What can be done about student loans?

Student loans are generally not dischargeable in bankruptcy.  Can they be discharged?  Yes but it is very hard.  I don't suggest anyone think that it is going to be easy to do.  If you want to discharge them, my first suggestion is to see if you discharge them using the administrative process outside of bankruptcy. This is the first step down this road.  As I practice law in Kansas and Missouri and they agree on very little, I would be happy to talk to you about if bankruptcy can help you with your student loans on a case by case basis.  This offer is only good for Missouri and Kansas residents.

Chapter 7 and Student Loans

In the old days, before 1997, we had more options on how to discharge student loans.  Those days are over. In chapter 7, you would need to file an adversary complaint to discharge your student loans in the two places that I practice (Western District of Missouri and the District of Kansas).  It is possible, of course to discharge student loans but it is not automatic.  The Court rules on a case-by-case basis and the student loan creditors fight discharge with everything they have.  Expect this to be a hard road, assuming that their loans could not be discharged using the administrative process outside of bankruptcy.  

Chapter 13 and Student Loans

In the Western District of Missouri, you have several options for student loans.  If you want to discharge them again it is very hard but not impossible. If you want to pay them, you must use the following tests:

1.  Will the payments that come due during your bankruptcy pay off the loans in full?  

Yes! -- Then the loans must be treated as any other unsecured non-priority debt.  Bad news for most  Debtors!  How this would work is.  If you are paying 10% to unsecured non-priority creditors then the loans get 10% paid as well.  This is true even though you will still owe the balance at the end of the case.  

No! -- Then you have two options:

A. Treat them as any other unsecured non-priority debt.

B. Pay them through the plan the monthly amounts due under the contract.  (Please note that you can, with Court approval modify the contact by agreement with the creditor).  

C. Not pay during the life of the plan.  (This option is the less favored because the loans are just growing.  If you can pay anything on the debt I advise that you do so.

All of the above assumes that you really owe the money and that the school you attended is not on the bad school list, where the government has agreed that students did not receive value for their loans and those debts are dischargeable outside of bankruptcy. 


Susan Bratcher
Connect with me
Owner and Attorney