Chapter 13 bankruptcy is a payment plan bankruptcy for
Not necessarily a 100% payment plan.
Student Loans In Chapter 13 Bankruptcy
In Chapter 13, creditors in the same class must be treated, that is, paid, the same percentage of its claim.
Although, just as in Chapter 7 bankruptcy, student loan debt is NOT dischargeable unless you file a lawsuit in the bankruptcy court and prove that having to repay your student loan debt would be an undue hardship for you or your dependents.
An obvious problem for those who are already in bankruptcy, and with student loan debt, is, how do you pay an attorney to file that lawsuit to discharge your student loan debt?
Attorney fees can be paid by the Chapter 13 trustee from the payments you are making.
As always, bankruptcy attorney fees are subject to court approval, but they are paid ahead of most creditors.
What Is A Good Case For Discharging Student Loan Debt?
Funny you should ask. I think I have one now.
A 65 year old grandmother, still working part-time, with custody of 3 grandchildren age 6 and under.
Oh, and a couple hundred thousand dollars of student loan debt.
I am not sure when the government made these loans, but my client did make some payments on them.
Which is one of the prongs, as we bankruptcy lawyers say, of the Brunner test for discharging student loans.
It is not possible that my client’s income will go up, at her age, and the grandkids have a long way to go before they will be on their own.
My client will be 81 when the youngest grand child is 18.
I have filed these cases before, during a Chapter 13 bankruptcy case.
Last time out, we made a deal with the government, as my client was able to qualify for income based repayment of – zero dollars per month.
He has to supply his tax returns every year to re-qualify, but he should be able to do that.
I find that the government will do things in a lawsuit that they cannot do outside of court.
That is, they can waive rehabilitation, to let my client consolidate all the government student loans, which needs to be done to get into the income based repayment plans.
This CANNOT be done with private student loan debt.
Unless the creditor agrees, which I have neither seen nor heard happening.
As always, consult an expert.