Student loans came due this month - need advice please

[cspa522]

We are 24 months into our Ch. 13 with 3 years to go. My husband was in school for his Masters when we filed. Our plan is actually very, very accommodating and we are able to put a nice chunk into savings each month, and I planned to make the payments outside the plan when I thought they would be between $300 and $500 a month. However, we just got the first bill yesterday and it's for $958 a month!!

So:

1. We have contacted our attorney (last night and have also been in touch with her several weeks prior to this, alerting her that this was going to come due soon) for advice.

2. My husband is calling the Fed Loan people today because our attorney advised us that if we tell them we're in a Ch. 13 BK they may lower our payment.

However, until I get answers back from them, I'm pretty nervous. What is YOUR story when it comes to student loans in Ch. 13? Did you pay in or outside the plan? What are pros and cons of each?

Is it likely the Fed will work with us? Will our trustee lower our plan payment amount to help us make the student loan payments?

I'm really not sure how this works!

Thanks in advance for any help you can give me!

[SMinGA2]

Have you looked into Income Based repayment, to see if that could lower your payment?

[Pjmax]

http://studentaid.ed.gov/repay-loans...ay-as-you-earn

I don't know if you qualify, but this new program was effective 12/21/12. Worth looking into anyway.

http://studentaid.ed.gov/repay-loans...s/income-based

Same site, income-based repayment program.

[cspa522]

It looks like if I qualify for the Pay as you Earn program it lowers the payment to $736 a month, which is better, yes, but still crazy. Lunch time can't come soon enough so he can call and find out what our options are. I'm assuming if I report to the attorney that we are now required to spend between $700 and $1000 a month repaying his student loans they'll have to lower our BK payment?

[Slingerland]

Maybe I'm wrong, but I thought a C-13 put student loans into forbearance automatically for the duration of the payment plan?

[LadyInTheRed]

Maybe I'm wrong, but I thought a C-13 put student loans into forbearance automatically for the duration of the payment plan?

No. Some lenders automatically put student loans into forebearance. Nobody should assume their loan will go into forebearance without checking with the servicer of their loan.

[HHM]

Sounds like some of the loans were dispersed AFTER the chapter 13 filing.

I would probably notify the servicer of the chapter 13 filing, they might just throw the loans into bankruptcy deferment, no questions asked. If they take a harder line approach (e.g. loans were incurred after filing), then you need to work on payments etc.

I would tread lightly before involving the BK trustee; strictly speaking, you need trustee permission to incur debt during a chapter 13 BK. If these loans were really dispersed after the BK filing and that fact was not disclosed to the trustee and if permission to take the loans was not sought, that is a problem; so you won't find the BK trustee or court too accommodating. Worst case scenario, if the servicer won't work with you, you may have to dismiss and refile your case.

[cspa522]

We were up front with our attorney about the student loans when we filed. She's been aware of them the entire time. Shouldn't she have included that somehow?

My husband called the FedLoan people today and they were able to lower our payment to $527 a month for 2 years, then it goes up to $675 for the last years. At that point we will be out of the BK and should be able to refinance them if needed.

I have emailed my attorney with all of this information, so hopefully it works out and we're not in trouble. I will be severely angry if we are, because we disclosed all of this at the time we filed, and have discussed it with her many times since then. He finished school in June, so we knew that the loans were going to come due in December/January. I contacted her early last month to ask about what we need to do when we get the bill, etc., and she was the one who advised us to contact the Fed Loan people and tell them we're in bankruptcy and to see if they would work with us to lower our payment so we don't have to put it in the BK filing.

[HHM]

Let's back up and ask a preliminary question, is this a joint bankruptcy or just you?

If joint...
Just keep your head low and keep making your chapter 13 payment. Strictly speaking, the duty of the debtor is to devote ALL disposable income to the plan for the life of the plan. So, if you really have $527 per month lying around (and are able to save), that is a large chunk of income not going to the plan. If the trustee audits your plan (very very rare), and requests updated income and expense info, you could have a problem.

As for the student loans, the key fact is when the loans were dispersed. If all loans had been dispersed prior to filing chapter 13, no problem. If not, then some sort of disclosure should have been made in the plan regarding future student loan obligations.

[Slingerland]

No. Some lenders automatically put student loans into forebearance. Nobody should assume their loan will go into forebearance without checking with the servicer of their loan.

LITR, not to hijack the thread, but what if the loans are owned by the Dept of Education?

[cspa522]

Head is down. We'll make the payment and let it go. My attorney knows that we have a lot of wiggle room in our plan, so I'm betting the reason she said we should try to make the payments outside the plan is for that reason - so we don't alter the attorney as to how much we're able to save. Thanks for the advice everyone!

[dmc-2008]

I have a student loan and cant bk it. I notice that the payment due is now zero but i am still making them because when i an done with this i dont want that hanging over my head. Only problem is the trustee does not look at it as an expense and so i have to eek it out somehow!

[LadyInTheRed]

LITR, not to hijack the thread, but what if the loans are owned by the Dept of Education?

I don't know. All I know is that some members of this board have reported that their student loans automatically went into forebearance and some have reported the opposite. Better safe than sorry. Contact the loan servicer no matter what anybody here tells you happened to their loan. I have seen at least one post by a member who assumed their loan went into automatic forebearance only to get out of bankruptcy and find out that they were in default and could never get a forebearance.

[woeisme]

Mine went automatically into default because of the BK filing, even with making payments! They refused to apply any of the payments to the students loan, said they'd just put the $ in an escrow account and not apply any of it until after I got out of CH 13, which means the interest still accrues on the entire balance, the rat-bastards! So I stopped making payments since it wasn't getting me anywhere anyhow.

[dmc-2008]

Really? I should call and find out too!