J Thomas Black
Board Certified, Consumer Bankruptcy Law- Texas Board of Legal Specialization

Most student loans are federal loans, thankfully. Federal loans have quite a few repayment options, and most of my Houston student loan clients can handle resolving their federal student loan problems themselves, at least with a little coaching. And that's a good thing, because if you are not paying and are not in deferment or forbearance with your federal loans, the Dept. of Education has the power to administratively garnish your wages, even in Texas, and also intercept your income tax refunds.

But private student loans are another matter, and negotiating a settlement with a delinquent student loan creditor or debt collector can be very difficult. They want too much money, more than many of my clients can afford to pay. What makes it worse, is that many times private student loans are co-signed by a parent or other relative, so they can try to collect from them, too. They can even sue the borrower and the co-signers to collect private student loans, and it is getting more and more common for them to file lawsuits.

Senator Elizabeth Warren is shown in this video below, questioning a private student loan industry representative, about why they don't offer more affordable repayment options. She is a real fighter for consumers.

Good for her, maybe if enough pressure is brought on this industry, they will do something. Or, maybe it's time for Congress to change the Bankruptcy Code so that these loans are again dischargeable in bankruptcy, as they were prior to 2005.

If there is no other option to dealing with a private student loan, filing chapter 13 can stop student loan creditors from bothering you (federal loans also), and let you pay an amount that you can afford. They usually are not discharged by the bankruptcy unless you can show "undue hardship," but at least you are protected for 3-5 years, you usually get rid of all of your other debts, and when you are finished with the chapter 13, you can concentrate just on dealing with the student loans.

And with chapter 13, there is a co-debtor stay, so that the debt collectors cannot bother your co-signers either, all the time that you are in the plan, which can be from 3 to 5 years. Call our office anytime at 713-772-8037 for an appointment with one of our attorneys, and we will be happy to explain how to get protection from your creditors, including your student loan creditors.

Have you had any experiences with private student loans that you would like to share? Please leave your comments below. Thanks!

2 Comments
Yes, it is possible to do as you say. We call it a "chapter 20." You would not be eligible to receive a discharge in the subsequent chapter 13 case, but you would be using it to pay off priority IRS debt, and to stay or stop the collection efforts of the student loan creditors. The later case would only have to pay off your "priority" income taxes and any payroll taxes that you owe. Unless you can prove undue hardship and file an adversary proceeding as you say, the student loan debt would survive the bankruptcy and even accrue additional interest. But perhaps at the end of a 3 to 5 year chapter 13 plan your situation may have changed, and you may be better prepared to deal with it. It is also possible to reopen your chapter 7 case and seek an undue hardship of the student loans at that time, if you believe you may qualify then. Consult an experienced chapter 13 lawyer in your area to see if this is right for you. If you are looking for an attorney, you can always search for one on the website of the National Association of Consumer Bankruptcy Attorneys at www.nacba.org.
by J. Thomas Black August 9, 2014 at 11:00 AM
Hello I am one of the many people going through a Chapter 7 bankruptcy (already started process) but not having an adversary proceeding initiated to deal with the public and private student loan debt I have. If I also have IRS and state tax arrears, do you think that a Chapter 13 right after the Chapter 7 to put all of this remaining debt in a payment plan? Would a payment plan have to pay off the whole amount of the debt? The student debt is in the 6 figures, so the payments would be onerous/impossible. Anon
by Anon August 9, 2014 at 01:03 AM
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