Edcuation Loans and DMI

[siloc]

Newbie here with a question I can't find through forum search.

I completed a 22C and it states I have ~$1,000 in disposable income.

My wife and I pay $600 each month for education loans.

We have ~$80,000 in unsecured debt.

Will a repayment plan factor in the $600 toward educaiton loans? Therefore, only ~$400 per month would go towards repayment of unsecured debt?

[HHM]

Nope, student loan (or education loan) payments DO NOT count.

[siloc]

So, the full $1,000 of DNI goes towards unsecured debt? The DNI calculation does not include student loans, correct? Mortgage and auto loans are deducted in calculation of DNI. Why aren't student loans?

Thanks

[HHM]

Because student loans are a debt, and become part of your unsecured class of creditors in BK. Just because student loans are non-dischargeable in BK, does not mean they get treated differently for payment purposes in chapter 13. Plus, student loans go into automatic deferment in chapter 13.

Mortgage and car loans are secured debt. Plus, you are allowed housing and transportation expenses.

[lorelei]

But that depends on the district, doesn't it? I think some places do allow you to pay on your student loans outside the bankruptcy payment plan, just like a car or mortgage. That's my understanding of how it is where I am (West Michigan).

[HHM]

But that depends on the district, doesn't it? I think some places do allow you to pay on your student loans outside the bankruptcy payment plan, just like a car or mortgage. That's my understanding of how it is where I am (West Michigan).

Do you know, or are you guessing>

It is not district specific, there are 2 sets of circumstances where you can pay student loans as an expense. It's a little to complicated to get into here, but the exceptions rarely apply. Having to do with how Form B22-C comes out, whether there is any payment to class 4 creditors, etc.

[lorelei]

I don't know, but I'm not guessing. I'm trying my damned hardest to figure it all out. It's damned near impossible to make sense of anything when the practices differ from one court to the next (why is that, anyway?)

I do know that there is an entity called the Michigan Guaranty Agency, where payments on student loans are made when someone is in Ch. 13. When my attorney asked me what monthly payments I was making, he wrote down the student loans along with the rest of them, and from what he was saying, it sounded like he wanted to list them with my other actual monthly expenses. But I could be wrong, of course.

Of course, whatever research I do doesn't amount to doodley squat and its up to whatever the attorney and trustee finally come up with. It's the not knowing that kills me though.

[NoTomatoCan]

I am in Eastern District of Michigan and definitely not able to include the student loans in our budget.

Yes, we can continue to make payments to the Michigan Guaranty Agency, but only if we are able to scape up the money from some place else in our budget. We were not able to include our student loan payments as part of our monthly budger.

As HHM pointed out, our student loans are treated as any other unsecured creditor (oh, except for that whole getting discharged part - LOL). Our minimal unsecured payment means we just barely cover the interest on these loans while we are in our CH13.

Bottom line - unless you are in a 100% payback, don't count on being able to pay your student loans outside the plan. There are a (very) few out there who have managed to do this, but they are in the minority.

[HHM]

Okay, basically the 2 sets of circumstances that allow you to pay student loans in BK 13 are these.

1. You are 100% payment to unsecured creditors.
2. You have NO disposable income on Form B-22C (this means that unsecured creditors could not expect to get any sort of payment). This particular exception does appear to be district specific.

Beyond that, student loan payments DO NOT COUNT as an expense for BK purposes.

[lorelei]

Well, that sucks.

[NoTomatoCan]

Well, that sucks.

As someone with about $140k between my wife and I... Yes, it does suck.

[researchnerd]

Because student loans are a debt, and become part of your unsecured class of creditors in BK. Just because student loans are non-dischargeable in BK, does not mean they get treated differently for payment purposes in chapter 13. Plus, student loans go into automatic deferment in chapter 13.

Mortgage and car loans are secured debt. Plus, you are allowed housing and transportation expenses.

This is not necessarily true and may depend on jurisdiction. I asked my attorney about this and he said my student loan would not go into deferment. It is named in the plan but I need to pay it outside the plan. I am not in 100% payback either; in fact my proposed plan was 0% to unsecured.

[lorelei]

OK, here is where I get confused. I asked about the handling of student loans in a Chapter 13 on an "ask a lawyer" Website, specifically asking for local rules. An attorney (I believe so, it linked to his Website) said the following:

If you are eligible for a defferal you could defer payment but why would you? You want to maximize the payments to secured creditors and non-dischargeable debt through your Chapter 13

Which makes it sound like they do not HAVE to go into deferral.

Another attorney there said:

If you are filing for Chapter 13, you may be able to list the student loan payment as an unsecured long term debt to be paid outside the bankruptcy plan. You need to check with local counsel about whether that is acceptable in your area. Otherwise, it is treated as a general unsecured debt in bankruptcy and it gets paid whatever everyone else gets. If the payment is less than the regular payment, you will owe the difference when your bankruptcy is discharged.

So - I still don't know what to think.

[NoTomatoCan]

This is not necessarily true and may depend on jurisdiction. I asked my attorney about this and he said my student loan would not go into deferment. It is named in the plan but I need to pay it outside the plan. I am not in 100% payback either; in fact my proposed plan was 0% to unsecured.

Since you have now filed for CH7, would your situation fall under one of the exceptions HHM noted in a follow up post?

"2. You have NO disposable income on Form B-22C (this means that unsecured creditors could not expect to get any sort of payment). This particular exception does appear to be district specific. "

[researchnerd]

Since you have now filed for CH7, would your situation fall under one of the exceptions HHM noted in a follow up post?

"2. You have NO disposable income on Form B-22C (this means that unsecured creditors could not expect to get any sort of payment). This particular exception does appear to be district specific. "

Nope. When we originally filed the Ch13 we did have some disposable income, and I have only talked with my attorney about this in terms of a Ch13.

However, that raises a good question...will have to ask the attorney about whether the student loan treatment will change in Ch7. I haven't seen (or filed) the Ch7 conversion paperwork yet, but I should get it later this week for review.