Even in bankruptcy, student loans do not get discharged except in very rare cases. So if you are finding it difficult to pay for your student loans, you can go ahead ad file for chapter 13 bankruptcy as it would allow you to cut down or delay your monthly student loan obligations.
We will educate you on what happens to student loans in chapter 13 and how it would help you in managing your student loan.
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What Happens To Student Loans In Chapter 13
Even though you go bankrupt, it still doesn’t mean that all of your debts would get wiped out because we have debts that are regarded as nondischargeable debts.
It is a bit unfortunate that student loans fall under such a category of debts. Generally, the only way you can get to use bankruptcy in discharging student loans is by proving that trying to pay back those loans has become an undue hardship for you. Unfortunately, it is quite difficult to prove this, and it is granted in rare cases.
One of such cases where it gets granted is if there is a severe disability, and as a result, you are required to pay back all of your student loans even after receiving a bankruptcy discharge. In chapter 13, bankruptcy, student loans get to be treated as debts of nonpriority, just like in medical bills and credit cards.
What this means is you are required to pay out all of these debts in full, and this is where you can be able to cut down on what you pay as student obligations monthly, or you can have them delayed thanks to chapter 3 bankruptcy.
Furthermore, if your chapter 13 bankruptcy eventually gets over, you must go back to paying out your student loans. There are also circumstances where you would need to pay out your student loans outside of bankruptcy, but this depends on where you live.
Most jurisdictions do not permit payment of student loans outside bankruptcy, and this is because it is believed it would discriminate against other unsecured creditors unfairly by cutting down on the amount they would get paid through bankruptcy.
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How Can Chapter 13 Help You In Managing Student Loan Obligations
Even though it is impossible to discharge student loans in bankruptcy, Chapter 13 is there to help you reduce or delay your monthly obligations, and listed below are some of the ways that chapter 13 can get to be of help;
The Automatic Stay Prohibits Student Loans
The automatic stay would go into defect if you end up filing for Chapter 13 bankruptcy, and that would prevent all creditors from trying to get back what they are owed.
It also means that you would not be embarrassed by the student loan company during your bankruptcy period, and this period is likely to last as long as five years.
Chapter 13 Bankruptcy Can Delay Student Loan Payments
Since the automatic stay has already provided some protection, filing for chapter 13 bankruptcy does not allow you to make your regular student loan payments anymore. Still, It would instead pay it through the terms of the plan in your chapter 13 bankruptcy payment.
If your income is little or nothing, you might not have to pay for anything at all, but you should have it at the back of your mind that interests would always accumulate, and you would also need to pay them back once the case has been closed.
Chapter 13 Bankruptcy Can Reduce Your Monthly Obligations
Through your chapter 13 plan, you can still make some payment portions of your student loan, but why chapter 13 is beneficial is it would only allow you to pay what you can afford during this period.
If you cannot afford to pay the regular student loan, then you can go ahead and lower your monthly obligations meaning you can no pay a smaller amount. This chapter 13 plan can go on for as long as five years so that you can be able to boost your income and can go back to afford to make your regular payments.
Summary – What Happens To Student Loans In Chapter 13
I guess you would agree with me that bankruptcy isn’t always the best answer when dealing with your student loan problems, but it can be of great help in some situations.
Chapter 13 bankruptcy aims to take some financial pressure off your back, and it has been helpful to many people over the years.
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