getting ready to file, what to expect...

[CurtInKS]

My wife and I are in preparations to file for Chapter 7 bankruptcy, this September. Our financial situation is a compllicated mess, but I'll try and keep it simple.

We were married in January of 2007. We have a child on the way, in September.

In my previous marriage, I took out student loans, not only to put myself through school, undergrad, and grad school, but also to put my ex-wife through nursing school. We thought at the time, it would be easier after graduation, to have just one student loan payment. Long story short on that, we are now divorced, the loans have been in hardship forbearance for 4 years, and I owe $200k on them.


I want to begin paying those student loans, but the rest of my debt, doesn't allow me to do so, so we are preparing to file bankruptcy, on the following debts.

Credit Cards-$25k
repo'd vehicle(from ex-wife)-$16k
outstanding old cell phone bill(ex-wife)-$900

These bills account for just over $1,000 a month in payments. Our combined take home pay is $3,400 a month. Our other expenses are...

Mortgage-$550.00
Vehicle-$500.00
Regular living expenses(utilities, insurance, etc.)-$750.00
attorney(must re-affirm)-$200.00

That comes to $2,950.00 and we haven't eaten or put gas in our vehicles yet. I am a prideful man, and don't want to do this, but without having that extra money each month to pay those student loans, I really don't know what else to do. I have custody of my 8 year old daughter, and once our baby is born, we will be a household of 4, and my attorney assures me this will work.

Our plan, after September, is to dedicate $500 a month to the student loan, and $250 each to the mortgage and vehicle, and projected that in 5 years, the car and house will be paid for, and we can then focus that money to the student loans.

We are completing our worksheet now, and preparing to do our mandated credit counseling course online. I'd love to hear everyone's insight into my particular situation, and what to expect in the coming months and years. Thank you in advance.

[lrprn]

Hi Curt and welcome to BK Forum!

Owing $200,000 in student loans (did you keep all your ex-wife's student loans in the divorce?), paying $500/month towards them, it will literally take you a lifetime to pay these off. Go put in your numbers in the FinAid student loan calculator at http://www.finaid.org/calculators/loanpayments.phtml . Even at the lowest rate of student loan interest, this is going to take you many decades to put a dent in this total. FinAid is recommending that you make about $275,000/year to pay these off in 10 years, and about $180,000/year to pay them off in 20 years.....gulp! As I'm sure you're aware, you are in a very deep hole here.

Do you owe multiple lenders or have you consolidated your student loans under one lender?

[CurtInKS]

Hi Curt and welcome to BK Forum!

Owing $200,000 in student loans (did you keep all your ex-wife's student loans in the divorce?), paying $500/month towards them, it will literally take you a lifetime to pay these off. Go put in your numbers in the FinAid student loan calculator at http://www.finaid.org/calculators/loanpayments.phtml . Even at the lowest rate of student loan interest, this is going to take you many decades to put a dent in this total. FinAid is recommending that you make about $275,000/year to pay these off in 10 years, and about $180,000/year to pay them off in 20 years.....gulp! As I'm sure you're aware, you are in a very deep hole here.

Do you owe multiple lenders or have you consolidated your loans under one lender?

Thank you for the welcome!

I was unable to get any of the loans given to her in the divorce, because they were in my name. I was able to show, she didn't take any financial aid in her name, but somehow went through college, but he judge didn't care. I got my daughter, so I consider it a win.

I realize that $500 a month, won't make a dent. I am hoping that it's enough, to appease them, during the time after my bankruptcy, until I can pay off my home and car, and then bump the payment up to $1,500. I know it won't fix things, but since student loans can't be discharged, I really don't know what else to do.

Yes, all my loans are with Sallie Mae.

[lrprn]

Yes, all my loans are with Sallie Mae.

It does help to have multiple student loans consolidated so you don't have to deal with multiple lenders, especially if you have to put your loans in forebearance for any reason.

I really admire that you are doing what you can to pay these loans off. So sorry that the divorce judge did not see fit to give your ex-wife's loans to her so she could pay them off using the position the education prepared her for - that would have been the fair thing to do.

As long as you are paying the interest every month, that usually keeps a student loan lender at bay. Also if you have an agreement with them to pay less but consistently, they will usually accept that as well.

We have other members with big student loans bills that forced them into bankruptcy as well. Now the lenders are required to disclose the pay-back amount and time required to pay in full. Hopefully that will help others not find themselves in this situation in the future.

I'm glad your daughter is with you! Remember we're here on the tough days for venting and on the good days for sharing the joy! Again, welcome!

[CurtInKS]

It does help to have multiple student loans consolidated so you don't have to deal with multiple lenders, especially if you have to put your loans in forebearance for any reason.

I really admire that you are doing what you can to pay these loans off. So sorry that the divorce judge did not see fit to give your ex-wife's loans to her so she could pay them off using the position the education prepared her for - that would have been the fair thing to do.

As long as you are paying the interest every month, that usually keeps a student loan lender at bay. Also if you have an agreement with them to pay less but consistently, they will usually accept that as well.

We have other members with big student loans bills that forced them into bankruptcy as well. Now the lenders are required to disclose the pay-back amount and time required to pay in full. Hopefully that will help others not find themselves in this situation in the future.

