CHAPTER 13 CASES

IN NEW JERSEY –STUDENT LOAN AFTER

BANKRUPTCY

TRAVIS J. RICHARDS SOUTH NEW JERSEY BANKRUPTCY ATTORNEY

Are you struggling to pay student loans? If so, you are not alone. According to

an article in The Wall Street Journal, the Class of 2014 graduated with the honor

of being the most indebted college graduating class in history. The average

college graduate in 2014 began their career with $33,000 in student loan debt.

Unfortunately, next year’s graduates will probably take over that honor as the

number of college students borrowing money to pay for college increases each

year. As the burden of college loans continues to be a major problem in this

country, many wonder what happens to student loans after bankruptcy.

Filing bankruptcy is a very emotional and difficult decision; however, in many

cases, it is the only way for an individual to resolve his or her debt problems.

Unfortunately, most student loans are not dischargeable through bankruptcy. In

other words, student loans after bankruptcy remain a problem for the debtor.

However, if you file a Chapter 13 bankruptcy case, your student loans after

bankruptcy are much more manageable because of the benefits of a Chapter 13

bankruptcy.

Chapter 13 Bankruptcy and Student Loans

As discussed above, most student loans are not discharged through bankruptcy.

While most other unsecured debt (i.e. credit cards, medical bills, personal loans,

etc.) are erased through a

bankruptcy filing, student

loans survive a bankruptcy

filing. You remain legally

liable for your student loan

debt. However, by filing a

Chapter 13 case, you can

reorganize your debts and

gain time to recover from

a financial crisis so that

you can afford to pay your

student loans after bankruptcy. For example, consider a debtor who files a

Chapter 13 case with over $50,000 in student loans.

Karen graduated from school five years ago. She has worked diligently to pay

her student loans but she still owes roughly $50,000 on her loans. Karen fell

behind on all of her bills while she was unemployed. Even though Karen has a

new job, she is facing foreclosure, repossession and collections because she is

unable to catch up her bills on her current income. Filing a Chapter 13

bankruptcy will give Karen the opportunity to reorganize her debts. It will also

give her time to recover from her financial crisis before she must begin repaying

her student loans.

When Karen filed her Chapter 13 case, it stopped the foreclosure and the

repossession as well as placed a hold on all collection activities. She was able to

catch up her mortgage payments through her bankruptcy plan as well as pay her

car loan through the plan at a lower interest rate. Upon completion of her

Chapter 13 case, Karen’s

vehicle was paid in full and her

mortgage was current.

Karen’s credit card bills,

personal loans and medical bills

were also included in her

bankruptcy case as well as her

student loans. The student

loans after bankruptcy must be

paid but the other unsecured debt was discharged. Her credit cards, medical

bills and personal loans received a percentage of the amount she owed on each

account through her bankruptcy plan. Her student loan companies also received

the same percentage as her other unsecured creditors even though the student

loans are non-dischargeable.

After Karen made all of her Chapter 13 payments and the case was closed, any

remaining balances owed on the unsecured debts, other than her student loans,

were discharged and she no longer owed these creditors. Because student loans

after bankruptcy are non-dischargeable, she continues to owe that debt but the

bankruptcy gave her the time and ability to repay her student loans. Karen no

longer has a car

payment or other

unsecured payments;

therefore, she has more

disposable income to

pay toward her student

loans.

A debtor may choose to

pay student loan

payments during

bankruptcy; however, it is not required. Karen chose to make interest only

payments toward her student loans during her bankruptcy to keep the balance

owed from increasing due to interest.

Managing Student Loans After Bankruptcy

During her Chapter 13 bankruptcy, Karen learned how to budget and manage

her money through the mandatory Debtor Education Course. When she

completed her bankruptcy plan, Karen used the money that she was paying to

the bankruptcy trustee each month to pay her student loans. Therefore, her

monthly budget did not change.

