Handling Student Loan Debt After Bankruptcy

June 2nd, 2010 by Reed Allmand

Like child support obligations and some types of taxes, student loan debt will most likely survive your bankruptcy filing unless you can prove that repaying them will cause an undue hardship.  So how does a debtor get a fresh financial start after bankruptcy even if they still need to repay student loans? Let’s take a look at few tips:

1. Immediately contact your student loan lenders after your bankruptcy discharge and arrange repayment.  A matter of fact, you should take the time to strategize how you will repay your student loans even before you receive your bankruptcy discharge.
2. Thoroughly investigate all of your repayment options whether you have government student loans or private students loans. Remember, government student loans have more options for deferment and loan forgiveness than private student loans so take advantage of those options.
3. Honestly calculate how long it will take to repay your student loans if you choose certain repayment options.  Do you want to sacrifice now to repay your student loans in 5 or 7 years or do you want a long-term commitment that offers a smaller monthly payment and/or an opportunity for forgiveness after 25 years.
4. Whatever choice you make, do not take any repayment plan that will prevent you from saving money and creating an emergency savings account.  As we have mentioned in numerous posts, failing to create an emergency cash account could land you back in bankruptcy.  It is not a question of if an emergency will happen but when.
5. Minimize the amount of unsecured debt you use after bankruptcy.  Debtors exiting bankruptcy are attractive customers for many credit card lenders because they know that they have no or few other debts to pay once they receive their bankruptcy discharge.  Don’t fall into the trap of accruing more credit card debt only to find out that you will be unable to maintain your student loan repayment plan.