Student and SBA Disaster loan
My friend has a student loan and also a SBA disaster (she remodeled her home) loan totaling 140 thousand dollars. She is under the assumption that if she files chapter 13, that both these loans will be discharged. Anyone know? She has an appointment with an attorney on Thurs. I thought government loans could NOT be discharged. Her SBA is like a second mortgage.
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Student loan - Not likely. It would likely be deferred during the term of her Ch 13 and she could owe even more than she does right down due to the accrual of interest!
SBA Disaster Loan - If it is secured by her home, the debt will be discharged but not the lien on her home. They could force foreclosure if she has enough equity to make it worth their while to do so.
She should check with an attorney of course. As always, your mileage may vary.
~~ Filed Over Median Income Chapter 7: 12/17/2010 ~~ 341 Held: 1/12/2011 ~~ Discharged: 03/16/2011 ~~Not an attorney - just an opinionated woman. -
Student loan WILL NOT be discharged (short of her filing an Adversary Proceeding and trying to demonstrate undue hardship...not likely).
The SBA loan is a different story. First, did she fraudulently take out the loan. The way your post reads it sounds like she took out the loan and used the money to remodel her house. If that is the case, she may have bigger problems. The issue with the SBA is whether it is a secured debt (which it probably is). Inherently, SBA loans are dischargeable, but if she took out the loan under false pretenses, or if the debt is secured, the debt may survive.Last edited by HHM; 05-22-2012, 11:39 AM.Comment
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SBA disaster loans can be used to repair homes that are damaged in a declared natural disaster. Some of my parent's neighbors got one after the tornadoes last year. They do typically put a lien on your home, though.~~ Filed Over Median Income Chapter 7: 12/17/2010 ~~ 341 Held: 1/12/2011 ~~ Discharged: 03/16/2011 ~~Not an attorney - just an opinionated woman.Comment
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She took out the loans in 2006 after back to back hurricanes in FL. That is when the market was good and property values were high. Now, however, the market dropped here in Miami. She used the house as collateral. She is able to pay the first mortgage but not the SBA.Comment
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Chapter 13:
Stuck with the SL unless she proves a hardship (separate adversary proceeding required with some jurisdictions stating the issue is not "ripe" until the end of the Plan duration).
Can strip off the SBA (2nd mortgage) if no equity in property after consideration of the 1st.
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