Private student loan canceled

[BoomerSooner]

Crap. I want to cry. Feb 4th is the last day for objections in my case in the western district of OK. My attorney ASSURED me before filing that my student loan disbursements for loans that have already been approved would NOT be effected, private or government backed. Well, I go to an adult studies bachelor's degree completion program. I am in my senior year. The tuition is a lot, and federal student loans (subsidized + unsub) still fall about $6k short of paying the remainder of my tuition. So, I obtained a private student loan from Sallie Mae several months before I filed last year. I received the first half in a disbursement for last fall; the second half was set to be disbursed this spring sometime, probably in Feb. I tried signing into my Sallie Mae online account, and they removed my access. I called, and they said that they can't give me any info on my account since they received notice of my BK. They DID tell me, after much prodding, that the remainder of my disbursement coming up has been canceled. They also said that I am under no obligation to pay since it's in BK status. Now, this goes against everything my attorney told me. I was told that student loans, public or private, STILL had to be paid. In addition, I was told my disbursements would NOT be cancelled, and now I am screwed. I have no way to finish my senior year without this money. My attorney clearly does not know of what he speaks. What are my options here?

I also found out today, thanks to TurboTax, that we're set to receive $6k back in federal taxes. That's almost exactly what I need to pay for the rest of school. Is there anything I can do to plead for the trustee's mercy on this? I am so sad right now, I want to cry. I have no idea what to do.

[JRScott]

Okay first off it really depends on the nature of the loan. If it is an educational loan then yes it has to be repaid, however if it was just a signature loan then it would be dispersed in the bankruptcy.

Have you talked to your lawyer yet on this matter?

Also I'd call them back up the loan company and talk to another agent, ask to speak to a supervisor and make sure what you were told is what really is going to happen. It could just be a temporary hold until your discharge.

If possible see if you can exempt the tax refund with any remaining deductions (you'll have to pay to amend filings). Then if the loan really is gone you can use that money. At the same time your overpaying your taxes by about 500 dollars a month which is crazy. You need to adjust your withholding so that you have your money each month when you need it, no sense loaning it to the government interest free for a year.

[BoomerSooner]

Okay first off it really depends on the nature of the loan. If it is an educational loan then yes it has to be repaid, however if it was just a signature loan then it would be dispersed in the bankruptcy.

Have you talked to your lawyer yet on this matter?

Also I'd call them back up the loan company and talk to another agent, ask to speak to a supervisor and make sure what you were told is what really is going to happen. It could just be a temporary hold until your discharge.

If possible see if you can exempt the tax refund with any remaining deductions (you'll have to pay to amend filings). Then if the loan really is gone you can use that money. At the same time your overpaying your taxes by about 500 dollars a month which is crazy. You need to adjust your withholding so that you have your money each month when you need it, no sense loaning it to the government interest free for a year.

thanks for the advice on all fronts. Agreed about overpaying; it really is from the new student tax credit rules in place this year - wife and I are both full time students, so it bumped up our return by several k's. I've adjusted my withholdings this year to make sure it doesn't happen again.

I'll call Sallie Mae again to see if I can get further clarification. As for my attorney, he has been pretty unresponsive via phone and email since the 341. Pretty frustrating. He was cheap...I guess I should have known better.

[aces67]

You need to get your lawyer to exempt your return. If you can't reach him by phone or email just show up at his office unannounced.

As for the student loan it still has to be repaid BK or not. Do you have a financial aid counselor that can help you with it? They are usually really helpful in these situations.

[backtoschool]

Private student loans are based on your credit score. They cannot deny you a student loan due to bankruptcy, but they can require a co-signer for the loan.

If you are going to use your tax return to pay for school, then make sure it is exempted in your petition.

[BoomerSooner]

Well, my attorney finally responded.

He basically told me that his work for me was done, and that if I wanted any further representation it would be $3500 for him to file any additional exemptions or do any further work on my case. What the hell?
He completely avoided the question as to WHY he did not exempt my possible tax return. His words:

My fee to you was small. My job for you is over even thou I have resoponded on multiple occasions. At $250 per hour you can see based on time spent-----
I have religiously stay away from your inquire as how to manipulate the preparation and filing of your tax return. Your tax return should be correct and filed appropriately. Early on I asked about the size of your potential refund and you advised--very little..

