Treatment in Chapter 13
- Classified as unsecured debt: Paid alongside credit cards and medical bills
- Reduced payments: Based on disposable income, not contractual payment
- No collection during plan: Automatic stay prevents garnishment and offsets
- Codebtor stay (section 1301): Protects cosigners -- critical for parent PLUS loans
- Adversary proceeding: Can pursue discharge during the plan
Ch.7 vs Ch.13 for Student Loans
| Factor | Ch.7 | Ch.13 |
|---|---|---|
| Adversary proceeding | Yes | Yes |
| Reduced payments | No | Yes |
| Codebtor stay | No | Yes |
| Protection duration | 3-4 months | 3-5 years |
The Interest Problem
Interest continues accruing during Chapter 13. If your plan pays less than the full payment, your balance grows. This only matters if you do not pursue discharge via adversary proceeding.
For federal loans, interest capitalization during the plan period can add thousands to your balance. If you complete your Chapter 13 plan without filing an adversary proceeding, you exit bankruptcy owing more than when you started. This is why strategic use of the adversary proceeding is critical for borrowers who have any chance of meeting the undue hardship standard.
Private student loans present an additional complication. Unlike federal loans, private lenders are not bound by income-driven repayment options after bankruptcy. If your private loan balance grows during the plan, you may face aggressive collection immediately upon case closure. Consider whether a Chapter 7 filing combined with an adversary proceeding might be a better strategy if you do not need the codebtor stay or mortgage cure features of Chapter 13.
Last updated: March 2026. Not legal advice.
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