Consequences of Bankruptcy for School Loans.

Consequences of Bankruptcy

The bankruptcy discharge is intended for certain borrowers who have filed a petition for relief under the Bankruptcy Code. Student loans are not discharged through bankruptcy.

Student Loan Consequences of Bankruptcy

While collection activity may cease under bankruptcy relief laws, borrowers will most likely be responsible for all of their student loan debt.

Borrowers who declare bankruptcy and have loans already in a default status will need to make six voluntary, satisfactory payments to regain federal loan eligibility. Please note that borrowers who filed under Chapter 13 may already have made payment arrangements through their bankruptcy plan. Six consecutive payments to the court-appointed trustee will still be necessary. Questions regarding defaulted loans in relation to bankruptcy may be directed to Rita Ray at 1-800-MGA -LOAN (1-800-642-5626), extension 60614.

Borrowers who declare bankruptcy and have no previous loans in default status will still be eligible for federal student loans in accordance with federal education and bankruptcy laws. A borrower should be aware that if he or she declares bankruptcy, lenders may require the borrower to fill out a new Master Promissory Note and the school to certify entirely new federal loans. Questions regarding loan eligibility for borrowers in bankruptcy with no prior loans in default may be directed to the Michigan Guaranty Agency Customer Services Unit at 1-800-MGA-LOAN (1-800-642-5626), extension 36076.