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How are student loans handled in Chapter 13 bankruptcy?

People in Ohio and all over the nation are struggling to repay student loans, often well into adulthood. Because failure to keep current on student loans can result in continued creditor harassment and other issues, many people have considered filing for Chapter 13 bankruptcy as a means of tackling outstanding debt once and for all. If you find yourself in this situation, you may be wondering just how student loans are handled under Chapter 13 bankruptcy.

According to StudentLoanBorrowerAssistance.org, having student loan debt discharged is largely a matter of proving undue financial hardship. This is accomplished via the Brunner test, which refers to a specific set of criteria an applicant must meet to have his or her student loan debt fully discharged by way of bankruptcy. Most courts around the country utilize this standard when determining whether debt should be discharged, which is based on a 1987 court decision.

In order to meet the criteria set forth by the Brunner test, you must establish that you are unable to pay back student loans with your current income and expenses. This entails meeting what is referred to as a “minimal standard of living”, which would be imperiled if you were to remit money owed for a student loan. Additionally, you must also show that your inability to pay will continue for a length of time, as well as that you’ve thus far made every attempt at paying back your loans.

Even if you don’t meet the criteria for undue financial hardship, filing for bankruptcy can be useful in other ways. For instance, Chapter 13 entails devising a repayment plan, which can offer a term ranging from three to five years. You will also have more control of how much your monthly payments are under Chapter 13, which can be exceedingly beneficial for getting current on debt. 

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