Chapter 13 & Private Student Loans (Specifically Wells Fargo)

[DirkDiggler]

Ok, I've been reading all the horror stories about private student loans and chapter 13. My paperwork was dropped off at my attorney's office last week, should hear back from him this coming week as to Ch. 7 or 13. In the extreme event that we can't make a 7 work, what happens to the (3) Wells Fargo private student loans we have? Those 3 are the only student loans we have for a total of $31k. They are all current and have never been late. 2 of them are co-signed by my wife's mother. Can we continue to make the payments on the loans so they don't go into default and start harrassing my mother in law, who just retired? If we do continue payment on them, will that reduce the DMI for a payment on a Ch. 13? I'm reallllllllllly hoping we can swing a ch 7 so we can keep up on the payments on the SL's, but if we absolutley HAVE to do a 13 I want to know what to do about the SL's....thanks!

[lrprn]

In the extreme event that we can't make a 7 work, what happens to the (3) Wells Fargo private student loans we have? Those 3 are the only student loans we have for a total of $31k. They are all current and have never been late. 2 of them are co-signed by my wife's mother.

Whether you can list the three loans as legitimate expenses when you file depends on your local bk court's customs. Some trustees allow student loan payments to be included in your expenses, and some don't. Your lawyer can tell you what to expect in your case.

If your trustee is one that doesn't allow student loan payments to be included as expenses, then your lender puts the three loans into a deferred status for the life of your Ch 13 plan. Interest will still accrue, but no payments need to be made by yourselves.

The two loans that your MIL co-signed are treated differently by the lender. The SL lender will then go after your MIL to pay on those two loans as soon as you stop paying on them.

Can we continue to make the payments on the loans so they don't go into default and start harrassing my mother in law, who just retired?

If you have sufficient leftover dollars after your other financial obligations and expenses are met each month, yes. You can do anything you want with any leftover money during a 13. Just be prepared there are likely to be months that you won't have the extra cash to push to the student loans. Those months your MIL would have to make the payments on the two she co-signed to keep them current.

If we do continue payment on them, will that reduce the DMI for a payment on a Ch. 13?

See my comment above - this is going to depend on what's allowed by the Ch 13 trustee(s) in your local court.

[DirkDiggler]

Well that just means I need to do everything I can to go Ch7. I'm NOT letting them go after my mother in law, that would be insane LOL