Obtaining Student Loans

[centaurds]

I am in college and will graduate in December of this year. I have really made a financial mess out of myself. I am preparing to file Chapter 7 bankruptcy pro se, a hope to have a case number by July 15th.

I am supposed to get Stafford Loans through my school to cover my last semester of college in mid august.

If I file in July, will the disbursement of the funds to my university be disrupted? I cannot go without having these student loans to pay my tuition my last semester - it would be a nightmare!

I know student loans are not discharged in BK but I am worried about be obtaining my final loan while I have an active BK case. Please help!



Also, if disbursement of my loans was not interrupted, what about any additional funds the university will send to me to help cover books and other supplies? Will I need to report that money to the trustee? How will that work?

[Exployer1234]

You can still receive Pell Grants. I am battling with my school right now over my student loans. You should be able to get Stafford Loans. In some cases though you will have to be discharged from BK.

[backtoschool]

If you apply for the loans BEFORE you file for bankruptcy, you can get the loans disbursed directly to your school to pay your tuition, and the refund portion of the loan will have to be counted as a cash asset and will have to be exempted on your petition. You may have to sign a new master promissory note, but you can still get the loans once you sign the new paperwork.

[kartoons19]

Backtoschool,

I have already applied for my student loans (Stafford) for Aug and Jan, but haven't found out how much I will get. I am going to file (ch7) within the new few weeks. What if I file before I find out my loan amount and before receiving the disbursement, how will that affect my bk? Unfortunately CO doesn't have cash exemptions, so I am spending my summer disbursement on necessities before filing. TIA for your help.

[backtoschool]

Backtoschool,

I have already applied for my student loans (Stafford) for Aug and Jan, but haven't found out how much I will get. I am going to file (ch7) within the new few weeks. What if I file before I find out my loan amount and before receiving the disbursement, how will that affect my bk? Unfortunately CO doesn't have cash exemptions, so I am spending my summer disbursement on necessities before filing. TIA for your help.

If you have already applied for the loans, and are in an eligible school, then it most likely is just a matter of whether you are going to get subsidized or unsubsidized stafford loans, and how much of each. All stafford loans both subsidized and unsubsidized will be available to you if you file bankruptcy. The loans will go to the university to pay your tuition and the university will disburse the remainder of the loans to you after tuition and fees are paid.

That money is a cash asset for bankruptcy purposes. It is not income however, so you do not have to count it towards the means test. As long as the refund portion of the money is disbursed to you after you file (preferably after your 341), you can spend it on living expenses and there is no effect in regards to your bankruptcy.

If the money is disbursed to you BEFORE you file (and perhaps even before your 341 if you end up with an aggressive trustee that will ask a lot of questions about money you have received since you filed, etc....) then that money has to be exempted as a cash asset in order to protect it from becoming part of the bankruptcy estate.

So the best thing to do is to file as quickly as you can so that any disbursement you get will happen after you file and after your 341.

[kartoons19]

So the best thing to do is to file as quickly as you can so that any disbursement you get will happen after you file and after your 341.

I will be filing prior to disbusement, but unforunately the 341 will probably be after the disbursement. I will ask my attorney how to handle this. Thanks for your help.

[centaurds]

I will be filing prior to disbusement, but unforunately the 341 will probably be after the disbursement. I will ask my attorney how to handle this. Thanks for your help.

I have a feeling I will be in the same boat - please come back and update us with what your attorney says. Thanks!

[Broke1]

I'm very curious as well about the disbursement after filiing but before the 341. I may wait to apply for the loan until I finish the 341. Please let us know what your attorney suggests.

[kartoons19]

I plan on speaking with my attorney when I turn in my paperwork this week, so I'll let you know what she says.

[kartoons19]

I finally had a chance to speak with my attorney about this and she said that I should have my Aug student loan disbursement go into a checking or savings account with nothing else in it. That way it will be clear that the money in the account is only student loan money. She said they can't touch it. I will have my summer student loans spent by the time I file, but will have a few thousand in my account by the time of the 341. This is her take on it. I will still advise asking your own attorney if you are using one.