Chapter 13 bankruptcy and student loan debt

Under current nuances of U.S. codes of law, student loan debt is not dischargeable. At least, that is the way it has always been in the past. There have been several recent litigation cases, however, including a married couple who owed more than $120,000 on student loans, where the court has ruled that a portion of their college tuition debts could be discharged through bankruptcy.

Couple filed Chapter 13 bankruptcy and wound up in more debt

The wife explained that they had been making monthly payments of $1,000 to a company called Navient for debt owed on their student loans. She further stated that they while they struggled to make the payments on the loans, they were able to satisfy all their other monthly debts at home. However, the woman says that interest rates continued to increase the debt, and it began to affect her relationship with her kids, her marriage and her entire life.

The woman’s husband filed for Chapter 13 bankruptcy in 2009. Over the next six years, the couple paid approximately $27,000 toward the principal of the loan debt through a restructured payment plan. Because Navient kept adding interest during bankruptcy, it amounted to more than $44,000 added to their principal, leaving them in worse financial shape after bankruptcy than before.

Couple files a complaint against Navient

The couple filed a complaint against Navient, which the company appealed. Navient asked the court to dismiss the complaint due to bankruptcy codes that state that student loan debt is not dischargeable. The court denied the appeal. In addition to the couple’s case, there have been several other cases where the court has ruled in favor of discharging student loan debt. Any Tennessee resident concerned about similar issues may seek consultation with an experienced bankruptcy law attorney before heading to court.

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