Student Loans and Bankruptcy

Dischargeability of Student Loans in Bankruptcy:

by: Jonathan Goldsmith Cohen
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The way to look at student loans isn’t “How can I get out of my student loans” but “How can I manage them over the long term?” By: Jonathan Cohen

Perhaps you have Googled or heard that there is case law that allows for student loans to be discharged (forgiven) through a Chapter 7 or Chapter 13 Bankruptcy filing. I’ll cut to the chase. Your student loans are not going to be forgiven through a bankruptcy filing, bankruptcy court litigation to discharge the loans, or a New Jersey State Superior Court action seeking forgiveness on the loans. The case law affords forgiveness only for those who are unable to ever work again. An example would be someone who has suffered traumatic injury or had life-threatening health problems and is on permanent disability. The way to look at student loans isn’t “How can I get out of my student loans” but “How can I manage them over the long term?”

Managing Your Student Loans Through Chapter 13 Bankruptcy

If you are unable to defer your student loan payments anymore, work out an affordable payment arrangement with your student loan creditors, are in default, need breathing room to get your financial footing, and/or there is no way for you to make the minimum payments, it is time to think about a Chapter 13 Bankruptcy. Chapter 13 Bankruptcy stops collection efforts on all student loans for 36-60 months and allows you to make voluntary payments to your student loan creditors during the time you are under the protection of the bankruptcy code. While in Chapter 13, student loan creditors cannot demand any payment, garnish wages, levy bank accounts, or seize your tax refund and apply it to the loan balance(s).

What Will This Do To My Credit

If you aren’t making payments on a long-term debt obligation such as these loans, your credit has already been adversely impacted. The credit reporting agencies see that you have fallen behind on a long-term obligation. In addition, if the loans were co-signed by a parent for example, your non-payment on student loans will damage their credit. A Chapter 13 can actually improve your credit after problems dealing with student loans because you can get back into a status where the loans are being reported as being paid on time.

As always, e-mail me at or call me at 732-741-9500 with any questions regarding student loans and Chapter 13 Bankruptcy. I look forward to hearing from you.

Also Read:
New Jersey Higher Education Student Assistance Authority Loans (NJ CLASS Loans) and Bankruptcy