Sometimes in life you have to pick the best of two (or more) bad options.

So it goes with student loans and bankruptcy.

Option Number One:  Pay the student loan debt now when you can’t afford it.

Option Number Two:  File Chapter 13 bankruptcy now and pay the student loans later.

Most people know you can’t eliminate student loans by filing bankruptcy, but you can put off paying on them for up to 5 years by filing Chapter 13 bankruptcy.

I recently met with a potential client who is in her 5th year at UCF.  She works part time while finishing up her degree. She, like so many other people in college these days, took out a huge amount of student loans to allow her to go to college.  Colleges and the government make it real easy to do.

There is no way she can repay her loans on her current income and her loans will become due only 6 months after graduation.  She really doesn’t have a lot of other debt, maybe $10,000 total of credit card debt she racked up while in school.

By filing a Chapter 13 bankruptcy she can put off having to pay her student loans for up to 5 years.  During that time, on her current income, she would only have to make about a $75/month Chapter 13 Trustee payment.  Yes, she would have to file bankruptcy, and that sucks.

But…

Consider the alternative of having the equivalent of a mortgage payment to make on a student loan debt when you’re only 6 months out of college making about $30,000/year.

The idea here is that you pay what you can afford while camping out in a Chapter 13 bankruptcy.  After 5 years, hopefully your income has increased to the point where you can handle the student loan debt and, by the way, the credit card debt is wiped out.

Is this a perfect answer?  No, it’s not.  But it’s something to consider.