How Bankruptcy Affects Student Loans

Bankruptcy helps in many ways but it is not a cure for everything. If you want to wipe the slate clean and get a fresh start, know how bankruptcy affects all your debt, including your student loans.

As you list your assets in preparation for bankruptcy, you may think all your debt is included. If you have student loans, that is not the case. The law surrounding bankruptcy and student loans states that you cannot discharge your student debt obligations in a bankruptcy filing.

Bankruptcy and Student Loans Fact #1: You cannot discharge student loans in a normal bankruptcy.
Bankruptcy is an excellent way to discharge credit card, mortgage, and auto loan debt. However, some debt obligations will remain after bankruptcy.
Debts not affected by bankruptcy are alimony, child support, taxes, fines, and student loans. Student loans, whether federal or private, are exempt from the bankruptcy process. In the case of federal student loans, the government can seize your tax refund or garnish your wages to make sure it collects its money.
However, there are some exceptions to this law. If you die or are declared 100 percent disabled, your student loan debts will be discharged and your estate will not be responsible for your debts. In the case of disability, your credit score isn’t affected by the student loan discharge. Also, if you attended a school that closed before you were able to complete your academic courses, your student loans will be canceled.

Bankruptcy and Student Loans Fact #2: You can request a hardship hearing.
If you believe your student loan debt is overwhelming, request a hardship hearing. This allows you to present your case to a special judge during your bankruptcy to request that your student loans are discharged. A discharge of student loans after a hardship hearing is extremely rare, but if you think you have a good reason why paying your school loans presents a hardship, talk to a qualified bankruptcy attorney.
Everyone declaring bankruptcy is experiencing some type of hardship. If your situation isn’t extremely grave, getting your student loans discharged is a waste of time!

Bankruptcy and Student Loans Fact #3: Some federal programs will pay your student loans for you!
Federal programs like Peace Corps, AmeriCorps, or Vista can relieve some or all debt obligations if you work for them. These service programs might give you a flat amount of money or they could offer to shave a percentage off your loans. You won’t be making much money but you could be relieved of as much as 15 percent of your student loans.
If you are currently struggling to repay your student loans, make sure you explore your bankruptcy options before defaulting. This also includes debt consolidation loans. If you talk to your lender, you might be able to arrange a loan deferment or a forbearance, which grants you temporary relief by postponing your loan payments for a specified period of time. You can also work out a different payment plan with your lender to help you make payments every month.
Remember that removing a student loan is all but impossible, so you might as well start finding ways to repay your student loans as soon as possible.

If you are struggling with bankruptcy and student loans, it is still possible to build your credit score to 720. Go to to find out how.