Student loan & Chapter 13...Can they really do this?

[pbolden]

My wife and I filed ch. 13 after a failed business. After five long hard years of having virtually nothing, shopping for clothes at the salvation army, etc. We completed the plan and the bankruptcy was discharged

Today I received a letter from the ECMC about my student loan in short stating that I stilled owed the money. WHAT!!! I went back to the trustee's website and looked over our plan and yes, ECMC was included at the same payback rate as other non-secured debts, and yes they were paid in accordance with the bankruptcy and yes they GLADLY TOOK EVERY DIME sent to them by the trustee!

Didn't ALL creditors have a time period to contest their inclusion in the plan? If this is left to stand it makes a mockery of the whole process and places us right back in financial jeopardy.

Question: If the student loan was paid through the ch. 13 and ch. 13 was paid in full and discharged. Can the ECMC defy that and attempt to collect more money?

I feel like I've been KICK IN THE GUT!

Thanks,
Paul

[justbroke]

Question: If the student loan was paid through the ch. 13 and ch. 13 was paid in full and discharged. Can the ECMC defy that and attempt to collect more money?

Student loans, with few exceptions, are not dischargeable in either a Chapter 7 or a Chapter 13.

Did your Chapter 13 pay 100% of what you owed, with interest, to ECMC? Sounds like it didn't.

Just because you paid creditors back 10%, 30%, or even 70% during the life of your Chapter 13, doesn't make non-dischargeable debts go away.

I would have hoped your lawyer explained that to you. You owe ECMC until they are paid off in full.

[arkienurse]

My wife and I filed ch. 13 after a failed business. After five long hard years of having virtually nothing, shopping for clothes at the salvation army, etc. We completed the plan and the bankruptcy was discharged

Today I received a letter from the ECMC about my student loan in short stating that I stilled owed the money. WHAT!!! I went back to the trustee's website and looked over our plan and yes, ECMC was included at the same payback rate as other non-secured debts, and yes they were paid in accordance with the bankruptcy and yes they GLADLY TOOK EVERY DIME sent to them by the trustee!

Didn't ALL creditors have a time period to contest their inclusion in the plan? If this is left to stand it makes a mockery of the whole process and places us right back in financial jeopardy.

Question: If the student loan was paid through the ch. 13 and ch. 13 was paid in full and discharged. Can the ECMC defy that and attempt to collect more money?

I feel like I've been KICK IN THE GUT!

Thanks,
Paul

Didn't your lawyer tell you that student loans are not dischargeable, except in very rare cases that none of us will probably ever be able to meet the requirements. We were told at the time that student loans are considered secured non priority debts and are non dischargeable.
My student loans were included in my 13 plan. They paid the minimum payment for me, and it was made clear that I would have to pick back up as soon as the bk was closed, as the amount of my student loans wouldn't be fully paid off by the end of the plan. So when I knew I was closing, I called the student loan authority to find out where I needed to start paying my payments to. They eventually sold the loans back to EdFinancial, which had them before we bk'd

Really, your lawyer should have made sure you understood this fact.

And we are the lucky ones, you and I. From what I have read on this board, some of the new law filers aren't allowed the funds to pay on their student loans while in the bk, leading to coming out of bk owing substantially more than they did when they filed. Where is the fair and fresh start in that?

[pbolden]

Thanks for the replies guys,

No, I don't recall our attorney explaining this. My issues are these: First why allow it to be included at all if the debt isn't going to be retired along with the other debts. Or why not include it as a secured or priority at 100% so that at the end of the plan it would have been taken care of. Instead, my wife and I are celebrating have completed the plan and then the very first letter we receive from ECMC was full of threats...just like the old days...Great fair and fresh start...GEEZ!

[woeisme]

The reason student loans are nodischargeable is because in the old days, people would run up big student loan debt, graduate with a degree (MD, law degre, etc.) and immediately file BK as soon as they graduated, sticking it to the US taxpayers who guarenteed these student loans, and they would be scott free not oweing a dime and about to embark on a career where they made big bucks. So the loophole was closed, and BK no longer covers discharge of student loans. All your student loan paperwork clearly states that the debt is non-dischargeable in BK. Sorry you didn't understand that, but it is made clear as a bell in the paperwork, in the mandatorty student loan counseling schools are required to have, etc. Asking why it wasn't paid 100% is like asking why don't they pay my entire mortage so I don't owe a dime on my house when I come out of BK? Because it's supposed to help you get a new start, but not be a total free ride.

