Student Loans and Chapter 13 Bankruptcy

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Student Loans and Chapter 13 Bankruptcy

Student loans are very easy to accumulate and notoriously difficult to pay back. University financial aid offices freely hand out federal loans without regard to the borrower's credit scores and their ability to repay. Some students graduate with more than $25,000 in student loan debt before they have even secured a job.

Many deep in debt students are not aware, however, that student loan payments can be drastically reduced for up to five years if they are included in a Chapter 13 bankruptcy plan. While Chapter 7 is a liquidation plan, Chapter 13 provides for monthly debt payments. Through standard calculations, the debtor's disposable income is figured and a portion of that amount is divided between creditors. Secured debt, like home loans and car loans, must be paid in full by the end of the plan. Those creditors that hold credit card debt, however, usually only get pennies on the dollar.

Most interestingly, in Chapter 13, student loan debt is treated like credit card debt during the term of the payment plan. A student with minimal income and lots of debt may actually be allowed to pay student loan creditors pennies on the dollar while protected under a Chapter 13 plan.

Remember, a Chapter 13 repayment plan lasts only a maximum of five years. While credit card and similar debts will be discharged after the successful completion of the plan, student loan debt typically will not, and it will become due and payable as soon as the plan ends. Nevertheless, five years of greatly reduced payments can be of significant help, and many of those burdened with student loan debt welcome the period of relief, even if it is only temporary.

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Richard R

Austin, Texas, United States •

Richard Radbil, an Austin, Texas resident, joined RWR Legal as a Paralegal in July, 2013. He is now the Firm Administrator. Mr. Radbil is previously from Wisconsin where he founded a restaurant that morphed into the largest corporate catering business in the state. After many successful years of operation, Mr. Radbil, a graduate of the of University of Wisconsin, sold the business and obtained a Master's Degree in Legal Studies from Texas State University in 2018 along with paralegal certification. Richard is also a Certified Professional Resume Writer. Richard developed numerous state-of-the-art and innovative business practices and was a featured speaker and educator at the 2011 Catersource National Convention in Las Vegas, NV. In 2018, Richard was asked to join the Legal Studies Advisory Board at Texas State University. Richard...

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