Avoiding the Means Test if Your Student Loans Are Non-Consumer Debts

WHY DOES IT MATTER WHETHER OR NOT STUDENT LOANS ARE CONSIDERED CONSUMER DEBTS? Whether your student loans are considered consumer debts may determine whether you can file a Chapter 7 "straight bankruptcy" case. If you have a lot of student loans, and if they can be classified as non-consumer debts, then you may qualify for Chapter 7 when otherwise you could not have. Why would that matter? If you wouldn't qualify for Chapter 7 your other alternative would be filing a Chapter 13 "adjustment of debts" case, which requires you to pay all you can afford to your creditors during a 3 to 5 year period. Instead, under Chapter 7 you could discharge—legally, permanently write off—your other debts within about 4 months and then be able to focus on paying your student loans. Or you could then deal with your student loans in other ways (such as through an income-driven repayment plan). WHY MAY I NOT BE ABLE TO FILE A CHAPTER 7 CASE? You have to…

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