Chapter 13 discharge and college loan

[fozzmichigan]

Hi,

This may of been asked before but I couldn't find it. My daughter received her first college loan from Citibank in 2008 for her freshman year in college. I had to cosign. In late 2009 My wife (now ex) & I filed for Ch13. The student loan was initially included because I cosigned but my attorney had it dismissed because it wasn't in default as she was still in school. Fast forward to now. My Chapter 13 was a 5 year plan which as of a month ago was discharged but not yet closed. My daughter is still in school in a graduate program at Wake Forest. She has tried on numerous occasions to contact Citibank about the loan even though she is still in school but they refused to talk to her because of the bankruptcy. Well when my discharge orders started getting sent out Citibank immediately sent the account to collections (violating the STAY since the case isn't closed yet) and is demanding payment in full with 30 days from me. I guess i am wondering if anyone has run into this before or has any advice. To me it seems unfair since if there were no bankruptcy involved she (my daughter) still wouldn't be required to start paying off the loan since she is still in college so why now are they demanding full payment when technically (my technically) she wouldn't owe anything yet if the bankruptcy hadn't happened.

Thanks
Dave

[justbroke]

Sending the account to collections does not violate the automatic stay. The automatic stay, imposed by 11 USC 362, ended at the time your discharge was granted. Further, it didn't violate the permanent discharge injunction, under 11 USC 524, because the debt is non-dischargeable.

I think your case is atypical and that this may require special handling. One issue is that your daughter is still in school. I don't know if this affects the loan vis-a-vis undergrad versus graduate deferment (where the loan has no payments until graduation or exit from school). The second issue is that you chose not to have your Chapter 13 make any payments during the pendency, to at least reduce interest or make a small pittance. I don't think that may have mattered in the case of this loan being defaulted, but it may have been better (if you actually had disposable income and they would have received something).

In most instances that we have here on BKForum, the debtor's school loans were already out of deferment because they were out of school. I suggest contacting Cit directly and asking for the department that deals with bankruptcy. Explain your case and maybe they'll pull it back from collections.

[May2014]

I don't have any answers, but I am curious about the loan. Seeing that Citibank holds the loan makes me wonder if it was a personal loan used for college or was it an actual student loan (Stafford, I think?). I have two student loans, but while I was in school they were deferred. AFTER I finished school, I had to sign papers and choose how long I wanted my repayments to last. But my loan companies have been Mohela, AES, and Fedloan...not anything that sounds credit-card like. Maybe that makes a difference in how it's handled?

[fozzmichigan]

May2014, it was not a personal loan but a college loan offered by Citibank in 2008. Justbroke, according to the trustees office it is a violation of the stay, I would ask my attorney but they aren't really anxious to discuss anything with me at the moment as the Trustee has taken in interest into how much money they have charged me and are having them appear in front of the judge and explain it. In regards to Citibank, my daughter has tried on numerous occasions to talk to them and they refuse to discuss it while I am still in bankruptcy. In regards to including it in the bankruptcy I was at the bare minimum of being able to qualify as having any disposable income, 5% to creditors, so anything additional could of caused problems. I also couldn't wrap my head around paying anything on the loan while she was still in school and if there wasn't a CH13 involved then there would not of been any payments owed yet. I also need to clarify. My daughter has and continues to pay for all of here college costs by herself. The only reason I co-signed was because they required it. All subsequent loans she needed she did by herself.

[justbroke]

The Trustee's office may believe it's a violation of the discharge injunction (sometimes referred to as the automatic stay). You should speak with your attorney to get their feeling. I do know that the "automatic stay" imposed by 11 USC 362 ends upon the entry of a discharge order. I do know that the "permanent discharge injunction" found in 11 USC 524 begins right at discharge for those items that are not excluded by virtue of 11 USC 523 (student loans being one of those non-dischargeable items). It matters as to just which "stay" has been violated (the automatic stay or the injunction).

So the question would be whether they violated the discharge injunction. You attorney should be able to clarify this. Most of the people that answer the phones at the Trustee's office are not attorneys just am I am not one. This is why I highly suggest you get with your attorney to review your specifics.

Student loan debt is a very tricky area. Many people end up in exactly the place that you are in. I included my student debt in my Chapter 13. They were treated no differently than any other unsecured creditor (like credit cards).

[fozzmichigan]

Well as it turns out it is all a mute point. Since the College loan was taken out in mid 2008 and it is now 6 years later, Citibank has decided to rescind the collections and cancel the debt. They will be sending my daughter a 1099-C for the amount of the loan to be included on next years taxes. Don't know if this in the long run will be a good or bad thing, the only thing she is worried about is severely damaging her 790 credit score.

[LadyInTheRed]

If anything gets reported on her credit report, she should dispute it. She was not obligated to pay yet because she was still in school, right? So, she did not default.

[justbroke]

I personally don't know why Citibank did that, but good for them.

[fozzmichigan]

I am unclear why citibank did it as well. i was only getting information 2nd hand because they would only talk to her since it is her loan. had something to do with time limitations on collections of loans without payment. They mentioned 6 years as being the number of years that had elapsed. if it does show up on her credit Report she already has a letter drafted to dispute the item.