Does bankruptcy help people overwhelmed with student loan debt? Generally, student loans are not dischargeable in bankruptcy, but there are exceptions. Greg Dunn, Bankruptcy and Debt Relief Attorney in Honolulu, HI, keeps up with legal trends and court decisions that may benefit his clients. Below, Attorney Dunn discusses reasons why filing Chapter 13 bankruptcy is a good option for obtaining debt relief from burdensome school loans.

Why Include Student Loan Debt in a Chapter 13 Bankruptcy?

To Receive Debt Relief

A payment plan under Chapter 13 bankruptcy will restructure student loan debt and will spread out the debt payments over a 36 to 60-month period. Bankruptcy courts understand graduates may not be able to pay what creditors demand, but a bankruptcy plan to approve a student loan debt can be worked out for well-meaning debtors.

For Protection From Creditor Action

When debts are listed in a bankruptcy petition, the automatic stay protects the debtors from all actions by those creditors. Student loan debt is typically classified as non-priority unsecured debt, and a monthly payment amount may be lowered.

For Potential Undue Hardship Discharge

Chapter 13 bankruptcy court decisions such as Murray v. ECMC, 563 B.R. 52 (Bankr. D. Kan. 2016) give bankruptcy attorneys legal grounds to argue for discharge under the undue hardship provision even though their clients are not disabled or poor. In Murray, the married debtors had $300,000 in combined federal student loan debt and monthly income of $6,100, leaving them with disposable monthly income of $1,658.

Still, the bankruptcy court found their school loan debt was too burdensome, and discharged more than $200,000 in interest, reducing the loan debt to $77,524 in principal.   

Greg Dunn, Bankruptcy and Debt Relief Attorney has represented clients in more than 12,000 bankruptcy cases since 1996. His skill, dedication, and compassion give individuals the peace of mind they need during their difficult financial times.

If you are carrying a heavy student loan debt, discuss the option of Chapter 13 bankruptcy with Greg Dunn, Bankruptcy and Debt Relief Attorney in Honolulu, HI. Visit his website and Facebook page for more about his debt relief services now, and call (808) 524-4529 for a free debt consultation.