The following is based on my own personal experience, it may be different for you, but at least if you are facing a Chapter 13 and you have student loans (who doesn’t?) you will have an idea of what to expect.
Firstly, you can’t discharge student loans in a bankruptcy, that I know of.
However, I have see on web a lot of chatter about that changing. I have also seen a lot of chatter about lien stripping in a Chapter 7 but I wouldn’t count on it!
So here’s my situation. I have a student loan with the remainder of about $26,000.00.
When you file a Chapter 13 you have to tell them every debt, every cent you have as well as what you owe. It all gets included in the bankruptcy whether or not you can discharge it.
After I filed, also learned that the loan is not considered an expense. The court does not look at it as a living expense and expects you to defer it.
I got a notice that I was in default from the Student Loan Company, even though I have been paying regularly. When I logged in, it also said that ZERO amount was due, nothing had to be paid! So basically, you are in default and you don’t have to pay. But yet you owe it and will have to pay it someday. Kind of like being deferred.
Now here is where it can get tricky and you have to pay attention.
Some student loans will not allow you to pay on them when in BK. They just sit there in default until your BK is discharged incurring interest!
Some student loan companies will let you pay them but hold the money in a trust, while it still incurs interest. (That would be painful.)
I checked in with my Student Loan company and I told them that I am going to try to keep making the payment and stay in good standing with them, only if they do not put it in a trust and the balance continues to go down. They sent me an email that stated I can continue to make the payment and nothing “negative” will happen to my account if I continue to be current. I will monitor the balance monthly.
I can’t imagine paying into their trust. I would rather pay into my own bank account, earn some interest on it and then pay it off in full when I discharge.
It is coming out of my grocery money! I want this paid way down by the time I am done with this BK, I don’t want to come out the other end of these Sixty Payments just to have this huge student loan staring me in the face.