If you have student loan debt and you're having difficulty meeting your financial obligations, you may be wondering, "Can I include my student loans in bankruptcy?" Except in very limited circumstances, people cannot discharge their student loans in bankruptcy.

However, if you're having a hard time keeping up with your student loans, filing a Chapter 13 bankruptcy can help. A Chapter 13 allows debtors to reduce and/or delay their monthly obligations for a period of 3 to 5 years, often offering much-needed financial relief.

Student Loans Cannot Be Discharged in Bankruptcy

While the bankruptcy discharge can wipe out some types of debts, unfortunately student loan debt is not one of them. Only a very few number of people can discharge their student loan debt. They do this by proving to the bankruptcy court that paying back their loans would cause an undue hardship upon them, and this is very difficult to do.

Usually, student loan debt is only discharged when the debtor has become gravely ill, for example, with terminal cancer or an extreme disability, such as cerebral palsy. Because of this rule, the vast majority of people who file Chapter 13 bankruptcy will have to pay back their student loans after their bankruptcy is discharged.

Still, Bankruptcy Helps Debtors

When a debtor files Chapter 13 bankruptcy, their student loans are treated as nonpriority unsecured debts, just like a credit card or medical bill. Meaning, the debtor is not required to fully pay off their student loans through their bankruptcy repayment plan.

Instead, the debtor's student loans receive a percentage of the money paid to unsecured creditors. In effect, a struggling debtor can use Chapter 13 to help reduce their monthly student loan obligations while their bankruptcy is in effect. This effectively delays the full payments, but the debtor must continue paying on their student loans after the Chapter 13 is discharged.

Interested in filing Chapter 13 bankruptcy so you can gain some relief? Contact a bankruptcy attorney for assistance!