Pay student loans while in plan?

[flower04]

Can you do this, assuming you have cash flow to do so? Does anyone know what the allowable IRS expense is for this? I can't seem to find it.
Thanks

[treehugger1]

In my district, I believe if you are in a 100% payback plan over five years, and you have enough remaining wages to pay the loans in the plan, it is allowed. But, different BK districts have different rules. If you are not allowed to put the SL's in the plan, then they sit on the outside with the interest compounding until the 13 is finally discharged.

[rrockinggramma]

government student loans are suspended while you are in a chapter 13 but the interest continues to accumulate. I never paid a dime because they were paid by the trustee in my plan (well the 10 percent to unsecured) and the government applied the paiyments to interest and principal. Now that I am discharged I am back in repayment. I could have paid if I had the extra to do so but I never felt the desire to send my extra to them. LOL

[zeezee]

So does that mean that the payments that would have gone to loans goes to creditors or is it extra fluff in the budget?

[rrockinggramma]

it means that your student loans are unsecured creditors in any plan and you will not be allowed to budget those payments into your budget outside of the plan. So it ups your payment to the trustee, no fluff.

[zeezee]

Thanks rg (I had to shorten that) Man that's going to suck with all that accrued interest after 5 years!

[rrockinggramma]

it definitely does. I owe about 4,000 more and that was with the trustee making payments. However the chapter 13 was still worth it for me in many respects. I just upped my student loan repayment plan so I can have them paid off sooner ( I owe on 4 loans )

[zeezee]

Okay, now I'm lost. I know they become unsecured but if the trustee is paying on them why couldn't they just as well be paid by the filer? Is it that they are not making full payments? Just interest? Or just whatever they deem the creditor gets?

[rrockinggramma]

because they are unsecured they get the percentage to unsecured as required by your plan. I had 4 loans totalling about 10,000. The government filed 4 claims, but the trustee only entered 1 loan for about 4000. So my plan (which ended up paying about 80 percent total to unsecured due to lack of claims filed) only paid about 3200 to the government. I was ok with it. Perhaps in your district outside payments are allowed. They were not for me.

[zeezee]

I see. Thanks much for clarifying. I am about to go in next month maybe but I haven't gotten to the point of asking about school loans. Mines were in forbearance but my lawyer told me get them out and start making payments so that my monthly expenses were higher by the time I file.

[lrprn]

The first issue is whether student loan payments can be counted as an expense or not on Schedule J when you file. That depends on local trustee practices. Some allow it, most don't.

The next issue is whether you can make partial or full payments to student loans after filing using your own left-over income. Again, some trustees state in their instructions to filers that this isn't allowed, but some don't have a problem with it. The more sympathetic trustees understand that Ch 13 filers with student loans are really screwed by the current bk law because gov't and private student loans are unsecured but not dischargeable, and because the interest on the loans continue throughout the life of the 13 plan, adding a considerable amount to what is owed by the end of the plan.

[ccfriend]

For my bk my lawyer calculated them into my budget. My plan states that I will pay the student loans outside the plan. Well when I went to pay them each month I was told by the student loan holder that I could not pay them because of the bk. I asked the Sallie Mae if I could just send a check anyway and the person on the phone said they were not sure if the money would even be applied to my loan. So, I haven't paid on them. I have been using the money I would have paid each month to put in a saving account and then when my bk is done I will pay a big lump sum!

[indebt00]

My lawyer is trying to get our student loan payable outside the bk but thinks its going to be an issue with the trustee as the trustee would want the most possible going to unsecureds...so we will see.

He said its better to be paying as you are technically past due for the entire
5 yrs if they are included in the unsecured part and they can come after you at the end for the unpaid payments/penalties/fees....does this sound true???

[Billssuck]

I pay my student loan outside of my plan and the trustee didn't have any problem with including it as an expense. However, the company that has it has failed to send me statements since I filed and I have mailed in the payment with a letter each month so far. I asked my attorney about it and they said I should be able to get statements mailed to me again by a simple phone call to them. We shall see how that goes....

[lrprn]

He said its better to be paying as you are technically past due for the entire 5 yrs if they are included in the unsecured part and they can come after you at the end for the unpaid payments/penalties/fees....does this sound true???

Technically for non-govt student loans this is possible because non-govt SL lenders can do pretty much anything they want around late fees. Look at your original loan agreement to see how the lender deals with late fee collections.

However, so far in the almost four years I've been here at BK Forum, we've never had this happen to any of our Ch 13 members who successfully finished their Ch 13s. They were notified about the full brunt of the unpaid interest added to their account afterwards when their SL bill payments started up again almost immediately after receiving notice their 13 was finally discharged. (Nice of the lender, huh )

Do be sure to dispute any late fees added to your SL account while it was in forebearance. The lender can't charge late fees if the SL payment has been waived for the length of your Ch 13 plan.