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Every week someone calls to ask me about getting rid of student loans in bankruptcy.  Most of them have heard that bankruptcy can’t help with student loans.  They’re half right.

Student loan debt is generally not dischargeable in bankruptcy.  This means the debt will still be owed at the end of the bankruptcy.  However, bankruptcy can still help with collection and sometimes repayment of student loans.

Rarely would a chapter 7 bankruptcy be helpful in dealing with student loan debt.  The automatic stay would stop collection activity during the time the bankruptcy is pending, but, at the end, the balance would still be owed.  Of course, if you were unable to pay the student loans because of other pressing debts, the bankruptcy may free up some cash.  However, the debt will be untouched by the bankruptcy.

A chapter 13 is used to repay and restructure debt.  Using a chapter 13 a person can put off paying student loans for up to sixty months.  Additionally, a portion of the student loans will usually be repaid.  At the end of the chapter 13, a balance will still be owed.  However, the hope is that at the end of the chapter 13 a person’s financial condition will be greatly improved making you able to repay.

Bankruptcy may not be the perfect answer for dealing with student loan debt but at least it can help.