Cash Asset (Student Loan) Questions.

[mlsmket7]

I have a question, I am going to be receiving a lump sum of cash from a student loan disbursement.

I have paid my filing fee and attorney, completed the pre-filing counseling, and am just awaiting an official filing I guess.

My question is...what is the best way to keep this $$$ safe? Shall I have my wife open a savings account in my son's name? Keep it as cash until after the filing? We have allocated how we want to spend it...Christmas presents, an upcoming vacation (pre-planned and already paid for, just not the spending money portion of it).

What is my best course of action?

Thanks!

[backtoschool]

It's a cash asset if you get it before you file and will have to be exempted. It's not counted as income though on the means test per my attorney. (I asked this question when I filed as I am going back to school in the fall)

If you get the disbursement after you file, and you applied for the student loan before you file (which is what you did) then you are fine, but if you could get the money disbursed after your 341 mtg, even better.

Is the money a stafford loan or a private loan? Stafford loans usually go directly to the school and then they issue you a refund. You could not request the refund until after you file.

[coffee]

You dont want to hide the asset thats a big no no.

I'm not sure if student loan money is exempted, ask your lawyer. If not you could always exempt it by using the federal or state exemptions, I guess it depends on where you live and how much of the exemptions you already used. Definitely call your lawyer and ask.

[mlsmket7]

It's a cash asset if you get it before you file and will have to be exempted. It's not counted as income though on the means test per my attorney. (I asked this question when I filed as I am going back to school in the fall)

If you get the disbursement after you file, and you applied for the student loan before you file (which is what you did) then you are fine, but if you could get the money disbursed after your 341 mtg, even better.

Is the money a stafford loan or a private loan? Stafford loans usually go directly to the school and then they issue you a refund. You could not request the refund until after you file.

It's a Stafford loan, and the disbursement has taken place. I'm scheduled to pick up the refund in 2 weeks, as I have finalized what the refund balance is. I just checked on OpenNet. The remaining disbursement is scheduled for January (2nd semester).

Technically, I've paid my attorney, done my counseling, but have not heard back on when I have filed.

Will I still get the second semester's disbursement?

[backtoschool]

It's a Stafford loan, and the disbursement has taken place. I'm scheduled to pick up the refund in 2 weeks, as I have finalized what the refund balance is. I just checked on OpenNet. The remaining disbursement is scheduled for January (2nd semester).

Technically, I've paid my attorney, done my counseling, but have not heard back on when I have filed.

Will I still get the second semester's disbursement?

File before you get the disbursement, then the disbursement is not part of your assets when you filed. Make sure your attorney files before you get the disbursement, otherwise the money will have to be exempted as part of your assets. If you have enough exemptions left, this isn't an issue.

Your jan disbursement won't be affected, since you will have filed and had your 341 by then.

[mlsmket7]

You dont want to hide the asset thats a big no no.

I'm not sure if student loan money is exempted, ask your lawyer. If not you could always exempt it by using the federal or state exemptions, I guess it depends on where you live and how much of the exemptions you already used. Definitely call your lawyer and ask.

I'm not sure what the cash exemptions are for Indiana (or federal). Our savings account is basically empty, and my paycheck goes to living expenses.

[mlsmket7]

File before you get the disbursement, then the disbursement is not part of your assets when you filed. Make sure your attorney files before you get the disbursement, otherwise the money will have to be exempted as part of your assets. If you have enough exemptions left, this isn't an issue.

Your jan disbursement won't be affected, since you will have filed and had your 341 by then.

Unfortunately, the disbursement for this semester has been disbursed.

I'm trying to find out what Indiana exemptions are. I have 2 car loans with zero or negative equity, the house is wholly in my wife's name, and other than small personal property, have no other assets. What I am going to do with the cash is the question.

Thanks for the info on the Jan. disbursement.

[backtoschool]

Unfortunately, the disbursement for this semester has been disbursed.

I'm trying to find out what Indiana exemptions are. I have 2 car loans with zero or negative equity, the house is wholly in my wife's name, and other than small personal property, have no other assets. What I am going to do with the cash is the question.

Thanks for the info on the Jan. disbursement.

Don't try to hide the cash, since your wife's and kids accounts will be looked at by the trustee most likely anyway.

