Does Chapter 7 Bankruptcy Include Student Loans?
Millions of people across the country are currently borrowing or paying down student loan debt. While your education may have been valuable to you and your future, the student loans you have to pay back can be overwhelming. But what are your options if you can no longer afford to make your student loan payments? And does Chapter 7 bankruptcy get rid of student loans?
Despite what you may have heard, it is possible to discharge student loan debt through bankruptcy. However, doing so is much more difficult than getting relief from other forms of debt.
Does Chapter 7 Bankruptcy Cover Student Loans?
Chapter 7 bankruptcy can help you get relief for your student loans, but the bar to doing so is quite high.
In order to qualify to have your student loan debts discharged in Chapter 7 bankruptcy, you have to show that paying off your student loan debts would cause you undue hardship. Questions that may be asked during this process include:
- Are you unable to make your student loan payments while also affording a reasonable, minimum standard of living, both for yourself and any dependents you have?
- Will this hardship persist for the majority of the time during which you are repaying your debt?
- Have you made your best effort to pay back your student loans?
If your answers to all three questions are “Yes,” then you may qualify to have your student loan debt discharged.
However, even if you meet all three requirements, it is still at the court’s discretion whether or not to discharge your student loans. In addition to the usual Chapter 7 bankruptcy process, you will have to participate in a special hearing specific to the topic of student loans.
Things to Consider Before You File for Chapter 7 Bankruptcy
You should always consider the benefits and repercussions of bankruptcy before you file.
Chapter 7 bankruptcy does provide significant relief from your debts, as they’ll essentially be wiped out. Your obligation to pay credit card debts, a mortgage, or car loans will be eliminated, but you will also have to surrender your collateral. Chapter 7 bankruptcy allows you to start over with a clean slate.
However, your credit will suffer for some time. A Chapter 7 bankruptcy will remain on your credit history for ten years. In addition, any non-exempt assets can be used to pay off your debts.
Alternatives to Chapter 7 Bankruptcy for Student Loans
If you don’t qualify to have your student loan debt discharged in Chapter 7 bankruptcy, you do have a few other options for some form of relief, such as:
- You can apply for an income-based or income-driven repayment plan for federal loans. Your payments are based on your income. The repayment term for your loans is extended to 25 years.
- You can apply for federal loan rehabilitation or consolidation if your student loans are in default.
- For private loans, your private loan servicer may have relief options available to you. You should contact them for information or discuss your case with a lawyer.
Talk to Our Knowledgeable Chapter 7 Bankruptcy Attorneys in Cary, NC Today
If you are drowning in student loan debt or otherwise need debt relief, filing for bankruptcy may help. But before you do so, you should speak with an experienced Cary bankruptcy lawyer about student loans and bankruptcy under Chapter 7.
The board-certified Chapter 7 bankruptcy specialist attorneys at Sasser Law Group have helped thousands of people in Cary, NC, and the surrounding region overcome their debt burdens. You can rely on our more than 20 years of experience in the field and trust that we will always do what’s best for you. Call us today at (919) 319-7400 or contact us online for a free consultation.
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For more than 20 years, the Sasser Law Firm has been helping individuals and business owners sort through financial hardships to see the light at the end of the tunnel. Our North Carolina bankruptcy attorneys are all board-certified specialists, which means we have passed a complex exam, undergone a thorough peer review, and continue to earn legal education credits in this ever-evolving area of law.