Will filing chapter 13 bankruptcy stop my student loans from collecting on me or demanding repayment?

Yes (so long as the case is open).

I had this question today from a client who could’ve been a simple chapter 7 case.  Unfortunately, she had $80,000 of student loans whose repayment schedule was going to start in three months.  Her husband had another $100,000 of student loans coming due next year.

if we filed a simple chapter 7, I could discharge their debts (except for the nasty student loans) in about three months, just in time for the student loans to start hammering her.  She would’ve wiped out a $250 month payment to a judgment creditor in exchange for $500+ a month on her student loan debt.  This didn’t count her husband’s loan debt.

She had an interesting idea though:  what if we filed a chapter 13 and stretched it out for the three year plan?  The student loans would not be discharged in the bankruptcy, but the chapter 13 would give her a three year breather in which they could not collect.  Interest would accrue, but their family would not be forced underwater with huge student loan payments.

I normally tell a client to stick with the simple chapter 7, but in her case, she was right.  This upcoming chapter 13 would control payments to student loans ($0 a month instead of $500+ a month), would stop student loan garnishment of her tax refunds, and she could convert it to a chapter 7 at any time.

She was right;  a chapter 13 will stop your student loans from collecting on you.

Leave a Reply