Paying Student Loans while in Ch. 13

[nsupanda]

Yeah right, we'll eventually be making our student loans payable to the Emperor of China.

[IamOld]

Indeed! Maybe they'll have more mercy :-)

[HHM]

Here is a blog post that explains the chapter 13, "pay student loan" issues and options
http://www.**********.com/blog/2011/...13-bankruptcy/

To the larger point, understand that all loans, not just mortgages, turn into asset backed securities and are serviced in the same manner. Behind the scenes, there is a problem with making payment to your student loans outside of BK, odds are, the servicer will hold the funds in the "suspense account." (reason being, the interest on the suspense account is a revenue stream), until the chapter 13 is discharged. Whether they can legally do so is questionable (I don't think they can), but student loan servicing is even less regulated than mortgage loan servicing.

It is still good advice to pay student loans on a voluntary basis if you can; but it may be a headache once you pop out of 13 to know if the payments were properly applied.

[nsupanda]

Thanks for the info!

[IamOld]

HHM- sorry this is a sideways question but - we're paying our mort to HSBC outside the Ch 13 directly to them, while Trustee is sending them the arrears ("Only" 2 months arrears) - they should be applying OUR payments to the months I'm sending them for right? The only proxy I have to see what they're doing is the credit report, where I do see the balance declining...month over month

[HHM]

HHM- sorry this is a sideways question but - we're paying our mort to HSBC outside the Ch 13 directly to them, while Trustee is sending them the arrears ("Only" 2 months arrears) - they should be applying OUR payments to the months I'm sending them for right? The only proxy I have to see what they're doing is the credit report, where I do see the balance declining...month over month

That is how it should work, since paying the mortgage directly, outside the plan is "part of the plan", so the mortgage lender should be applying all received payments. The difference here (or what the article terms the "practical approach") is that payments to the student loans outside the plan are not part of the plan. The payments are entirely voluntary, so it is not clear what obligation the student lender has to apply payments during the chapter 13.

[IamOld]

That is how it should work, since paying the mortgage directly, outside the plan is "part of the plan". The difference here (or what the article terms the "practical approach") is that payments to the student loans outside the plan are not part of the plan. The payments are entirely voluntary, so it is not clear what obligation the student lender has to apply payments during the chapter 13.

AH! I see - thanks so much!!!