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Student loans must be listed as a debt in any Chapter 7 filing. Most student loans cannot be discharged in a Chapter 7 without a showing of "hardship," which is more than just difficulty paying the loan. If student loans were easily dischargeable, no lending entity would want to lend a student money, and the rest of us would pay for those unpaid loans by higher interest rates for other loans or higher taxes or deficit spending.

If the student loans are the only reason for filing Chapter 7 bankruptcy, it would not be worth it, usually. The main usefulness would be to get the benefit of the "automatic stay", preventing any collection action while the stay is in effect. The stay would end on the dismissal of the c. 7 or the order discharging all debts dischargeable under the c. 7 rules. At most, this would be for six months.

The only point of filing a Chapter 7 with student loans as the only debts would be to get a determination that there is a hardship and that the loans are discharged for that reason.

Anyone having problems with student loans should first try consolidation, particularly with the consolidator of last resort, The William D. Ford Foundation: http://www.ed.gov/offices/OSFA P/DirectLoan/index.html. They have an option that allows you to pay according to your income.

If you have debts that can be discharged in a Chapter 7 and discharging those debts would make it easier for you to make your student loan payments, you can do that. You CANNOT omit the student loans from your Schedule of creditors.

You may want to consider filing a Chapter 13, which will allow you to pay all of your unsecured creditors the same percentage, including the student loans. That may work for you, since the plan can be up to five years long (60 months), assuming you have enough "excess income" each month to support those payments. In most bankruptcy courts, you cannot treat student loans any differently than you treat other unsecured debts. If you have secured debts, such as a mortgage or car loan, that is in arrears, you will have to include the arrears in your plan. If you have no secured debts, you can still file a Chapter 13. In any Chapter 13, you have to add the Trustee's fee (usually 10% of the amount of the plan, added to the final plan amount).

This is a very technical area of bankruptcy law, so you should use the services of an experienced bankruptcy lawyer in your area.

Learn more about this author, Raymond Bilodeau.
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