Student Loans and Ch 7?

[Freddy03]

I know that my student loan payment is not included as an expense but I don't understand why?

It's a bill I have to pay back and it can't be in forebearance for ever.

[frogger]

Don't worry. When your chapter 7 is discharged, they will want to be paid again.

[Freddy03]

Don't worry. When your chapter 7 is discharged, they will want to be paid again.

LOL I understand they want their money. I'm confused on why that amount wouldn't be an expense since I have to pay it.

[frogger]

You're in the Chapter 7 forum, so I assume that you filed a 7. Whether it's an expense or not does not matter long term in the 7 process. You are 7, therefore you have no payment plan afterwards.

You can file a Chapter 7 today and still be broke and in debt. Whether you can afford to live or not after filing just doesn't matter.

[Freddy03]

You're in the Chapter 7 forum, so I assume that you filed a 7. Whether it's an expense or not does not matter long term in the 7 process. You are 7, therefore you have no payment plan afterwards.

You can file a Chapter 7 today and still be broke and in debt. Whether you can afford to live or not after filing just doesn't matter.

Oh got it. Thanks - I'll be filing late Feb.

[october99]

I have a really hard time with this concept as well Freddy. It seems to me that it should be a preferred creditor/debt. It should rank right up there with taxes since it is owed to the govt and non-dischargable. It appears to be a huge flaw in the bk rules/laws.

The whole student loan mess in this country is bound to have an impact on the state of things eventually. In the meantime, I suppose that the powers that be will just stick their head in the sand and ignore it as long as possible so why shouldn't we just do the same? Let it remain in forebearance as long as possible, get into the income based repayment plan and pay as little as possible as it comes due and hopefully have the debt forgiven in 25 years if there is any left.

[bk2009]

I can see where you might be concerned with a student loan payment if you're in a chap 7 and you have additional positive income at the end of each month. For someone with a huge student loan balance, they might be paying hundreds of dollars per month on their student loans and not being able to include them as an expense could potentially turn them into a Chap 13. Is this why you're concerned, OP?

[Freddy03]

I can see where you might be concerned with a student loan payment if you're in a chap 7 and you have additional positive income at the end of each month. For someone with a huge student loan balance, they might be paying hundreds of dollars per month on their student loans and not being able to include them as an expense could potentially turn them into a Chap 13. Is this why you're concerned, OP?

No - my student loans are about $100 a month (for now).

[tcreegan]

Hi Freddy,

I am with you, makes no sense that student loan payments aren't an expense...if they aren't then what the h*** is?! Not like they are going away....

Tom in Colo

[LadyInTheRed]

BAPCPA created the means test to make sure a Chap 7 debtor does not have the means to pay unsecured creditors something over 3 to 5 years. Because a student loan can be put in forbearance during a Chap 13, a debtor can instead pay that amount in a Chap 13 plan. That's why a student loan cannot be included as an expense.

That's my guess anyway.

So, Freddy03, if your student loan payment isn't high enough to put you into a Chap 13, why are you concerned? Intellectual curiosity?

[Freddy03]

BAPCPA created the means test to make sure a Chap 7 debtor does not have the means to pay unsecured creditors something over 3 to 5 years. Because a student loan can be put in forbearance during a Chap 13, a debtor can instead pay that amount in a Chap 13 plan. That's why a student loan cannot be included as an expense.

That's my guess anyway.

So, Freddy03, if your student loan payment isn't high enough to put you into a Chap 13, why are you concerned? Intellectual curiosity?

Thanks!

Right now it wouldn't put me in a 13 (fingers crossed - I'm over the median w/ a slight -DMI) but in a few years my payments will triple. So I guess I'm just curious.

[october99]

BAPCPA created the means test to make sure a Chap 7 debtor does not have the means to pay unsecured creditors something over 3 to 5 years. Because a student loan can be put in forbearance during a Chap 13, a debtor can instead pay that amount in a Chap 13 plan. That's why a student loan cannot be included as an expense.

That's my guess anyway.

So, Freddy03, if your student loan payment isn't high enough to put you into a Chap 13, why are you concerned? Intellectual curiosity?

True, but with compounding interest it guarantees a higher payment and longer payoff timeline. More money for the govt, yipee! If the feds don't care so much for being repaid this money in front of the CC companies, then why not allow taxes to be put into forebearance too?

I'm not so much affected as my payment is fairly low (for now) and DH's SL payment can be incorporated into my expenses as I am filing single and it is non-contributing income.