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Student loan, credit card debt part of Chapter 13 bankruptcy

Chapter 13 bankruptcy offers an excellent option for those who wish to gradually eliminate their debts. Known as reorganization bankruptcy, approved Chapter 13 bankruptcy filings will involve plans for debtors to pay off their eligible debts. For some Florida debtors, this may include student loan debt and credit card debt.

Often, bankruptcy courts treat student loan debt similar to other priority debts like child support and back taxes in a Chapter 13 filing, meaning the debt will be payable in full. Under current law, student loan debt is typically only dischargeable if a debtor can demonstrate undue hardship, which is usually very difficult to establish, but may be established if a debtor can demonstrate that he or she lives with a permanent disability making him or her unable to repay the debt. Additionally, a court may consider a debtor's poverty or long-term good-faith efforts to repay the debt, without being able to repay it, when allowing a complete discharge. Furthermore, to have a student loan debt dismissed entirely, a debtor will need to file a Complaint to Determine Dischargeability of a Debt separate from a debtor's Chapter 13 filing.

Typically, a person filing for Chapter 13 bankruptcy will have to pay a portion of the debts he or she owes on credit cards. This is known as unsecured debt. Before approving a repayment plan, a court may require a debtor to detail how he or she will repay unsecured creditors an amount of money equal to the value of the debtor's nonexempt property.

Understanding what debt might be dischargeable, and what debt might not be, can be an important factor for a Floridian in the process of deciding whether to file for bankruptcy and which chapter may be the best fit.

Source: FindLaw, "Chapter 13 Bankruptcy Rules FAQ," accessed Dec. 26, 2015

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