Law Office of Judith A. Descalso Law Office of Judith A. Descalso

Is it true that bankruptcy can't help with student loans?

When an Escondido resident is considering whether or not they should look into a personal bankruptcy filing, the decision can be driven by a variety of reasons. Some people may have thousands in credit card debt - so much that they think it might be impossible to pay it all back with interest accumulating every month. Others want to stop foreclosure actions on their homes and know that filing for bankruptcy will stay those proceedings. And, increasingly every day, millions of Americans are dealing with medical debt. However, now and in the years to come, there will be millions more facing another kind of debt - student loan debt.

So, is there an answer on how best to approach student loan debt? There are definitely options out there, but, unfortunately, a Chapter 7 bankruptcy filing is not currently a viable option. Student loan debt, as many of our readers know from previous posts here, cannot be discharged in a bankruptcy filing. Even more unfortunate, however, is that there was seemingly some sentiment amongst our nation's leaders in recent months to change this prohibition - before a number of fiscal battles paralyzed the national government, leading to a "shutdown."

However, as a recent article noted, there are still advocacy groups pushing Congress to consider changes to the bankruptcy laws. There may actually be enough support to at least allow private student loans to be including in future bankruptcy proceedings, although the changes will need to occur through the legislative process.

While student loan debt cannot currently be discharged in a bankruptcy proceeding, that doesn't necessarily mean that a bankruptcy filing can't help an Escondido resident struggling with debt. Once most other forms of debt are discharged through bankruptcy, a person's income could be aimed at the student loans, free from the obligation to pay back other debts.

Source: Investor Place, "Student Loan Bankruptcy: A Double Whammy," Alyssa Oursler, Oct. 8, 2013

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