Can student loans be included?

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Updated: 4/13/2007 3:35 pm
Student loans have always been included in the category of debts that generally couldn't be discharged in Chapter Seven bankruptcy. However, there were some exceptions, such as if payments on the loans first became due at least seven years prior to a planned filing, or if you could show the court that it would be 'undue hardship' for you to repay them. Filing Chapter Seven also automatically stopped collection of the loan, which meant you could avoid interest and late charges that would have accumulated during bankruptcy proceedings. However, federal law has changed, and effective October 8, 1998, filing bankruptcy to cancel liabilities for student loans and grants is no longer permitted. If your loan was granted prior to that date, you or an attorney should contact your servicing agency to find out whether the loan may be dischargeable. Otherwise, you'll need to continue making payments. If you're not eligible to have your student loan debt discharged through bankruptcy, it's not a good idea to default on paying it. You could face severe consequences, such as having negative information placed on your credit report. In addition, the government could garnish your wages or deny you income tax refunds or other payments. This applies to your parents, as well, if they're the ones who took out the loans on your behalf. There are other options to default and bankruptcy in meeting student loan obligations. Contact your loan servicer or an attorney to find out ways you can possibly lower your monthly payments or what other options may be available.

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