Student loans are non-dischargeable debt as stated by Skokie bankruptcy attorney. By non-dischargeable debt, I mean that debt is going to survive your Chapter 7 filing. Now, it still may be a great idea to file Chapter 7 to eliminate whatever debt you can other than the non-dischargeable debts such as student loans. You might be able to work out a payment plan with your student loan financing company after your Chapter 7 is complete.
If you are not able to work out a reasonable payment plan, you could also try to reorganize the debt within a Chapter 13 bankruptcy case. Please keep in mind that Chapter 13 will allow you to pay the student loans less than 100% on the dollar, however the remaining portion that you didn’t pay will remain due and owing after your case is over.
For example, if you wish to cram your student loan through a Chapter 13 and pay $.10 on the dollar, be aware that the other 90% is going to be due plus interest after your Chapter 13 completes. Some people feel it’s good to stretch your student loan over the next 60 months and pay less than 100% back. It prevents your student loan company from garnishing your wages or attaching a tax refund or taking any other collection effort.
If you really don’t have the ability to pay back the student loan and it’s an extreme hardship case, you might be able to petition the court for what’s known as eight were hard ship discharge. I have not seen a successful student loan hardship discharge case brought and won so I don’t recommend that course of action. However, in limited circumstances, for example if you no longer have the ability to work or if you became completely ill to the point where you will never be able to work again, then you might be able to bring a hardship discharge and knockout that student loan forever.