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Student Loans and Bankruptcy. What You Need to Know?

kokou adzo



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Student loans and student debt is a problem that many US citizens face throughout their lives. It is known that student loans are harder to get discharged than other types of unsecured debt. However, it is not impossible. In this article, we will discuss how to file for student loan bankruptcy and discuss the types of bankruptcies, Chapter 7 and Chapter 13, in more detail.

The General Challenge of Discharging Student Loans in Bankruptcy

Student loan bankruptcy works differently than other loan discharges, and the process is far more complex. One of the reasons is that the current bankruptcy laws have been created so that it is challenging to discharge student loans in bankruptcy, whether granted by commercial banks or the federal government. Even if everything is filed correctly, that does not guarantee student loans will be discharged. However, the US government has been addressing the problem and been trying to make the process easier by creating new regulations.  

Overview of the Legal Landscape

Here is a general overview of the legal landscape, the different types of bankruptcy, and the difference between federal and private student loans.

The Basics of Bankruptcy

Investopedia defines bankruptcy as “a legal proceeding initiated when a person or business is unable to repay outstanding debts or obligations.” In the case of student loans, bankruptcy is needed when people cannot make their payments on time and struggle to repay their student loans.

Types of Bankruptcy: Chapter 7 vs. Chapter 13

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Chapter 7 and Chapter 13 bankruptcy might be a solution for some people with student debt.

In the first case, debtors must prove limited available income for repayment of debts, and the entire process can take up to four months. Whereas Chapter 13 requires some income for debt repayment, and debts can be restructured, and some of them will need to be repaid.

Understanding Student Loans in Bankruptcy

It’s important to note that regardless of which approach you take with the types of bankruptcies, you’ll need to demonstrate that repaying the loans would be an undue hardship. This means that you’re unable to maintain a basic standard of living and are experiencing ongoing difficulties.

Federal vs. Private Student Loans: A Legal Distinction

You need to understand the difference between federal and private student loans in order to navigate the complexities of student loan bankruptcy. The government grants federal student loans and they usually come with specific advantages, making them more eligible for loan forgiveness programs. On the other hand, private student loans are provided by private lenders and have fewer options for repayment plans.

The Bankruptcy Process for Student Loans

The bankruptcy process for student loans is not an automatic process, and it might be challenging and time-consuming. That does not mean one should give up easily. If a person can prove to the bankruptcy that the repayment of their loan would result in undue hardship, the court may consider their case. However, they must first address other factors such as demonstrating evidence of hardship or making an effort to pay prior to filing for bankruptcy.

Alternatives to Bankruptcy for Managing Student Loans

If your bankruptcy case does not work out the way you intended it to, there is no need to worry. There exist alternatives to bankruptcy that can help you with your student loan. Some of the most famous ones include credit counseling, debt consolidation, debt management plan, and debt forgiveness. Whichever you choose, ensure you are familiar with the conditions and that you are a suitable candidate.

Taking Control: Navigating the Road to Financial Freedom from Student Loans

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Navigating the complexities of student loans and bankruptcy is no small feat. This article has highlighted the challenges and intricacies involved in discharging student loans through bankruptcy, particularly under Chapter 7 and Chapter 13. Understanding the nuances between federal and private student loans is crucial in this journey, as each comes with its own set of rules and potential relief options.

Remember, bankruptcy is not a one-size-fits-all solution, and it certainly isn’t the end of the road. Alternatives like credit counseling, debt consolidation, and debt management plans offer viable paths to manage your student loan debt effectively.

Now, it’s your turn to take control. Don’t let the weight of student loans dictate your future. Explore your options, seek professional advice, and make informed decisions. Whether it’s pursuing bankruptcy or an alternative route, the key is to act now. Your financial freedom isn’t just a dream; it’s a possibility that awaits your action.

Kokou Adzo is the editor and author of He is passionate about business and tech, and brings you the latest Startup news and information. He graduated from university of Siena (Italy) and Rennes (France) in Communications and Political Science with a Master's Degree. He manages the editorial operations at

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