Will Filing for Chapter 13 Bankruptcy in Arizona Help or Hurt My Student Loans?

We have said it before and will say it again—some of the few things you can count on in life are death, taxes, and student loan payments. Many Americans struggle throughout their adult life to stay on top of their student loan payments, but as the economy has struggled and stumbled along, many new graduates—or even people who have been cemented in the workforce for a while—have faced challenges as they try to find a job that can accommodate their debt load.

Unfortunately, the longer people struggle to start their career, the further behind they may slip in their payment of loans and other bills. Factor in a cross-country move, a medical issue, or other life event, and they may be in more financial trouble than they anticipated.

Phoenix Chapter 13 Bankruptcy: The Indirect Student Loan Relief

Because of the significant financial commitment a Chapter 13 bankruptcy can be, it can also offer many advantages for the filer, one of which is its treatment of student loan debt. While priority debts like support payments and taxes take center stage in your payment plan, nonpriority loans like credit card debt and student loans get the “leftover” disposable income for the duration of your repayment.

Unlike credit card bills that are discharged after you complete your payment plan successfully, student loans remain with you. This can mean a few things, depending on how your other debt is distributed. If you have a lot of unsecured debt that will claim a large portion of your disposable income, you may end up only paying a very small amount toward your student loans over the course of your plan, leaving you with large interest accrual and more debt when all is said and done.

On the other hand, if most of your debt is secured debt, you may end up able to cover your interest and even some of your principle on your student loans. Even if you do not end up keeping up with your interest payments, relieving yourself of other larger debts may free up more money after your bankruptcy to allow you to take control of your student loan payments once again.

Making the Right Choice for You

Here at Curry, Pearson & Wooten, our experienced Phoenix bankruptcy lawyers want you to have a stronger financial future. We will work closely with you to help you decide which option is right for you—even if that means waiting to file. If you are struggling with bills and student loan debt, give us a call at 602-258-1000 to discuss your situation with one of our attorneys today.