Because she had no car payment or unsecured debts other than the student

loans, Karen is in a much better position to manage her student loans after

bankruptcy than she was before the bankruptcy. The skills she learned about

budgeting through her bankruptcy helped as Karen worked to improve her

financial well-being.

Tips for managing student loans after bankruptcy:

Use your bankruptcy plan payment to pay student loans. You have

been paying the bankruptcy trustee for five years. Use that money to pay

your student loans and you will not notice any decrease in your monthly

disposable income.

Set up automatic payments. The bankruptcy trustee encourages

automatic payments because debtors who have their bankruptcy payments

automatically drafted from their paycheck are more successful. Take a

lesson from this and set up payroll deductions for your student loans. If

your payroll department does not offer this, set up an automatic draft from

your checking account for the same day your payroll is deposited.

Maintain a monthly budget. Having a monthly budget is essential for

managing your money wisely. Keeping a budget helps you ensure that you

do not have more money going out than coming in each month. It also

helps you see where you can reduce costs and expenses if necessary.

Request an interest rate reduction. If you set up automatic payments,

most student loan companies will reduce the interest rate on your loans.

Be care of consolidation loans. Some consolidation loans may reduce

interest or monthly payments but they increase the term of the loan. By

increasing the term of your loan, you pay more money over the life of the

loan. Look at consolidation loans very carefully and review all terms

carefully before signing.

Talk to your student loan company. There are several payment options

and plans available for your student loans. Discuss all of your options with

your student loan company to choose the one that is best for you.

Contact an Experienced Mount Holly Bankruptcy Attorney

Personal Approach, Professional Service, Affordable Payment Plans

The Law Office of Travis J. Richards, LLC is a full-service Mount Holly bankruptcy

law firm focused on Chapter 7 Bankruptcy, Chapter 13 Bankruptcy, debt

consolidation, credit repair, tax liens, student loans and foreclosure. We

represent clients in Burlington County and throughout South Jersey.

Contact our office at 609-267-5297 to schedule your free consultation to

discuss bankruptcy and non-bankruptcy alternatives. You may also use our

convenient online contact form and one of our friendly, professional staff

members will contact you to answer your bankruptcy questions and/or schedule

a free consultation with Travis J. Richards.

About the Author

Travis J. Richards

Travis Richards is not your typical attorney. He understands the random curve balls life throws at honest, hard-working people. Growing up on farm in Southampton, New Jersey, money didn’t always come easy for many of his family, friends and neighbors. He saw that bad things often happen to good people. This background shaped his approach to the practice of law. Mr. Richards considers it a privilege to help clients from all walks of life recover from financial hardship. In doing so, he aims to provide every client with the same service he would provide a member of his own family. His mission is to get to know each client individually and provide the best legal advice possible for them to regain control of their lives.

“Over the past decade I have impacted the lives of hundreds of individuals and families in an extremely positive way,” he says. “Through bankruptcy I am able to show my clients a freedom that they thought impossible to achieve…My goal is not only wipe out the debt they have accumulated, but also help make sure they will never be in a situation to need my services again.” Mr Richards has helped hundreds of individuals eliminate debt, keep their property and return to financial stability. “Bankruptcy gives deserving individuals a second chance.”

Mr.Richards graduated with honors from Rutgers University, in New Brunswick, NJ where he majored in History. In 1999 he graduated, again with honors, from Rutgers School of Law, Camden, NJ. He was admitted to the New Jersey and Pennsylvania Bar in 1999, where he is licensed to practice law before the United States District Courts. Mr. Richards practices bankruptcy, mortgage loan modification work, debtor rights and credit card negotiations. He maintains memberships in the National Associate of Consumer Bankruptcy Attorneys, the Burlington County Bar Association, the New Jersey State Bar, the Pennsylvania State Bar, and the American Bankruptcy Institute

The Law Office of Travis J. Richards 141 High Street Mount Holly NJ 08060 Phone: 609 267-5297 Fax: 609 267-5295 Website: njbankruptcyinformation.com