I'm glad your daughter is with you! Remember we're here on the tough days for venting and on the good days for sharing the joy! Again, welcome!

Thanks so much! I fought for 2 years, to get custody, beacuse my ex, is living with, and has 2 children with a registered sex offender.

I had someone tell me, that in dire cases, parts of student loans can be discharged. Anyone here every have that happen? I am not going to count on it, but I'm just curious.

[twuoo]

I think if your attorney can prove that paying back the student loans proves to be a hardship to you, it might be able to be discharged. But you'll have to find an attorney who is really willing to look at your situation and fight for you.

Try to find as much related info as you can online or your local library. Some of the more recent books do talk about the requirements to d/c student loans.

The attorney I'm going with didn't even try to tackle my student loans. Pretty much told me that in our district, he's never seen the judge d/c student loans, even for hardship cases. So I don't know what else to suggest???

Good luck to you though. I got saddled with the student loans in a divorce too.

[follie]

You might also look at getting some of them included. I have never heard of this being done, but if you can prove how much of the loan is yours and how much is hers, maybe something can be done? It's something to ask your lawyer about. You colleges should be able to provide copies of bills/receipts.

[lrprn]

I think if your attorney can prove that paying back the student loans proves to be a hardship to you, it might be able to be discharged.

To discharge a student loan in bankruptcy, you have to bring an adversary proceeding in the bankruptcy case and then prove at trial that repayment constitutes undue hardship for you and your family.

The majority of bankruptcy courts use the three-pronged approach from the 1987 Brunner case to decide if repaying student loans is indeed a hardship:
- If you are forced to repay the loan, you would not be able to maintain a minimal standard of living.
- There is evidence that this hardship will continue for a significant portion of the loan repayment period.
- You made good-faith efforts to repay the loan before filing bankruptcy (usually this means you have been in repayment for a minimum of five years).

Your loan will not be discharged if you are unable to satisfy any one of the three requirements. Given what you've told us so far about your situation, I don't think you can meet all three of these.

If your student loans are government-guaranteed, you definitely should investigate the Income Contingent Repayment program offered through the Department of Education. This program allows you to make reasonable, income-based payments each year for 25 years, after which the unpaid portion of the loans may be forgiven. For more about the ICR program, go to http://www.finaid.org/loans/icr.phtml . Hope this helps!

[CindyLou]

I think your situation does warrant further discussion with an attorney. ...it si a little out of the normal. If I may ask, what is your occupation? Some occupations allow for loan forgiveness.

[CurtInKS]

I think your situation does warrant further discussion with an attorney. ...it si a little out of the normal. If I may ask, what is your occupation? Some occupations allow for loan forgiveness.

The official title is Human Service Specialist. I am a case manager for the Social and Rehabilitation Services(SRS). It has different names in different states, but most know it as welfare.

I think I will see if my attorney would be willing to look at it.

[CurtInKS]

To discharge a student loan in bankruptcy, you have to bring an adversary proceeding in the bankruptcy case and then prove at trial that repayment constitutes undue hardship for you and your family.

The majority of bankruptcy courts use the three-pronged approach from the 1987 Brunner case to decide if repaying student loans is indeed a hardship:
- If you are forced to repay the loan, you would not be able to maintain a minimal standard of living.
- There is evidence that this hardship will continue for a significant portion of the loan repayment period.
- You made good-faith efforts to repay the loan before filing bankruptcy (usually this means you have been in repayment for a minimum of five years).

Your loan will not be discharged if you are unable to satisfy any one of the three requirements. Given what you've told us so far about your situation, I don't think you can meet all three of these.

If your student loans are government-guaranteed, you definitely should investigate the Income Contingent Repayment program offered through the Department of Education. This program allows you to make reasonable, income-based payments each year for 25 years, after which the unpaid portion of the loans may be forgiven. For more about the ICR program, go to http://www.finaid.org/loans/icr.phtml . Hope this helps!

Yeah, it looks like I would only be 2 out of 3, on the criteria. Thank you for that link. I am hoping to get something worked out, quickly, after September, and start my repayment.

[CurtInKS]

Someone at work here today told me, that she is letting Sallie Mae garnish her wages, because they can only take 10% of her takehome pay, which would amount to about $175, but her minimums due were over $400, so she took the cheaper of the 2 choices. That makes no sense to me, that they wouldn't take the full amount. Anyone know anything about this?

[jal1129]

There is more then likely a law in your state that only allows for 10% of a paycheck to be garnished. I'm sure Sallie Mae will get all of thier money it will just take longer with the smaller payments.

[CurtInKS]

As an update, we have been unable to file. I've had some significant health problems, waiting on the birth of our daughter was another issue, so we are finally planning to do so, next Thursday, the day before payday. It's been the longest 6 months of my life, waiting for this. I've been re-reading everything on the board, and I'm doing my credit counseling course today, and will complete my worksheets tonight. I just pray this all works, or I don't know what I will do.

[CurtInKS]

Wow, has it really been a year since I was last here? I guess with everything that has happened(waaaay too much to get into on this thread) this whole process has really been delayed. Short version, got our discharge letter today. Great news! What is next? Case will close in a week or so?

[Rest of post deleted because Curt posted the same question in a new thread - http://www.bkforum.com/showthread.php?t=33175 ]