During Bankruptcy
During Bankruptcy, Your Student Loan(s) May Not Go Away
Bankruptcy may protect you from collection efforts, administrative wage garnishment and the withholding of your tax refund and government payments, but it does not automatically eliminate your student loan(s).
Overview
In fact, interest continues to accrue on your student loan balance while your bankruptcy is pending, increasing the total amount you owe.
Here are some things you can do to stay on top of your loan(s) during bankruptcy.
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Determine Who Holds Your Student Loan(s)
If you filed for bankruptcy, your loan holder(s) may no longer "hold" your student loan(s).
If ECMC holds your loan(s), you can log in to view your loan information. If you don't know who your loan holder(s) is, go to the Federal Student Aid (FSA) website, which is the central database for all federal student loan information.
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Discuss Your Options with Your Attorney for Making Voluntary Payments or Payments As Part of the Repayment Plan during a Chapter 13 Bankruptcy
You are not required to make direct regular monthly payments on your student loan(s) during the bankruptcy process unless you have provided for direct payment outside of your Chapter 13 plan. Often, your student loan creditors will be scheduled to receive a distribution from the payments you make to your Chapter 13 trustee. Regardless, interest on the student loan(s) continues to accrue while your bankruptcy is pending. When you emerge from bankruptcy, you will be responsible for any remaining student loan balance.
If you are in a Chapter 13 plan and your student loan creditor(s) is scheduled to receive a distribution from your plan payment, ask your attorney or the trustee how much of your plan payment will be paid toward your student loan(s).
To give you an idea of how interest on your student loan(s) grows while you’re in bankruptcy, this chart shows the loan balance and total accrued interest after one, three and five years. The interest rate in this sample scenario is 7%.
SAMPLE SCENARIO (INTEREST RATE 7%)
Accrued interest on student loans during bankruptcy
Loan Balance
Accrued Interest after One Year
Accrued Interest after Three Years
Accrued Interest after Five Years
$5,000
$350
$1,050
$1,750
$10,000
$700
$2,100
$3,500
$15,000
$1,050
$3,150
$5,250
$20,000
$1,400
$4,200
$7,000
$25,000
$1,750
$5,250
$8,750
$30,000
$2,100
$6,300
$10,500
$35,000
$2,450
$7,350
$12,250
$40,000
$2,800
$8,400
$14,000
$45,000
$3,150
$9,450
$15,750
$50,000
$3,500
$10,500
$17,500
If ECMC holds your loan(s) and your bankruptcy plan allows voluntary payments outside the Chapter 13 plan, you may send payments to:
ECMC
Lockbox #8682
P.O. Box 16478
St. Paul, MN 55116-0478If you don’t know who currently holds your loan(s), find out on the Federal Student Aid (FSA) website, the central database of federal student loan information.
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Stay Eligible for Title IV Federal Financial Aid
If you have filed for bankruptcy and are still enrolled in school at least half-time, you may still be eligible for additional Title IV federal financial aid.
Talk to your school’s financial aid counselor for more information. The financial aid counselor may request information such as the Title IV eligibility letter. You may also contact your loan holder(s) for assistance.
Read more information on Regaining Title IV Eligibility While in a Bankruptcy.
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Get Additional Help
If you filed for bankruptcy, your loan holder(s) may no longer "hold" your student loan(s).
If ECMC holds your loan(s) and you have questions about student loans in bankruptcy, please contact us at 888-363-4562.
If you don't know who your loan holder(s) is, go to the Federal Student Aid (FSA) website, which is the central database for all federal student loan information.
Please note: If you wish ECMC to discuss your private information with someone other than you or your attorney, please complete and sign a Borrower’s Authorization to Disclose Information giving your consent and mail the form directly to us at:
ECMC
P.O. Box 16408
St. Paul, MN 55116-0408