What happens to my student loans if I file for bankruptcy?

While in bankruptcy, you are protected from collection activities on your student loans. During the bankruptcy process your loans will continue to accrue interest, increasing your loan balance. Once the bankruptcy process is complete, you will still owe the balance on your student loans. Remember, student loans are rarely dischargeable (eligible for release) under bankruptcy laws, so, in almost all cases, after bankruptcy, you will have to repay your student loans. Learn more >

Will I need to repay my student loans after my bankruptcy case is over?

In the majority of cases, student loan debt is not dischargeable (forgiven) in bankruptcy, so you will have to repay them. You may have read that student loans can be discharged when paying them would place an “undue hardship” on the borrower. But undue hardship is difficult to prove and it is ultimately up to the bankruptcy courts to make the determination. Learn more >

What does dischargeable mean?

When you file for bankruptcy, a bankruptcy court can release you, depending on your individual circumstances, from having to repay certain debts, called “dischargeable” debts. For such debts, a discharge order permanently prevents creditors (people you owe money to) from taking any action to collect on such discharged debts. Remember, typically student loans are not dischargeable debt.

They say my student loans are nondischargeable debt, what does that mean?

A nondischargeable debt is a debt you are required to repay. Generally, nondischargeble debts include taxes, student loans, child support and alimony. If the bankruptcy court does not determine your student loans are dischargeable, you will have to repay them after bankruptcy.

Is there anything I can do to get my student loans to be dischargeable debts?

You can file a separate “adversary proceeding” with the bankruptcy court. The purpose of the adversary proceeding is to prove “undue hardship.” Learn more >

How do I prove undue hardship on my student loans?

To prove undue hardship, you must file a separate adversary proceeding with the bankruptcy court explaining your financial situation and how your student loan debt imposes particular hardship. It is important to note the bankruptcy courts have fairly strict requirements to prove undue hardship. Learn more >

Why do I need to authorize ECMC to talk to my attorney or credit counselor about my bankruptcy case?

ECMC is required by law to protect your private information. For that reason, we will not disclose information we have about you to anyone without your consent. You can complete the Authorization to Disclose Info in Bankruptcy to give your consent.

Why should I make payments on my student loans during bankruptcy if I don’t have to?

Interest on student loans continues to accrue on your loan balance even during bankruptcy proceedings. It’s a good idea to pay at least the amount of interest that accrues on your loans during this time because the amount you owe will keep growing. Learn more >

My tax refund was seized to repay my student loans. How do I get my refund back?

If you defaulted on your student loans because you failed to make payments over a 9-month period, your state and federal funds can be withheld (referred to as an offset) to pay back your student loans. If you filed for bankruptcy prior to the offset, you may be able to get the money returned to you. Learn more >

What is default and how do I know if I am in it or not?

Default occurs for most student loans when you are 270 days past due on your student loan payments. If you are in default, you should have received a Notice of Default, or your tax refund and/or part of your wages may have been taken to pay your student loan debt. Contact the holder of your loan to determine if you are in default and what you can do. Default is serious and can cause long-term financial consequences. Learn more >

If you don’t know who holds your loans, go to the National Student Loan Data System (NSLDS), which is the central database for all federal student loan information. If ECMC holds your loans, call us at 1-800-780-7997.

What is a credit bureau?

A credit bureau is an agency that stores credit information on individuals and produces a report to creditors on the information gathered. Credit bureaus assign a score representing your credit worthiness (your ability to borrow money and pay it back). This information is then available to future employers and creditors.

What is a credit report?

A credit bureau report is a detailed list of your credit history, including information about the amount you have borrowed (all your debt, including student loans) and your repayment patterns and payment history.

What does a credit score have to do with bankruptcy?

A person’s credit score is considered predictive of the person’s future credit performance. A credit score is a number, generally between 330 and 830, that reflects the credit history shown in your credit report. To arrive at a single score, a credit bureau assigns numerical values to specific pieces of your personal financial information, such as bankruptcy filings, outstanding debt, the number of inquiries on your credit history, the number of open accounts, etc. These values are put through a series of mathematical calculations to produce the single number, the credit score. The lower the score, the worse your credit history is and the harder it is to obtain loans for things like a car or a home. In some cases, a low score can also hinder your eligibility for employment.

What is Chapter 7 bankruptcy?

In Chapter 7 bankruptcy, your nonexempt assets are liquidated, or sold for cash, to pay your creditors. Any remaining unsecured debt, like credit card debt, is usually discharged. But in most cases, your student loans will remain a debt you must repay.

What is Chapter 13 bankruptcy?

A Chapter 13 bankruptcy does not force you to liquidate your assets, or convert your property into cash, but it does require you to repay all or a portion of your debts in installments specified by a court-ordered bankruptcy plan.

If you successfully complete your Chapter 13 bankruptcy plan, the court discharges most or all of your remaining unsecured debt (debt that is not attached to a tangible asset)—but not your student loans. This debt will most likely remain, and you must repay it.

What is a Chapter 13 bankruptcy plan?

A Chapter 13 bankruptcy plan is a reorganization proposal detailing how you will pay off the amount of money you owe. A typical lifespan is 3 to 5 years, during which you make monthly payments to a trustee under a court-approved plan of reorganization. That trustee distributes plan payments according to a schedule.

What is a Trustee and what role do they play in repaying my student loan?

Trustees are court-appointed representatives of your individual bankruptcy case who monitor and manage all aspects of your bankruptcy case, such as distribute payments to creditors, and ensure all parties comply with the bankruptcy code.