I just googled, and Indiana has a $4,000 wildcard exemption, but it says that it is for "tangible property" (not sure if cash is considered "tangible") so if you are not claiming any other exemptions, then $4,000 would be protected if it is "tangible" but your attorney needs to exempt it in your petition.

[mlsmket7]

Don't try to hide the cash, since your wife's and kids accounts will be looked at by the trustee most likely anyway.

I just googled, and Indiana has a $4,000 wildcard exemption, but it says that it is for "tangible property" (not sure if cash is considered "tangible") so if you are not claiming any other exemptions, then $4,000 would be protected if it is "tangible" but your attorney needs to exempt it in your petition.

Yeah, I saw the wildcard exemption, but didn't know exactly what that means. I won't be taking a homestead exemption, and understood that I was able to keep cash in lieu of a homestead exemption.

[sweet2ooth81]

Student Loan Disbursements are exempt

I found this online. Please give it to your attorney.

"This exemption is known as 20 USC section 1095a(d). It says quite simply that student loans, grants or work awards made under Subchapter IV of Title 20, or Part C, Chapter 34, of Title 42, cannot be taken by creditors of the student receiving the assistance. As a non-bankruptcy federal exemption law, it can be used by anyone filing bankruptcy if they select the state, or non-bankruptcy, exemptions in their bankruptcy case.

Although some states have “opted out” of the federal bankruptcy exemptions, every state must allow use of the state and federal non-bankruptcy exemptions. This means that no matter what state you live in, you can exempt student loan proceeds from the bankruptcy trustee if you so choose."

[backtoschool]

I found this online. Please give it to your attorney.

"This exemption is known as 20 USC section 1095a(d). It says quite simply that student loans, grants or work awards made under Subchapter IV of Title 20, or Part C, Chapter 34, of Title 42, cannot be taken by creditors of the student receiving the assistance. As a non-bankruptcy federal exemption law, it can be used by anyone filing bankruptcy if they select the state, or non-bankruptcy, exemptions in their bankruptcy case.

Although some states have “opted out” of the federal bankruptcy exemptions, every state must allow use of the state and federal non-bankruptcy exemptions. This means that no matter what state you live in, you can exempt student loan proceeds from the bankruptcy trustee if you so choose."

This is incorrect. The refund portion of the disbursement that is used for living expenses must be exempted as a cash asset if it is sitting in the bank on filing day.

[ccsjoe]

B2S is correct. Regardless of the origin of the cash, if it is sitting as cash on hand or in a bank account on the day of filing and being used for living or household expenses, it must be exempted.

[tcreegan]

hmmm, would be nice but a little dubious...20 USC section 1095a(d) isn't a correct notation, and title 20 deals with wage garnishments.

The nonbankruptcy federal exempts are a really odd bunch: Survivor benefits for lighthouse workers, clothing for seamen, Klamath Indian Tribe benefits,....

backtoschool and cssjoe have it right, once that disbursement hits the bank, it becomes a cash asset that needs protection...

Unless you are a lighthouse survivor, seaman, or Klamath Indian of course...

Tom in Colo

[sweet2ooth81]

I think student loan proceeds that are funded federally may be exempt.

Title 20, Chapter 28, Subchapter IV, Part F

(d) No attachment of student assistance

Except as authorized in this section, notwithstanding any other

provision of Federal or State law, no grant, loan, or work

assistance awarded under this subchapter and part C of subchapter I

of chapter 34 of title 42, or property traceable to such

assistance, shall be subject to garnishment or attachment in order

to satisfy any debt owed by the student awarded such assistance,

other than a debt owed to the Secretary and arising under this

subchapter and part C of subchapter I of chapter 34 of title 42.

[sweet2ooth81]

What federal benefits are ordinarily exempt from garnishment?

The Federal Trade Commission (FTC), the nation’s consumer protection agency, has suggestions on how to protect your federal benefits from garnishment. The federal benefits that are exempt from garnishment include:
Social Security Benefits
Supplemental Security Income (SSI) Benefits
Veterans’ Benefits
Civil Service and Federal Retirement and Disability Benefits
Military Annuities and Survivors’ Benefits
Student Assistance
Railroad Retirement Benefits
Merchant Seamen Wages
Longshoremen’s and Harbor Workers’ Death and Disability Benefits
Foreign Service Retirement and Disability Benefits
Compensation for Injury, Death, or Detention of Employees of U.S. Contractors Outside the U.S.
Federal Emergency Management Agency Federal Disaster Assistance.