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Does the Automatic Stay in Bankruptcy Stop Student Loan Collections?

Posted By Allmand Law Firm, PLLC || 26-Nov-2013

The Automatic Stay and Student Loans

If you have student loan debt that is being pursued by the creditor when you file bankruptcy, collection efforts come to a halt due to the automatic stay. This also ceases collection attempts through bank and wage garnishments. This can give debtors time to figure out how to repay their loan obligations if they are unable to get them discharged.

The Brunner Test

It has been said that getting student loan debt eliminated or discharged in bankruptcy is impossible. There are qualifications determined through what is known as the Brunner Test to see if you qualify. There are debtors who may actually meet qualifications but don't bother to ask about them. It may be rare but it is possible, but you won't know for sure unless you ask your attorney.

The Brunner Test looks at a few aspects such as your ability to pay, current financial situation and whether you have made good faith intentions toward making payments. You have to prove that making payments toward the debt is making things difficult for you when it comes to living needs.

When Does the Automatic Stay Go Into Effect?

The automatic stay in bankruptcy goes into effect immediately when your petition is filed. Creditors, including those you owe student loan payments to, should stop collection actions against you. As long as your case is pending they cannot continue to try and collect from you. If you are unable to get student loan debt discharged, after your case is completed you may still be responsible for the balance owed. Other unsecured debts may qualify for elimination making it easier for you to pay your student loans.

Have Any More Questions About Bankruptcy and Student Loans?

If you have any questions you would like answered regarding bankruptcy and student loans don't hesitate to give us a call.
Categories: Student Loans
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