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Can I File a Chapter 11 Bankruptcy on My Sallie Mae Student Loans? – Stephanie

By on April 29, 2012
Can I File a Chapter 11 Bankruptcy on My Sallie Mae Student Loans? – Stephanie

“Dear Steve,

I have 150K in student loans from Sallie Mae. I borrowed only 100, but 50K is interest. My current loan payment every month is 1000.00 and that is JUST interest. I have called and called them to try and get a lower monthly payment, and the only thing they will do for me is make them interest only payments for about 2 years. The interest only payments are still $1000.00. I cannot afford this payment. I am even living at home with my parents right now, and I still can’t swing 1000.00 loan payment. I only make 1800 a month.

I was reading on your site about how someone filed Chapter 11 bankruptcy and claimed undue hardship because Sallie Mae did not offer any kind of income contingent repayment plans. Is this true? I know you can’t typically file bankruptcy on student loans, but I have heard recently that if it is really causing you undue hardship then some judges will help. Do you know the best way to go about this and who to contact?

Stephanie”

Dear Stephanie,

A chapter 11 bankruptcy is a possibility but only works in extreme cases. And a chapter 11 bankruptcy can be very expensive to file.

You can click here to find a local bankruptcy attorney and discuss this situation and option with them. Really it will come down to local rules and how the bankruptcy court in your area handles these requests so a consultation with a local bankruptcy attorney makes the most sense.

There is talk now to reinstate the bankruptcy provision for private student loans that was taken away by Congress in 2005. However, if the republicans win during this next election I would bet that a repeal on the nondischargeability of bankruptcy loans would be very remote.

If the loan was government subsidized you’d have some really great options to deal with it. Because it is a private loan, you just don’t.

READ  43-Year-Old Mom Wins Partial Discharge of Federal Student Loan Debt

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About Steve Rhode

Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.

2 Comments

  1. Hchs16

    July 5, 2012 at 1:01 am

    If I get a loan to payoff the student loans can I then declare bankruptcy and have the new loan dismissed?

    • Steve Rhode

      July 5, 2012 at 12:21 pm

      It all depends how many years you have the loan before you file. Talk to a bankruptcy attorney about this.

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