Chapter 13s for student loans

Student loans were given extra protections in bankruptcy, making them very difficult to discharge. So what do you do when you have way too much student debt to handle, say $200,000 in student loan debt and you only make $40,000 a year?

One thing you can do is go back to school. While you are in school, the student loans are in deferment. This doesn’t do anything to reduce what you owe, but if you feel like getting another degree (or two or more), you can hold off having to pay on the student loans as long as you are in school.

Another thing to do is to go into a perpetual chapter 13 bankruptcy. The bankruptcy imposes an automatic stay which prevents the student loan creditors from garnishing or otherwise collecting on the student loan debt since it is unsecured, non-priority debt. For example, if the student loan creditor is garnishing you $400 a month, the chapter 13 plan payment could reduce it down to $100 per month netting an additional $300. Again, it won’t do anything to eliminate the debt since it isn’t discharged. In 5 years, when the chapter 13 plan is complete, you would file again and keep doing it until you die or Congress fixes the problem.

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