Timing Is Everything When Filing For Chapter 13 With Student Debts

4 January 2021
 Categories: Law, Blog

When you are filing for Chapter 13 bankruptcy, you may find it much easier to pay off your debts. However, by filing for Chapter 13 bankruptcy, you may also find yourself in a difficult situation if you also have student loan debts. Oftentimes, you will need to time your Chapter 13 filing carefully with help from a bankruptcy attorney.

Chapter 13 and Discharging Your Debt

To understand why you need to carefully time your bankruptcy based on your student loan debts, you'll need to understand how Chapter 13 discharges your debts. Some filers are surprised to find out that some of their debts may be discharged under Chapter 13 after they complete the repayment program. 

Chapter 13 bankruptcy actually discharges a broader range of debts than Chapter 7. If you're not sure if a particular debt may be discharged, it's always best to speak with your bankruptcy attorney. With student loan debts, you can only discharge them under certain circumstances.

Undue Hardship

You are only allowed to discharge your student loan debts if not doing so would place you under undue hardship. How you time your bankruptcy will affect whether you fall under the undue hardship requirement.

When you have undue hardship, you must meet three requirements:

  • Inability to pay student loan debts
  • Inability to pay student loan debts in the future
  • Previous attempts to make student loan payments

Your bankruptcy attorney will go over the ways in which you may make a good faith attempt to pay back your loan. You may not only make payments but also apply for programs that offer deferment and allow you to have a portion of your debt forgiven. 

Proper Timing for Your Chapter 13 Filing

If you are able to meet all of these requirements and then file for Chapter 13, you may be able to eventually discharge your student loan debts once you have completed the Chapter 13 program. You will still need to speak with your attorney about the next steps to take because your ability to pay your student loan debts might improve or deteriorate.

Even if you are not able to discharge your student loan debts, you may still find it worthwhile to file for Chapter 13 bankruptcy. You will be able to receive an automatic stay and you will not have to worry about being bothered by creditors. However, you should always seek an opinion from an attorney on whether this decision is right for you.

For more information, contact a bankruptcy attorney today.