New income and student loan debt due after BK filing

[silverlotus]

I've been wondering about what's going to happen in our situation. We're going to file before I go to work (I'm in college right now, until May) but I will be working sometime in a few months after that. We are planning to file probably at the end of April. And then next November, my student loans come due. I can expect to make about 1300 net which is more than a 10% income growth. However, my student loan debt should run me around 800-1000 a month. Which almost cancels out my paycheck.

I have no clue how to plan this with BK! I'm worried that working at all will push us into a 100% payback but it's not like I'm going to sit here for 5 years doing nothing. I want to start my career (again.. or finally. Something like that!).

I know a lawyer could tell me more, but I wonder if anyone has picked up 2nd jobs during a Ch. 13 and had student loans come due... expensive student loans especially!

P.S. I wanted to take a few more classes in college after filing to get a specialty certificate so I can make more money and find jobs easier. I wonder if they would allow me to put this in our budget?

[HHM]

Why would you be in a chapter 13 in the first place?

[kiddles]

You might look into consolidating your student loans with the Dept of Ed - they have a payment plan that goes 25 years. You'll have lower payments, but will pay more in interest.

[silverlotus]

... why not?

Why would you be in a chapter 13 in the first place?

[silverlotus]

Heh, yeah. That figure IS with a 25 year repayment plan.

You might look into consolidating your student loans with the Dept of Ed - they have a payment plan that goes 25 years. You'll have lower payments, but will pay more in interest.

[HHM]

... why not?

Umm...you only file chapter 13 if you "have to", or are "forced to".

From your post, and based on what you have shared so far, I don't see why you would be filing a chapter 13, vs filing a chapter 7. You said YOUR not working, so you don't have income to support a payment plan...I would assume your partner is making money...and if your only option is to file 13, then your partner must be making good money but it's unclear from your post why you are opting for a chapter 13.

I guess what I am asking is to fill us in on the back story so we can better understand the context of your question.

[silverlotus]

I don't know how much back information can even be helpful, but this is what I've got:

My husband makes 85K but we owe $65K in credit cards, another $16K in medical bills and $5K in back taxes. I will be owing $120K in student loans come next November. We bring home about $4600 net. Debts consume $2350 of that, and that doesn't include half the medical debt which is in collections. Rent is $1100. Car payment is $440.

We have no assets particularly -- no house, expensive jewelry, etc. We have two cars, one we are paying on (and are slightly upside down on so there is no equity) and another we own outright that is worth maybe $4000 on a good day. (However, my state allows a $10,000 vehicle exemption for married filing jointly). I plan on going to work this summer. As I said, I estimate my monthly net to be somewhere around $1300. But late fall of '08, I'll be paying nearly $1000 a month in student loans. I will not be working at the time I file, but the student loans will also not be due. Yet.

I don't know if I'm leaving anything out.

[CindyLou]

definitely consolidate those loans. you can choose interest only or graduated payment plans. you are not going to be stuck with that large pmt immediately. Also you will have a 6 month grace period.

[silverlotus]

Yeah, the 6 months is accounted for. I'm done in May and they'll start in November like I said. I've already chosen the graduated repayment plan for 25 or 30 years and that's what the estimated monthly payments were. $800-$1000. Standard 25 year repayment (with no graduated payments which is interest only) would run me about $1400 a month.

definitely consolidate those loans. you can choose interest only or graduated payment plans. you are not going to be stuck with that large pmt immediately. Also you will have a 6 month grace period.

[CindyLou]

my interest only choice onmine is......202: 3.25 percent at 360 MO. you should check your payment. nine is on 70,000

[jennordhavn]

Yeah, the 6 months is accounted for. I'm done in May and they'll start in November like I said. I've already chosen the graduated repayment plan for 25 or 30 years and that's what the estimated monthly payments were. $800-$1000. Standard 25 year repayment (with no graduated payments which is interest only) would run me about $1400 a month.

Maybe you could switch the loans to another lender? I owe about $137k and my graduated payments for the first two years are $480 and then go to $700ish. That is on a 30 yr. loan with 3.5% interest.

Good luck.

[silverlotus]

I don't know if I'd be able to get that good of an interest rate with our credit. I have a mix of federal and private loans. Most are private in fact. Who is your lender??

Maybe you could switch the loans to another lender? I owe about $137k and my graduated payments for the first two years are $480 and then go to $700ish. That is on a 30 yr. loan with 3.5% interest.

Good luck.

