Student Loans and bankruptcy

Student Loans and Bankruptcy

English: A photo from the movie My Guaranteed Student Loan (Warr Brothers Films, 2010) showing (left to right) Kai Greene, Aaron Warr, and Toney Freeman (Photo credit: Wikipedia)

Student Loans and Bankruptcy

Student loans and bankruptcy do not mix.  Under current law student loans cannot be discharged in bankruptcy.  They are exempt along with a few other things such as DWI awards, back child support and punitive damage awards

Income Based Repayment is the name of a federal program that factors in current income and family size in an attempt to equitably adjust your payments on your student loan(s).  After 20 years the balance is forgiven but income taxes can be assessed on the balance amount.  Annual income re-certification is required.To brush up on this welcome relief visit

5 years of teaching in low-income areas or working for a non profit or public service organization can earn you forgiveness in full after 10 years of payments. Up to $17,500.00 worth of forgiveness for Stafford loans can be earned by teaching in low income or certain specified districts.  Some lawmakers are pushing to give loans in furtherance of nursing studies special status.  Storm clouds are gathering under the Trump administration for this program.  We will have to take a wait and see attitude but those who are already signed up should be safe.

Student Loans and bankruptcy graduated payments

If these options are not a fit for you you can ask your lender about graduated payments for a time.  These payments will increase later so be aware that this is a different concept from outright forgiveness.  Check in with your lender. Student loans and bankruptcy don’t mix very well. Whether or not interest rates on these loans rise, they cannot be included in Chapter 7 bankruptcy proceedings except under special circumstances.  These circumstances include serious injury or, very rarely, working at a very low paying job where the pay is not likely to change. The bar is very high for relief.  Applicants must demonstrate good faith efforts to repay by trying to find a job, a budget that does not meet the most minimal standards of living and what one judge described as a “certainty of hopelessness” with proof that the condition is likely to persist for a significant portion of the repayment period for the loan.  Success is so rare that many lawyers refuse to take the cases knowing they will be facing an opponent who specializes in beating back these challenges. Payments are usually reduced for Chapter 13 bankruptcies.

The payments you owe will be an albatross around your neck that is always screeching to be fed.  The albatross must be fed every endless month without fail or it will ruin your financial picture and credit score for many years to come.  The enormity of the student debt problem has been a drag on the economy for many years.  New cars are not bought.  Home ownership seems so far away for so many people that they have lost hope.


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After practicing law for 37 years Edward F. St. Onge, Sr. now devotes all his time to helping consumers achieve a high credit score with amazing speed. Learn the counter-intuitive secrets to credit scoring through his down to earth instructions backed by extensive knowledge of the laws and trends. All of the latest tricks and techniques that they don't want you to know now at your disposal. At last a level playing field for the consumer!

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