[sdfileger]

That is a good question? I will be in the same boat in 3-4 months. I just sent my Attorney a email asking about that subject. This is what I wrote:

.................................................. .................................................. ....
I have a question about a student loan in my Chapter 13. SallieMae/Texas Guaranteed Student Loan. Amount; $10,514.72 (Motion to allow claims paper says Forgive 95%) The loan is unsecured. It was recently taken over by ECMC. I was reading on the Bankruptcy Forum website that they will come after you (ECMC Educational Credit Management Corporation) and tell you, you still owe the debt. This happened to someone who finished a 5 year Chapter 13. Is this true, or is my debt (school loan) discharged at the end of my Chapter 13? We were to pay all unsecured debt at 5%. I was never told that I may have to continue paying on Student Loans after discharge. If this is the case I would like to know, so I can contact this company when I am discharged in 3-4 months to make payment arrangements. Could you please email or phone me with the answer. Thank You
.................................................. .................................................. ....
Has anyone else had this issue? I don't mean to hijack your thread.

[sdfileger]

Pbolden was your loan a private or Federally back Student Loan?

[pbolden]

U.S. Dept. of Ed.

[lrprn]

Here's a good explanation plus the actual statutes themselves that make student loans non-dischargeable when filing bankruptcy - http://www.moranlaw.net/studentloans.htm and http://www.moranlaw.net/private_student_loans.htm

Sorry to hear you are just realizing this, but yes it's true - you do still owe whatever % of your student loan was not paid by your trustee during your Ch 13. This has been the case for federal student loans like yours since 1992.

[pbolden]

Thanks for the links lrprn.

It STINKS when citizens who hit hard times through no fault of their own aren't afforded similar legal redress as are the very schools and banking institutions involved in the lending process, ironic. Then again, I'm not a Lear jet owning, swank party throwing, on the public dole financial institution that's just to big to let fail.

Nope, I'm just a little guy with a run of bad luck who struggled but completed his ch. 13. and who's trying to get back on his feet...Oh, is that another boot coming my way?

Had to vent!

[EricaCallaha]

I feel your pain.

We will still own good ole Sallie Mae at the end of our bk. Our attorney suggested to us to keep things tight and take what we were paying into our plan and put it towards the student loan. That may hurt, but the loan will dwindle down quickly. I think we will put about 80% of our post 13 payment towards the student loan.

Just get it over with...like ripping off a Band-Aid.

[treehugger1]

At least some are "lucky" enough to have the opportunity to include the GSL's in their payment plans. It appears that in my district, the loans go to interest-bearing deferrment for the life of the BK 13. My interest would add up to $30+K over five-years. I'll keep postpong the BK until someone allows you to deduct GSL's as priority debt prior to the means test calculation. I do believe that the student loan issue will be one of the next big "credit bubbles" to burst. I'm no twhining an dlive with the current BK statutes, but one does have to wonder why the government has not enacted laws to protect their own "guarantees."

[or30313]

Thanks for the links lrprn.

It STINKS when citizens who hit hard times through no fault of their own aren't afforded similar legal redress as are the very schools and banking institutions involved in the lending process, ironic. Then again, I'm not a Lear jet owning, swank party throwing, on the public dole financial institution that's just to big to let fail.

Nope, I'm just a little guy with a run of bad luck who struggled but completed his ch. 13. and who's trying to get back on his feet...Oh, is that another boot coming my way?

Had to vent!

pbolden,

I'm in the exact same situation as you. I had a once successful business turn sour which forced me into Chapter 13. My business turned South through no fault of my own. It was simply as situation where consumers changed their buying habits (we had used bookstores and CD stores that were made obsolete by online sales).

At the time when we filed, I had a $48,000 balance on my SallieMae accounts. While we were in Chapter 13, my wife and I have completely changed our approach to spending; we're now living on less than 50% of my take-home pay.

Later this month, we'll be paying our plan 1.5 years early. We're paying off early so that we can get a jump start at paying off the student loan that has grown to $52,000 during our 3.5 years in Chapter 13. It grew by $4,000 even though it was included in our plan and our trustee has been paying on the note (just not enough to keep pace with the ugly 8.5% interest rate).

The difference is I don't feel like a victim at all -- quite the opposite. I feel blessed that Chapter 13 exists for folks like me. Through Chapter 13, my wife and I were able to get a new start. I feel blessed that the Federal Government made those loans available to us back when my wife and I were in undergrad and grad school. If those loans weren't available to us, my wife and I wouldn't have been able to afford school and we wouldn't have the education to fall back on when our businesses failed.

On the flip side, I feel terrible for all the businesses that gave us credit back when we were still in business. I abandoned four very large leases and a few hefty business lines of credit. The businesses that were only paid pennies on the dollar due to my Chapter 13 are far more the victim than I am.

I guess it all depends on your perspective.