Student Loan Disbursment Questions

[desertgrins]

Hello all - I am a first time poster and filer so I hope I have not redone an old thread. I just filed ch7 two days ago and have some federal financial aid loans due to be disbursed to me immediately. Will there be a problem? I hope not because I really need them to get back on my feet.
Thanks!

[jribe]

Hello all - I am a first time poster and filer so I hope I have not redone an old thread. I just filed ch7 two days ago and have some federal financial aid loans due to be disbursed to me immediately. Will there be a problem? I hope not because I really need them to get back on my feet.
Thanks!

if the money is sent directly to you (and not the school) you'll need to exempt the money or it can be taken by the trustee.

If the money is sent to the school and then they "refund" you some of it for books etc. That wold be better; because it's a smaller amount.

You'll need to find out this information.

Then check your states exemptions...

[desertgrins]

Thanks

Thank you very much for the information. I am in AZ and will check with my lawyer.

[music12]

your lawyer should have already asked you about any moneys coming in the near future. if the lawyer hasn't asked that, you should be very vigilant and keep an eye on your case.

[backtoschool]

If they are federal loans, they will be sent to your school to pay your tuition and fees, then if there is a refund due you, the school sends it to you in some way, either by cutting you a check, or putting it on a school debit card.

If they are stafford loans, the money is all part of a living expense budget for housing food and books while in school and is considered exempt since stafford loans are not dischargable. Since they are loans, and they are not dischargable debt, they are not considered income as far as exemptions are concerned.

If they are private loans all bets are off. (ie, I have no idea what the situation would be)

[jribe]

where did you find the information that supports your comment that the money is considered exempt because it's extra money from a stafford loan?

I haven't seen that anywhere- just curious...

I was under the impression that any money refunded to you was still needing to be exempted...

If they are federal loans, they will be sent to your school to pay your tuition and fees, then if there is a refund due you, the school sends it to you in some way, either by cutting you a check, or putting it on a school debit card.

If they are stafford loans, the money is all part of a living expense budget for housing food and books while in school and is considered exempt since stafford loans are not dischargable. Since they are loans, and they are not dischargable debt, they are not considered income as far as exemptions are concerned.

If they are private loans all bets are off. (ie, I have no idea what the situation would be)

[Amy26]

Hello all - I am a first time poster and filer so I hope I have not redone an old thread. I just filed ch7 two days ago and have some federal financial aid loans due to be disbursed to me immediately. Will there be a problem? I hope not because I really need them to get back on my feet.
Thanks!

I'm kind of confused by the statements actually... federal financial loans would typically NOT be dispursed to you. And most federal loans are for tuition and related expenses... not to live off of. Are you a full time student? Staying in the dorm?

And I'm not sure how productive using federal student loans to "get back on your feet" would be.

I would also agree with the last poster and think the money would need to be disclosed just from the simple fact that if the OP is getting the money directly dispursed to her and it hits her bank account before her 341, it will need to be at the very least explained right?

[music12]

well, amy, nobody asked you at your 341 whether there is anything going on in your bank account, right? so nobody would ask the OP either. but of course, that's not the main issue...

[Amy26]

That's because I didn't have any large deposits or anything into my checking account. I had to provide an additional bank statement to the trustee after I filed. And I believe its part of the issue because they asked if there will be a problem... :P

[desertgrins]

Well I checked with my lawyer and he said, since the extra money leftover after the school tuition is paid will be sent to me post petition, there is no need to worry. As far as "getting back on my feet", I will need it to pay for books, software and hardware for my courses, as I have nothing extra of my own at this point. Thank you all for your help. It is much appreciated. Just trying to learn all I can while I wait for the 341.

[music12]

oh! nobody asked me for bank statements after i filed. and nobody asked me about it at my 341. so i guess i have a different perspective!

[backtoschool]

where did you find the information that supports your comment that the money is considered exempt because it's extra money from a stafford loan?

I haven't seen that anywhere- just curious...

I was under the impression that any money refunded to you was still needing to be exempted...

I got it off of the dept of ed website. This is for stafford loans distributed by the federal direct loans program (not a bank) , not private loans.

[backtoschool]

also, this is for chapter 7 only. In chapter 13, you need the trustee's permission to incur additional debt....

Here is some more info from the "common manual" given to school lenders by the dept of ed:

"However, if a lender holds a loan that was approved prior to the bankruptcy action but for which the first disbursement was not made until after the date of the borrower’s bankruptcy petition, then the loan is considered post-petition debt. The lender may not include the post-petition loan in any bankruptcy claim filing, regardless of the bankruptcy type.

For a bankruptcy action where a claim should not be filed because the loan is not dischargeable (see subsection 13.8.A for requirements) and the MPN is used as a multi-year note, an MPN executed before the bankruptcy action remains valid for future loans. However, at its discretion, a lender may choose to obtain a new MPN from the borrower."

MPN is the master promissory note signed when you do your student loan entrance interview. Basically what this is saying, is that worst case scenario, you may need to fill out a new MPN before you get your disbursement.

[jribe]

i don't see any mention of something saying that it is not included as income nor that it would be exempted from assets in BK.. That was what i was questioning.

[coffee]

I'm kind of confused by the statements actually... federal financial loans would typically NOT be dispursed to you. And most federal loans are for tuition and related expenses... not to live off of. Are you a full time student? Staying in the dorm?

Actually you can take the extra money not used for your tuition and books to help you with things like transportation, buy a new computer, and living expenses while going to school. It was spelled out in my financial aid pamphlet the school I'm going to gave me.