Tag Archives: Chapter 13

What Happens to Student Loans in Bankruptcy?

Graduate - Gril holding signIn most instances, the obligation remains to repay student loans despite filing Chapter 7 or Chapter 13 bankruptcy.

During a bankruptcy case, the debtor is exempt from collection on the student loan, this is called an Automatic Stay. The automatic stay immediately goes into effect upon the filing of the bankruptcy petition and prevents collectors from taking any action against the debtor to collect.

Interest continues to build, even during a pending bankruptcy. As a result, the ultimate balance for a student loan is higher with additional interest.  In some situations, the interest on the loan may be excused.  The type of bankruptcy filed combined with other factors determine whether interest is forgiven. Chapter 7 and Chapter 13 bankruptcies treat student loans differently.

In a Chapter 7 bankruptcy, a debtor’s assets are sold, and debts are paid from sales proceeds in accordance with a priority system of seniority. The priority scheme is set in the bankruptcy code and based upon the order of liens, rather than preferences of the debtor. The most senior debts may be the only debts repaid due to the larger number of debts compared to asset sale proceeds. Student loans are often classified as senior debts and are paid in first priority.

In Chapter 13, debtors enter into a reorganization plan and make payments over several years to repay a percentage of total debts. The Chapter 13 plan establishes new terms for the repayment of debts, and lenders must consent to the plan’s terms. While a complete discharge of a student loan is nearly impossible, it is probable that the loan will be restructured through the bankruptcy plan, and the borrower’s payments each month will be lowered to a more affordable sum.

While it would be nice to have Chapter 7 or 13 bankruptcy eliminate outstanding student loan debt, total discharge of that debt seldom occurs.  More often, student loans are paid first as senior debts or paid through installments in Chapter 13.

*from a recent blog at attorneys.com


Find Bankruptcy Data

Our Bankruptcy file provides robust and comprehensive data including the most current data available combined with rich history as our records date back to 2002. We compile our database, which is over 20 million records today and contains a wide array of information such as filing dates, dismissals, discharges, Chapter 7 and Chapter 13.


2013/2014 Consumer BK ComparisonDuring the 12-month period ending December 31, 2014, 936,795 cases were filed in federal bankruptcy courts, down from the 1,071,932 bankruptcy cases filed in calendar year 2013—a 12.6 percent drop in filings.

Chapter 13 Discharges up 59.6 percent

In the first quarter of 2014, there were over 45,000 Consumer Bankruptcy Chapter 13 discharges. That number is up 19.4% from first quarter discharges in 2013 (38,000) and up 59.6% from first quarter 2012 (28,668).



PLEASE NOTE: Our data is based on one per household, minus multiple filers and has been cleansed to postal specifications.

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One of the biggest problems independent auto dealers have is getting financing to run their credit operations. Now, a Milwaukee-area entrepreneur with a long auto sales pedigree has come up with a way to help dealers raise more money, and lower their financing costs while allowing a new group of investors to get into the auto finance business.

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2013 – 2012 Bankruptcy Trends

2014-01-21Comparing 2012 to 2013 BK Filings & Discharges, our data shows that Chapter 7 Filings were down by 10.2% with almost 76,000 fewer filings in 2013. Chapter 7 discharges dropped by over 90,000 representing an 11.5% decrease from 2012.

Chapter 13 filings increased by over 13,000 to show an almost 5% increase (4.6%) while Chapter 13 discharges increased by 36.8% with 39,000 more in 2013.

Please note: Our data is based on one per household, minus multiple filers and has been cleansed to postal specifications