Filing for bankruptcy generally allows you to discharge a variety of debts. In some cases, it may be possible to eliminate student loan balances in Chapter 7 or 13 bankruptcy. In fact, you may be able to get a full discharge without losing assets such as a car, boat or North Carolina home.
What type of bankruptcy will you pursue?
As a general rule, it may be best to file for Chapter 7 protection to eliminate student loan debt. This is primarily because you may be able to obtain a discharge in a matter of months. If you file for Chapter 13 protection, your debts won’t be wiped away until the end of your repayment period.
Therefore, your loans will continue to accrue interest for up to five years after your payment plan is approved. Of course, a reorganization proceeding may still be in your best interest if you want to protect assets or feel a moral obligation to repay at least a portion of your debt.
You’ll need to file an adversarial proceeding
Filing an adversarial proceeding informs the court that you would like to have your student loans considered for discharge. Several factors will be considered when determining how these balances should be dealt with. For instance, it may be easier to get rid of private debt than one that is serviced by the government.
It’s important to note that your loan servicer may fight harder if student debt is the only type that you are carrying when you file. A personal bankruptcy attorney may be able to provide more insight into what else the court might consider during an adversarial proceeding.
If you’re struggling to stay current on your existing debts, it may be a good idea to file for bankruptcy. A lawyer may help you fill out paperwork, hold creditors accountable for violating the automatic stay or take other steps to assist during your case.