However if the student has a fairly large student loan debt, bankruptcy can often be an option to be used to get rid of additional unsecured loans which in doing so can give the student more money to help pay off his/her actual student loans. It is also true that although the government has done a lot to make sure that federal student loan bankruptcy cannot be carried out, they have thankfully provided other ways to help students such as, limiting the amounts that the student can be made to pay for his or her student loans depending upon how much income he or she has. It was also true that in some cases when a student has an excessive amount of debt sometimes he or she can obtain some financial aid.

Additionally within the bankruptcy law there is a clause that states if it can be proven that obligating a student to pay his or her loans would result in undue hardship upon his or her shoulders, the elimination of debts will be performed. However the truth is that it is extremely difficult for a student to prove that he or she is under an undue hardship and so students rarely manage to achieve a total elimination of their debts.

Chapter 13 bankruptcy, one of the few options?

Avoiding any aggressive and ugly collection actions can sometimes be achieved with a federal student loan bankruptcy using the 13th chapter of bankruptcy. But only if the person in question meets all the necessary criteria. What can happen if all goes well is that a court trustee may oversee loan repayments and make sure that while loans are being paid off the students still has enough income to survive. If this does happen the rate that the student will have to pay for his or her loans will not necessarily always be the same during the chapter 13 bankruptcy, for instance if the persons income happens to increase the student debtors will be in their right to demand a higher rate.

The reality is that most students will not be able to eliminate their debts with a federal student loan bankruptcy, but most will be able to have other obligations released/eased so that their main student loan debts will be possible to be managed.

Remember the best way to go about your debts and bankruptcy is to acquire the skills of a trained lawyer to deal with your case and advise you on what you should do, it will cost you but then in the long run it will probably turn out for the best.

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.