Daughters college needs documentation that I cannot incur new debt

[suzychapstic]

Hello,
We are in a 60 month CH 13 that will be discharged 3/2015. My daughter is in college. The school wants parents to take out a parent plus loan to fund the costs. Of course I cannot take out that loan while in my CH 13. My dd will be able to get additional funding in her name (to cover her costs) as an independent student. The college wants a copy of something from the court stating that I am not able to incur the debt to process her through as an independent student.

I have not been able to find anything on my filing paperwork although I know that is the case. Is there a specific place where I could find this to send to the college? Or will I need to get a letter from my attorney? I am in Denver Bankruptcy Courts.

Thank you in advance
Suzy

[justbroke]

It should be in your "confirmation" order. It is probably titled "Order Confirming Chapter 13 Plan" or something similar. It would be in PACER, if you have access to PACER. Your attorney should have provided a copy to you. In that order, there should be a numbered paragraph stating that you can not incur any new debt without permission from the court.

[frogger]

In that order, there should be a numbered paragraph stating that you can not incur any new debt without permission from the court.

But I remain in awe at the number of people that do..............

[MD69107]

In my case, I just went ahead and applied for the Parent Plus Loan. I had to get denied the loan before my daughter could get the extra funding. It may be different with you though, mine was Chapter 7 at the time.

[suzychapstic]

The school had us apply. The decision came back as approved within 20 seconds of clicking the button......sheesh........I called student loans.gov and the lady told me Ch13 is not considered "adverse credit" but CH7 is.......Even though we can't take out the loan in a 13. This would have been a lot easier had they just denied me as they should have when the CH13 came up on my credit report.

[justbroke]

But I remain in awe at the number of people that do..............

Well, there are some arguments that the code does not "disallow" taking new credit. It's the interpretation of the Trustee's Duties to make sure that the debtor adheres to the plan from which this is divined. (11 USC 1302 (b)(4)... " advise, other than on legal matters, and assist the debtor in performance under the plan")

The section of the law, to assist the debtor in performance under the plan, is the source of this power. Some Districts have rationalized this and allow debtors to incur anywhere from $500-$5,000 without order of the court. Other courts, such as Florida, don't allow the debtor to incur "any" new debt without permission. Personally, I believe there should be some balance and debtors should be allowed somewhere between $500 and $5,000 without court order.

It would be interesting to see statistics on the vitality of Chapter 13 plans based on the "new debt" clause in Chapter 13 plans.

[suzychapstic]

Just Broke,
I have found the "Order Confirming Chapter 13 Plan". It is only one page and it has a numbered list. #1 states "That the plan complies with Chapter 13 and all other applicable provisions of Title 11, United States Code".....but it does not specifically state "Debtor to not incur new debt"

[justbroke]

I don't know what else to say. My plan specifically, at paragraph 3, stated that "the debtor is prohibited from incurring any post-confirmation debt during the term of the plan without approval of the Court or the Trustee." You may be in a District which allows this.

You could argue that your paragraph #1 implies that you can not incur any new debt during the term of the plan.

[suzychapstic]

Thank you so much for your help. I learn a lot from reading your replies on this forum.
I will see what I can do. Maybe I need to ask my attorney to write a letter? I would just be wayyyyy too nervous to take out a student loan for my daughter when I have 8 months left on a 60 month plan and possibly throw it all way. I can't see how it would be ok for me to take out a loan that has to start being paid back immediately while in my Ch13 without trustee permission, and I doubt any trustee would approve it.

[LadyInTheRed]

The order confirming my plan doesn't say anything about incurring new debt. But, an informational packet that the trustee gave everyone at the 341 said that neither the debtor nor the debtor's spouse is allowed to incur debt while the debtor is in BK. I wonder whether the BK court has any jurisdiction over a non-filing spouse. I have no way to keep my husband from incurring debt if he decides to do so and he is not the one who submitted to the jurisdiction of the bankruptcy court.

I think the portion of my confirmation order that prevents me from incurring debt is the portion that says:

IT IS FURTHER ORDERED that the future income of the Debtor is submitted to the supervision and control of Trustee, as is necessary for the execution of the Plan.

Arguably, if I have income to make payments on new debt, that income is subject to the supervision and control of the trustee so the trustee needs to approve any new debt. The counter to that argument is that if I can make payments on new debt and make my plan payment, then that income is not necessary for the execution of the Plan.

suzychapstic, I think you should ask your attorney to write a letter.

[suzychapstic]

Lady in the red,
I have the same statement
"The debtor submits to the supervision and control of the Trustee all or such portion of the debtor's future earnings or other future income as is necessary for the execution of the plan, including:
1. Future earnings of $215 per month which shall be paid to the trustee for a period of 60 months."

I think you are right about getting a letter from the attorney, because I did not interpret this to mean "You cannot incur new debt" even though I know that is one of the conditions......but as far as finding it in writing, I would not have interpreted that from the previous statement.

It would just be nice if the financial aid dept were familiar with CH13 and just asked me to provide my paperwork stating I am in a CH13, and not prove what the conditions of the plan are.

I will call attorney tomorrow and see what I can get and hopefully quickly and not at a large additional charge.

I will let you know what I find out.

Thanks to everyone for all of your help on this!

[spidge]

Suzy, I can only share my experience with my oldest child three years ago. We were a few dollars below median here and she was not approved for financial aid the first go'round. She went in and argued her position with a few different people many times then one day someone said to bring in the court order as proof of the chapter 13 and she was approved. The aid actually covered the previous semester that she paid full pop for.

Unfortunate note from this experience is that she was not successful until a person of her race(Caucasian) happened to be helping her that day. Pathetic!

[katztoo]

We had the same issue during 13 when our son was in college. Our attorney faxed them a letter (the school) saying that we are in a chapter 13 and are not allowed to incur new debt. He was then able to get additional funds as an independant student (including work study)

[suzychapstic]

Thanks to all who offered help. I appreciate it so much. Today I called the attorney and got a letter and sent it to the school along with my confirmation paperwork. I hope it goes through easily. Last year they were able to give her the additional funding without all of this. Fingers crossed as we don't have the money to pay in cash, of course, for her school.

[Pandora]

Hang on a sec.....something isnt right here with what I'm reading.

While FAFSA is required for parents to fill out - it is merely a GUIDELINE stating what the "family portion" will be for college - it is NOT mandatory that parents must apply for loans for their kids.

Where is this information coming from... the college financial people? If so..its a bulls*** story on their part. You are NOT required to apply for any loans whatsoever, nor co-sign for any. Your daughter could and CAN apply all on her own and get financial aid / student loans; ours did and we did not sign or apply for a single thing. All student loans are in her name and hers alone.