When ever your file you should mail a copy of the filed return to the Trustee directly to his office with any explanation you care to make. His address is on the first notice you recieved from the court. I dont not need to see it or have a copy

so, the question is, how do I go about trying to get this exempted myself?

[jennordhavn]

Sorry for your situation. When they told you there was no obligation to pay, it is probably because during the BK the loan is placed in deferment. Once you are discharged, you will again be responsible for paying the loan. I had Sallie Mae and it took about a month after my discharge before everything returned to normal and I was able to access my accounts online again. However, you can mail in payments during the BK if you want, just make sure you have the proper account number.

[Dst1]

This is some misleading advice in the column.

A private lender is under no obligation to give you a loan. It doesn't matter if it's a student loan. There is no law that says a private lender must give you a loan just because you are a student.

I agree that if your attorney told you that your private student loans could not be canceled he or she gave you wrong advice.

Now, having said that, I am surprised that they canceled a loan already approved. After all, it's not something that can be discharged. But then given who the lender is, nothing surprises me anymore. There is a huge push in DC right now to shut them down totally.

[BoomerSooner]

Now, having said that, I am surprised that they canceled a loan already approved. After all, it's not something that can be discharged. But then given who the lender is, nothing surprises me anymore. There is a huge push in DC right now to shut them down totally.

with my high debt to income ratio pre-filing, they were the only ones who would approve me. Ugh.

[tdawg]

Well, my attorney finally responded.

He basically told me that his work for me was done, and that if I wanted any further representation it would be $3500 for him to file any additional exemptions or do any further work on my case. What the hell?
He completely avoided the question as to WHY he did not exempt my possible tax return. His words:



so, the question is, how do I go about trying to get this exempted myself?

Sounds like your lawyer is in Covering His Ass mode (which is what lawyers are generally most concerned with). You should be able to file an amendment yourself. Quite a few people on here have filed things themselves.

[JRScott]

3500 dollars that's a rip off for just an amended form.

Well not knowing what exemptions you've used I'd take a copy of your current exemptions sheet. Look over it and compare it to what is allowed by your state. See if there is unused wildcard exemption etc that can be applied to the tax return. You can then make a new amended form yourself and take it to the clerk and file it and it'll cost about 29 dollars.

I'd call up the loan company tomorrow though as I mentioned above just do it yourself and see if it is a temporary hold or a permanent hold. I suspect it is probably a temp one and the clerk you talked to before can't tell the difference.

I do hope you'll come through this well

[mtbc]

An amendment should be easy, yes, if there's any "room" for it. I don't know if you have to amend Schedule B too (2nd page).

Can you file things yourself if you're represented, though, or do you first have to file some thing that, er, unrepresents you in the case?

[BoomerSooner]

I spoke with the trustee. he was very nice...I'm disappointed in the response, but SOMETHING is better than nothing.

here's an excerpt:
I am sorry, but basically a Chapter 7 trustee, in addition to working for the court, works for your creditors. If I did not collect the creditors' share of your tax refunds, I would be opening myself to a lawsuit and criticism by the Department of Justice, which oversees trustee activities.

However, your creditors are not entitled to the full amount of the refund. Here is how it is figured:

Federal tax refund $7,601
State tax refund 190

TOTAL: $7,791

You filed on October 30th, 2009. This is 302 days into the year, so your creditors are only entitled to 82.73% of the refund, or a total of $6,445.49.

[mtbc]

That sounds about right, I'm afraid. Still, if you have some room in unused exemptions that can take cash, maybe you can save some of it by amending your schedules.

[IZZYnGEORGE]

Lender found a loop hole

The same thing happened to me....My attorney assured my that i can not be declined a federal school loan just because of Ch 7. But the lender told me that since I filed that my current account is in default (even though I am still in school and do not have to make any pmts) and since I am in default they can not disburse any more monies until I am discharged, but since I will not get discharged until the middle of the semester they will not disburse any thing for spring 2010 and to reapply with my fafsa for nest school year...Totally sucks...I'm sorry you have to go through this and that your atty was/is not very helpful...Good luck!!!