Is Bankruptcy The Answer To Your Student Loan Problems?

Is Bankruptcy The Answer To Your Student Loan Problems?

By |June 25th, 2014|

If you’re in over your head with student loans, chances are you’re getting desperate.

The ads touting new student loan forgiveness programs are just bait-and-switch scams for federal student loan consolidation. Private lenders don’t offer any programs to bring down your payments in the long run, and you’ve read enough to realize it’s an uphill battle to wipe out student loans in bankruptcy.

Filing for bankruptcy so you can try to convince a judge to let you discharge your student loans costs a small fortune and chances of success are slim at best. We’ve talked about the cold, hard reality in the past.


Before you give up all hope and think about leaving the country forever, think about whether filing for bankruptcy is a good idea.

Is Bankruptcy The Hidden Solution?

Even if you can’t wipe out the student loan debt in bankruptcy, there’s a lot that the process may be able to do for you.

Take, for example, credit card debts. Bankruptcy may be able to wipe those out for you. Same with medical and dental bills, personal loans, and some tax debts.

Remove those obligations and suddenly you’ve got a few bucks left over to pay down the student loan debts. It won’t make the problem go away immediately, but at least bankruptcy will give you some breathing room so you can work with the student loan creditors.

Using Bankruptcy To Force A Student Loan Repayment Plan

Even if you don’t have other debts to wipe out, you may decide to use bankruptcy as a way to structure a repayment plan for your student loans.

The repayment plan will run up to 60 months and won’t result in the balance of the student loan debt being wiped out (in fact, the balance may rise if your repayment plan doesn’t cover the accrued interest). It will, however, give you room to breath more freely.

When the repayment plan is done, maybe your income will be high enough to resume regular payments. If not, you can go back to bankruptcy court.

A Tool For Debt Relief

All too often, we look at the bankruptcy process as a way to get out of debt immediately. If bankruptcy won’t help with one specific debt right away then it doesn’t seem worth it.

But dig a little more and you’ll see that bankruptcy may be able to help with student loan problems even without a discharge.

The goal is to get into a better financial position, and that means a review of the big picture. Looking at things on a debt-by-debt basis will only serve to make things worse.

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About the Author:

I've been a consumer protection lawyer since 1995, working to help people end their bill problems. I'm a faculty member at the Student Loan Law Workshop, a nationally recognized speaker, and a long-time member of both the National Association of Consumer Bankruptcy Attorneys and National Association of Consumer Advocates.