Student Loan Payments in Chapter 13

[redyhws]

I understand that Student Loans are not discharged, which creates a little bit of a dilemma. First, they are lumped in as "unsecured creditors", and any payments in your plan going to unsecured creditors are paid to such creditors in a proportionate amount (i.e., each creditor's payment is based on it's percentage of the debt, where the numerator is the outstanding debt for such creditor and the denominator is the total amount of unsecured debt in the plan (based on proof of claims filed)).

The problem is that interest accrues for any unpaid student loans, and because they are not discharged, you will be facing increased amounts on student loans left unpaid.

My questions are:

(1) can you request from the trustee to earmark amounts paid in your monthly payment to go directly to the student loan creditor before other unsecured creditors? If so, do you need to increase your monthly payment to the trustee by such amount or is it taken from the DMI?

(2) Can you make payments to student loan creditors outside the plan (without it constituting a "preference payment" during the bankruptcy plan period)? If this is true, then the student loan creditor shouldn't be listed in your plan, right (otherwise, they will get money from the trustee based on their percentage amount, and such money is already being paid by you directly to the student loan creditor).

[HHM]

This is nothing new.

1. No

2. Depends. The majority view seems to be that you cannot budget for student loans, at all, in chapter 13. (it prejudices your other unsecured creditors; and student loans are given no special priority over other unsecured creditors). Basically, what your attorney needs to do is pad your budget in other areas so you can pay at least the interest each month (but that provision does NOT go in the plan).
If you are in a 100% pay back plan to unsecured creditors, then you can put the student loan payments in your budget and continue to pay them outside the chapter 13 (assuming you can afford to do so).