[LadynRed]

85K is pretty high. What state are you in ? Whether or not you'd even be eligible for a Ch 7 depends on the median income limits and that pertains to TOTAL HOUSEHOLD income. Alone the one income may dictate a Ch 13 anyway. Once you file, any significant increase in income has to be reported, and an increase in expenses may require a plan modification.

[silverlotus]

Colorado. I believe the median income for my state is something like $68K for a family of 2. It's not exactly a cheap state so it's not like we're rich or anything.

It's my understanding that even if you're above the income level, if your normal expenses create a negative income every month then you're again eligible for Ch. 7.

I know that additional income needs to be reported and all that. That wasn't my question.

My question is more about what happens AFTER that. Like, what is going to happen with my particular situation. Getting a job will increase our income, so do we have to amend the plan so I can pay more towards the plan? And then when student loans come due, do we have to amend the plan AGAIN and drop the plan payments because it's a new expense? Since the student loans are nearly going to cancel out my income, couldn't I just get a job whenever after filing and then report everything once A.) I know I will continue working the job and B.) when the student loans are actually due?

85K is pretty high. What state are you in ? Whether or not you'd even be eligible for a Ch 7 depends on the median income limits and that pertains to TOTAL HOUSEHOLD income. Alone the one income may dictate a Ch 13 anyway. Once you file, any significant increase in income has to be reported, and an increase in expenses may require a plan modification.

[CindyLou]

The bad news is normally in a chapter 13 they will make you do a forebearance and NOT pay your student loans during the chapter 13. Districts differ, but unless you can pay off the loans during the BK they usually won't let you include them and pay on them til after the BK.

I went to Sallie Mae and did an "estimate my payments". Used 120,000 at 6% and here are your results.

Summary of results: You may qualify for the repayment plans listed below. See the "Details" links for more information.

The initial monthly payments are based on the loan amounts you entered and that you will repay the loan in the maximum amount of time allowed under your repayment plan.

Standard Level Repayment Details
Initial monthly payment $1,332

Graduated Repayment—Grad ChoiceSM 2 Details
Initial monthly payment $600

Graduated Repayment—Grad ChoiceSM 3 Details
Initial monthly payment $600

Graduated Repayment—Grad ChoiceSM 4 Details
Initial monthly payment $648

Graduated Repayment—Select StepSM 2 Details
Initial monthly payment $600

Graduated Repayment—Select StepSM 4 Details
Initial monthly payment N/A


Flex RepaySM (15 years)
Initial Monthly Payment N/A

Extended Repayment—Standard Details
Initial monthly payment $773

Extended Repayment—Select StepSM 2
Initial monthly payment $600 N/A

Extended Repayment—Select StepSM 4
Initial monthly payment $600

Income Sensitive Details
Initial monthly Payment $600

Threse are based on 30 years unless stated otherwise.

Here is the link if you want to plug in your own numbers (I wasn't sure of your rate and just guessed.) Remember you can only get the 30 year if you cosolidate.

http://www.salliemae.com/content/tools/calculators/repayment/index.html

You should be able consolidate at a lower rate when the t-bill rate changes. See the info below that explains this. You will have to wait until first of June to get the lower rate. Also, even if you have already consolidated, you can do it again. Here is the link if you want to go there.

http://www.studentloanconsolidator.com/consolidation/student-loan-consolidation-rates-andbills.php

How are student loan rates set?
Simple :

Treasury auctions occur every Monday of the year.
The last auction in the month of May each calendar year is when student loan rates are set.
The price of the 91-day Treasury Bill at that auction is the base rate for student loans, using the investment yield (as opposed to the discount yield)
Each student loan product then adds a margin on top of that investment yield.
Stafford loans for students in school or in grace periods are T-Bill + 1.7%.
Stafford loans for graduates in repayment (for loans after July 1, 1998) are T-Bill + 2.3%.
PLUS loans for parents are T+Bill plus 3.1%.
Stafford loans for graduates with loans older than July 1, 1998 are T-Bill + 3.1%.
Rates take effect on July 1 of that calendar year for the academic year beginning in September of that year.
Want to track T-Bill rates? The US Treasury publishes auction results every Tuesday.
As an example, the May 31, 2005 auction of the 91-day Treasury Bill had an investment yield of 3.0%.

Rates took effect July 1, 2005.
Stafford loans for students in school or in grace periods are 4.7%.
Stafford loans for graduates in repayment (for loans after July 1, 1998) are 5.3%.
PLUS loans for parents are 6.1%.
Stafford loans for graduates with loans older than July 1, 1998 are also 6.1%
These rates are good until June 30, 2006.
The next May rate-setting auction will be May 29, 2006.
Want to avoid rate increases? Consolidate now!