Even though student loans are one of the few debts that are almost never discharged in bankruptcy, a bankruptcy can still help with student loans.
If you are struggling to pay back your student loans, then you might be wondering if filing for Chapter 7 Bankruptcy or Chapter 13 Bankruptcy will be worth it, if they are unlikely to be discharged.
However, there are two main ways that filing for bankruptcy helps with student loans.
1. The Automatic Stay
When you file for bankruptcy relief, either Chapter 7 Bankruptcy or Chapter 13 Bankruptcy, there is a law called the Automatic Stay.
- The Automatic Stay says that no creditor can take any act to collect a debt from you
That is correct, no creditor can collect, not even a creditor with a debt that will survive the bankruptcy.
This means that student loan creditors cannot:
- Garnish your wages
- Get judgments
- Call you or send you billing statements
In a Chapter 13 Bankruptcy, the automatic stay lasts for 5 years.
This means that if you have a hopeless level of student debt, you can:
- File a Chapter 13 bankruptcy
- Make an affordable payment that will be split between the student loans and any other debts
- Protect you from hard collections like bank levies and wage garnishments
2. Get a transcript
Colleges and universities often withhold transcripts and other student records until the student pays off all of his or her tuition.
Courts have decided that this is a violation of the automatic stay.
Remember, any attempt to collect a debt is a violation of the automatic stay.
So if you need your transcript, then you can file a bankruptcy and request the transcript while the bankruptcy is pending.
For some people, bankruptcy helps with student loans, but it is not necessarily the best way to handle student loan debts, but it can be useful.
If you’re struggling with paying back your student loans, then whey not contact us at 612.824.4357 or visit one of our offices in Minneapolis, St Paul, Blaine, or Brooklyn Park, and tell us how we can help you.
Photo Credit: © Alexmillos | Dreamstime.com