Student Loans and Ch 7

[bf2bf]

I've read here that student loans are not dischargeable, unless extreme hardship can be proven.

Does it make a difference if the parent (who is filing for BK 7) is the one who took the student loan for the child?

Also, if student loans can not be discharged, why can't they be included as part of the allowable expenses?

[HHM]

Student loans took out by parents are still student loans for BK purposes and are non-dischargeable.

As for being an expense, unfortunately, the BK code has no provision for allowing it as an expenses (it is, technically a debt), and for the practical reason that in chapter 13, student loans go into forbearance. I know, it is messed up. Try writing your congressman.

Student loans exist in a limbo land (or purgatory) as it relates to bankruptcy. On the one hand, they are debt but student loans cannot be discharged. The BK code provides no priority status to student loans, they are classed along with general unsecured creditors, so you cannot pay them in preference to other unsecured creditors (that are being discharged).

[bf2bf]

Thanks HHM!

Would a $0 to $50/mo disposable income balance (meaning there is no money left to pay the student loan) constitute an "undue hardship" or is there a specific qualification/circumstances to be met?


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[HHM]

First, just realize what goes into an Adversarial Proceeding to even prove a hardship. You will need to conduct a trial and usually call 2 expert witnesses, one to testify as to the nature of your hardship and the other to testify that over the next 25 years (or what ever is remaining on your statute of limitations for your student loans) that you can NEVER make enough money to pay your necessary living expenses and make at least some type of payment to the student loans. Also, most student loan servicers have wised up and now offer income sensitive repayment schedules; the reason for doing so is because some recent court cases did, in fact, discharge student loan debt when the lender had no income sensitive repayment.

In any event, it is a very HIGH hurdle.

[Ann]

So if you file chapter 7, keep the house and cars and NOT include the student loan in the equation what happens? I mean if you are willing to keep the cars and house out of bankruptcy why can't you still make payments on that loan????

[bf2bf]

So if you file chapter 7, keep the house and cars and NOT include the student loan in the equation what happens? I mean if you are willing to keep the cars and house out of bankruptcy why can't you still make payments on that loan????

Is this directed to my post or HHM's answer?

If it's regarding my question, it's simple... I think BK is a BIG deal event in most people's lives and it is not entered into lightly.
So it's "human nature" to want to plan it in such a way as to trully get a "fresh start" that eliminates as many debts as possible.


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[LuciluS]

So if you file chapter 7, keep the house and cars and NOT include the student loan in the equation what happens? I mean if you are willing to keep the cars and house out of bankruptcy why can't you still make payments on that loan????

Ann:

We haven't filed yet (9/30/09); however, I'm going to have dh call his ParentPlus Loan thru Direct Loans, ask for the bankruptcy dept. & get the address to mail the payments to during our BK. Right now, they ACH our account and understand that is not permissible due to the automatic stay.
I don't think you cannot pay them,..you just can't include them as a monthly line item on your Schedule J - Current Expenditures.

Now I know in a Chapter 13, your Student and/or ParentPlus Loans go into forebearance amassing interest while in your Chapter 13, but I'm almost positive in a Chapter 7 you can continue to make payments during your BK.

Someone correct me if I'm wrong, please.

Luci

[bkmaggster]

Ann:

We haven't filed yet (9/30/09); however, I'm going to have dh call his ParentPlus Loan thru Direct Loans, ask for the bankruptcy dept. & get the address to mail the payments to during our BK. Right now, they ACH our account and understand that is not permissible due to the automatic stay.
I don't think you cannot pay them,..you just can't include them as a monthly line item on your Schedule J - Current Expenditures.

Now I know in a Chapter 13, your Student and/or ParentPlus Loans go into forebearance amassing interest while in your Chapter 13, but I'm almost positive in a Chapter 7 you can continue to make payments during your BK.

Someone correct me if I'm wrong, please.

Luci

I got a 6-month forbearance before filing, and I included student loan expenses on my schedule J. It seems like the expense is allowed in some districts and not in others from what I've read. If you are filing for bankruptcy, you probably qualify for a forbearance, and then you don't have to worry about making payments during the stay. Just a thought.

[Ann]

Thanks Luci, I appreciate your input. I had no idea you couldn't make automatic payments while in bankruptcy. Can I pay my bills online? I know that may seem like a really stupid question but I am so lost here. Thanks for your input!

[bkmaggster]

Thanks Luci, I appreciate your input. I had no idea you couldn't make automatic payments while in bankruptcy. Can I pay my bills online? I know that may seem like a really stupid question but I am so lost here. Thanks for your input!

You can, but you need to make sure that your creditors will accept them. Some creditors require you to pay to a different address if you are in BK.

[LuciluS]

Thanks Luci, I appreciate your input. I had no idea you couldn't make automatic payments while in bankruptcy. Can I pay my bills online? I know that may seem like a really stupid question but I am so lost here. Thanks for your input!

Yes Ann, you can continue to pay your bills online. But, just like bkmaggster said, you need to call each creditor you intend to keep paying and ask for the bankruptcy dept. Tell them you are getting ready to file BK and want to continue to make payments and is there a different address to mail your monthly payments to while you are in BK.

I intend to call our Mortgage Co. and Dh's truck loan co. after I make the payments in Sept. and do the steps I stated above. Our mortgage is due on the 1st; however, it is not late until the 16th. I get my SSD payment the 2nd Wed. of each month, so that is when I make the house payment and the truck payment.

If you are keeping your mortgage and/or auto loan, you need to find the original contracts and read them carefully. Because the mortgage co. loan papers read we are not late until the 16th, we don't have to make the payment on the 1st even during or after BK. Same thing with Dh's truck contract. Again, read the contracts carefully because their possibly could be a stipulation for BK.

The ParentPlus Loan has always been ACH on our checking account on the tenth. I'm going to pay them on or before the 10th.

Luci

[VirginiaGuy]

Student Loan Payments Can Be Included As Expenses!

There's a lot of misinformation about this out there because the law differs by jurisdiction. In some jurisdictions, you CAN include monthly student loan payments as expenses because the court reasons that you have to pay them, you can't discharge them, and so the payments are treated like rent or utilities. I have spoken with TWO ATTORNEYS here in Virginia about filing and both say definitively that in Virginia student loan payments can be included as expenses and no one will care. You definitely need to talk to an attorney about this so that you can find out the law in your jurisdiction. Thanks to my student loan payments, I will be able to file a Chapter 7 and not a 13.

[VirginiaGuy]

Also, I have been paying my student loans pretty much all along but not my credit cards and my attorneys say that this will NOT be considered a preferential payment here in Virginia.

[bf2bf]

There's a lot of misinformation about this out there because the law differs by jurisdiction. In some jurisdictions, you CAN include monthly student loan payments as expenses because the court reasons that you have to pay them, you can't discharge them, and so the payments are treated like rent or utilities. I have spoken with TWO ATTORNEYS here in Virginia about filing and both say definitively that in Virginia student loan payments can be included as expenses and no one will care. You definitely need to talk to an attorney about this so that you can find out the law in your jurisdiction. Thanks to my student loan payments, I will be able to file a Chapter 7 and not a 13.

Thanks, this is very helpful information.

The bottom line being that one must check ones own jurisdiction for any variations in law and process.


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[stressedNC]

Also, I have been paying my student loans pretty much all along but not my credit cards and my attorneys say that this will NOT be considered a preferential payment here in Virginia.

Same here included on J and making payments is not any issue, Western District NC