pay off your student loans, what other ways Chapter 13 helps, and how to get legal help.
Successfully Filing Chapter 13 Bankruptcy
Simply put, Chapter 13 allows you to discharge debts by paying some or all of the debt. Sometimes you pay a fraction of the debt, other times the full amount. While Chapter 7 is a way to eliminate debt, Chapter 13 buys you time to pay on what debts you owe.
Student Loans and Chapter 13
You are not always eligible for bankruptcy. If you owe more than $1,081,400 in secured debt or $360,475 in unsecured debt, you are not eligible for Chapter 13. You must also be able to prove you can afford the repayment plan. If you have no income coming in, you won't be able to keep up with the repayment plan. While you may not pay the balance in full, the repayment plan allows you to rebuild your finances so you can come out in the clear when done.
Chapter 13 Benefits
There are some other consideration with this form of bankruptcy. For one, you can buy time to pay off other debts so you can focus on your student loans. If you have a home, for example, you can protect it with Chapter 13. It's the same with a car and other assets: you can keep them and pay over a period of time on the debts. If you can buy time to pay off your home and car debts, you might have a better chance with the student loans.
Who can help?
In any bankruptcy case, you need an experienced lawyer. While it may seem simple to fill out some paperwork, appear in court, make your points, and come out some time later free of debt, it does not work that way (though it would be nice). Bankruptcy is a very complex legal process. And an experienced lawyer is not too expensive when you think of all the benefits a good one can bring. So if you're unsure of how to protect your assets, avoid losing everything, or simply paying on your student loans, contact an experienced bankruptcy lawyer today.
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