How a Chapter 13 Bankruptcy Helps With Student Loans

How a Chapter 13 Bankruptcy Helps With Student Loans

Richard Fonfrias, J.D.
Chicago’s Financial Rescue & Bankruptcy Lawyer
Fonfrias Law Group, LLC

Student loans can be effectively managed in bankruptcy by delaying when the full amount of your student loan is due.

Under a Chapter 13, student loans have no more priority than other unsecured debts, like medical bills and credit cards. This means in your Chapter 13 repayment plan, you are not required to pay off your student loans in full. Instead, student loans get their proportionate share of the money paid to other unsecured creditors.

Then, after your Chapter 13 plan ends, you continue to pay your student loans. In this way, a Chapter 13 bankruptcy can delay and cut your payments until your repayment play ends.

Some states allow you to continue paying on your student loans outside of your bankruptcy repayment plan. However, other states say this treats other unsecured creditors unfairly by allowing you to pay more on student loans than to other bills.

Here are three ways a Chapter 13 bankruptcy can help you with student loans

Automatic Stay Stops Collections: The automatic stay issued by the bankruptcy court, which bars all creditors from collection actions, also bars your student loan lender from trying to collect during the term of the bankruptcy, which can be as long as five years.

Bankruptcy Delays Payments: While the automatic stay is in effect, you do not have to make your normal student loan payments. Instead, your payments will be made through your Chapter 13 repayment plan under the plan’s terms. If you don’t have enough, or any, disposable income, then your repayment plan might not require you to pay anything toward your student loans. Even so, interest on your student loan will keep piling up and you’ll have to pay it after your Chapter 13 bankruptcy ends.

Bankruptcy Reduces Payments: A Chapter 13 bankruptcy requires that you pay unsecured creditors whatever you can afford. This means if you cannot afford your normal student loan payments, you can cut your payments and pay a lesser amount during your Chapter 13 repayment plan. This means you can reduce your payments for as long as five years, which is the maximum length of a Chapter 13 plan. This gives you time to boost your income so you can better afford your regular payments when your plan ends.

Rich Fonfrias of The Fonfrias Law Group is an Illinois bankruptcy lawyer offering legal services in all areas of bankruptcy law, finance law and financial rescue. If you are having serious money problems and are unable to pay your bills, let an experience Chicago attorney show you the best way to get out of debt. Serving Illinois and the greater Chicago area, Rich Fonfrias is Chicago’s preeminent financial rescue lawyer.

If you have any questions about how filing for bankruptcy will affect your credit score, please contact me at, or call 312-969-0730. I am always happy to give further information and discuss how bankruptcy can provide for those struggling with debt the opportunity to make fresh financial start. My Chicago law practice specializes in assisting people and businesses in debt. Let me show you how bankruptcy can help eliminate creditor calls, erase credit card debt, and put you on the path to a brighter future.