What are my options for discharging college debtin aChapter 13?

I currently have $94,000 undergraduate debt. I am fortunate to have an employer paying for my masters at MIT. I have prudently paid towards my debt, having funded a ROTH IRA during college that has helped to slowly chip away at my debt. Sallie Mae has refused to consolidate my private loans into a single loan with a single interest payment. Despite making interest and principal payments faithfully, the loan is snowballing out of control. I am seeking advice to help me understand: Class action lawsuits against Sallie Mae; and whether bankruptcy is at all an option for me. Has the 2005 Bush Bankruptcy Abuse Prevention Law been repealed?

Asked on November 27, 2011 under Bankruptcy Law, Connecticut


L.P., Member, Pennsylvania and New Jersey Bar / FreeAdvice Contributing Attorney

Answered 9 years ago | Contributor


Thank you for submitting your question regarding student loan/ college debt and Chapter 13 bankruptcy.  When a person files the necessary paperwork for a Chapter 13 bankruptcy, creditors can no longer attempt to collect against the creditor’s debt.  When the Chapter 13 filing fee has been paid and the appropriate paperwork has been filed, the court will put in place an “automatic stay.”  In general, during the “automatic stay,” creditors are not permitted to pursue debt collection.  However, some collection activities will remain active.  The debtor’s responsibility for some debt will continue.  Such financial responsibilities include pension loans, any outstanding tax debt, and child and spousal support. 

 While the remaining financial obligations will be placed on hold, as mentioned above, some debts will continue.  Student loans usually fall into the category of debt that the courts require the debtor to repay.  College loans or student loan debt is categorized as priority debt, which is the same category as child support and spousal support.  Since 2005, with the passage of the Bankruptcy Abuse Prevention and Consumer Protection Act, private loans are treated the same as federal loans, which means that the debt can only be discharged by demonstrating an “undue hardship.”  This phrase can be defined only by specific circumstances, and it will be at the court’s discretion to discharge this debt.  Usually only dire circumstances will allow this debt to be discharged, such as poverty or severe permanent disability, making it nearly impossible for the debtor to pay back the debt.

If you need further assistance, you should contact a bankruptcy attorney in your area to further assist you.






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