Wilton, CT asked in Bankruptcy for Connecticut

Q: Can I either leave my federal student loans out of chapter 7 bankruptcy or keep paying them so they are not defaulted

I am on an income driven repayment plan working towards PSLF. I have to file chapter 7 bankruptcy due to husbands bad money management. I don't want my loans to pause or go into default or in any way be affected by the bankruptcy. Is that possible? I have to stay on track so I am done paying them by the time I am 70 - I don't think I will be able to continue teaching beyond that so need to stay on the timeline.

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2 Lawyer Answers
W. J. Winterstein Jr.
W. J. Winterstein Jr.
PREMIUM
Answered
  • Bankruptcy Lawyer
  • Boyertown, PA

A: When you file for bankruptcy relief, you must file Schedules listing all of your debts and assets. And you must sign those Schedules under penalty of perjury. So, no, you cannot leave your student loans, or any other debt (or claim against you even if you don't think you owe it), "out of your Ch. 7 bankruptcy'.

That said, it is extremely difficult to get a total or even partial discharge of an educational loan; to attempt to do it, the burden is on you and your lawyer to initiate that. If you do nothing, your educational loan will not be affected/discharged by your bankruptcy filing (be sure to have your lawyer examine the proof of claim filed by the creditor who holds the right to payment of your student loans).

A bankruptcy discharge removes the legal obligation to pay all dischargeable unsecured debts, such as credit card balances, hospital and doctor charges, and most other debts not collateralized/secured (like a car loan). And you are entitled to stop paying all of such debts starting on the date you file your bankruptcy case.

However, what you do with your income starting the day after you file your bankruptcy petition is up to you, and you can spend your money however you chose. So, if you wish, you can continue to pay any of your existing debts, but that would be a gift to your creditors that they certainly will not expect to receive after you file for bankruptcy. I strongly recommend that you consult with a bankruptcy lawyer about your intent to continue to pay down any dischargeable debt.

Bankruptcy is designed to give a debtor a fresh start. I strongly recommend that you take advantage of that.

Christopher H. McCormick
Christopher H. McCormick
Answered
  • Bankruptcy Lawyer
  • West Hartford, CT
  • Licensed in Connecticut

A: Unless your eligible for a hardship discharge which is a very difficult to obtain if you are currently employed which you appear to indicate you are as a teacher your student loans will not be discharged so you should continue to pay, As attorney Winterstein indicated you have to list all debts on your schedules not just debts that are eligible for discharge and you also want to list them to present a full picture of your financial situation and list your student loan payments on your expense schedule to reflect the burden of paying them.

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