I previously wrote about various programs that are available for individuals struggling with student loan debt. You can find that information here and also a link to the website here. Many people have taken advantage of these programs with success but, sometimes, this does not solve all of their financial issues. Getting the student loans under control is important and it usually relieves some of the financial burden you may have, however, you may still need assistance with other consumer debt.
The Issue with Bankruptcy and Income-Based Repayment
We have helped many people who are in income-based repayment plans for their student loans find additional debt relief in chapter 13 or chapter 7 bankruptcy while they continue to make payments under their student loan payment plan. However, it has recently come to our attention via the National Association of Consumer Bankruptcy Lawyers (NACBA) that the Department of Education and some of its student loan servicers are kicking people who file for bankruptcy out of their income-based repayment plans. This has been reported in both Chapter 7 and Chapter 13 type bankruptcy filings. It is the opinion of bankruptcy professionals that this practice is in direct violation of 11 U.S.C. §525 which protects individuals who file for bankruptcy from discriminatory treatment. If this happens, it can potentially end a debtor’s progress toward certain student loan forgiveness or other cancellation of loans that they might have otherwise been eligible for had they remained in the income-based repayment plans.
If you are currently suffering with student loans and are not in any kind of repayment plan or, worse, if you are being garnished for student loan debt, you may have other options in bankruptcy. However, if you have your student loans under one of the income-based repayment plans, do not let the information here deter you from seeking help with other consumer debt issues you may have but it is important to let your bankruptcy attorney know that you are currently in one of these repayment plans so that he or she can address it properly.
Amy K Tanner is a shareholder in several of the Bond & Botes Law Offices. She holds a Bachelor of Science from Auburn University at Montgomery, and a Juris Doctorate from Thomas Goode Jones School of Law. She focuses primarily on consumer bankruptcy law in the Huntsville and Decatur offices.Read her full bio here.