Today, anyone attempting to claim Chapter 7 bankruptcy has to show that an undue financial hardship will result if the loans in question are not discharged. Since in a lot of cases with filing bankruptcy and student loans make up a very large portion of the individual’s debts, it is possible that a portion of the loan may be discharged by the judge, but in most cases a large proportion of the loan will still remain as a legal debt. In some other cases when filing bankruptcy and student loans are reviewed, if the loans are found to have been sold on multiple times to other lenders and with changing interest rates it can be very difficult to determine an exact balance, in these cases, if you’re lucky some or all of the loan could be discharged.

Abiding by the provisions of Chapter 13 bankruptcy, it is possible for a debtor to have arranged all of their unsecured and secured debt to become part of a repayment plan through the services of a court trustee. In these cases of bankruptcy and student loans happen to be included; the person has to meet specific criteria, for example: showing that they do indeed have the sufficient amount of capital available to make the monthly payments determined by the court to pay off their total debt within a five years period.

Proving the debtor has the capital to pay

He’s an example: if someone has a total outstanding debt filed in bankruptcy court of say $100,000, the trustee will them divide the $100,000 total by 60 months (5 years) to come up with a monthly payment of $1,667. If that someone can actually show that they do indeed have earning of that amount plus the necessary capital living expenses, it may be possible for them to file Chapter 13 bankruptcy and student loans could be included in the amount.

Having said that, if someone’s capital each month does allow for all their expenses counting the payment to the court, Chapter 13 won’t be allowed. Another option could be to file Chapter 13 bankruptcy to get rid of most of their other debts, thus freeing up funds to be able to pay the student loans. For a lot of people filing bankruptcy and student loans payments afterwards will put a big dent in their income, but with any luck after a period of time, it may be possible for them to secure a loan with lower interest rates and lower payments to pay off their student loans.

So filing bankruptcy and student loans don’t always mix well, but it’s not impossible to do in some cases. If you think you have a chance and you have been advised that bankruptcy is the right option for you, then you can give it a try, but like as always treed carefully, bankruptcy is serious business.