Trustee's objection to student loan claim - PLEASE READ

[bjh317s]

On September 21, the Trustee in my Chapter 13 case (converted to Ch 7 in November 2010) filed an objection to a claim made by Sallie Mae as follows:

The claim filed by SALLIE MAE GUARANTEE SVCS INC dated
August 24, 2010 for $ 45,245.45 was filed after the
last day for filing claims in this case which was
May 11, 2010 , and said claim should be denied.
WHEREFORE Trustee prays the Court will enter its order sustaining
this objection.

Then on 10/21/10, I received a signed order from the us bankruptcy judge that said the objection is sustained and the claim is denied. Then I converted to a Ch. 7 in November.

My credit report now shows no debt to Sallie Mae and says the amounts were included in or discharged in bankruptcy. I also stopped receiving any statements from Sallie Mae and when I go to log in to the web site it does not find my account.

Does anyone think this means that once I receive my discharge through ch. 7, which is set to be 2/15/11, that I will NOT be obligated to pay anything to Sallie Mae becuase they missed the deadline to file their claim? Or does the fact that I converted mean the previously disallowed claim is now valid and not dischargeable?

I appreciate any help regarding this.

Thanks,

Bill

[AngelinaCatHub]

Bill I think you're safe. The Judges ruling was made and not likely to be reversed. It cannot just "come back" by itself because you changed to bk7. It is a Court Order. 'Hub

[HHM]

that I will NOT be obligated to pay anything to Sallie Mae becuase they missed the deadline to file their claim?

Absolutely, positively DOES NOT mean that. You ARE still obligated to pay the student loan unless you filed an Adversary Proceeding requesting discharge of the student loan because repaying it would cause a hardship.

When a chapter 13 trustee objects to a claim, all they are objecting too is whether they should PAY the claim from the proceeds of your chapter 13 payment. Had you stayed in a chapter 13, all it means is that Sallie Mae would not have received any dividend from your plan. The status of the debt as non-dischargeable is unchanged.

Now that you converted to a 7, you will emerge from 7 still owing this debt. Sorry. But student loans ARE NOT (whether private, public, non-profit) discharged absent a finding of hardship, period.

[olivies]

It can't possibly be that easy. If SM never filed a claim, you would still be liable for the debt. Same difference. For example, in my filing, I know that the taxes I owe to a state agency were never claimed by the state, but I know full well that I still have to pay them when all is said and done and discharged (God willing). Certain debts survive bankruptcy, and I believe the way Congress wrote the laws that allows them to survive isn't easily loop-holed by them filing a timely claim or not. I'm not a lawyer, but it's just a hunch.

[bjh317s]

Okay, I thought I would likely still be on the hook for these. One more follow up though. The following was posted by the trustee after the 341 meeting:

Chapter 7 Trustee's Report of No Distribution: I, Tracy A. Brown, having been appointed trustee of the estate of the above-named debtor(s), report that I have neither received any property nor paid any money on account of this estate; that I have made a diligent inquiry into the financial affairs of the debtor(s) and the location of the property belonging to the estate; and that there is no property available for distribution from the estate over and above that exempted by law. Pursuant to Fed R Bank P 5009, I hereby certify that the estate of the above-named debtor(s) has been fully administered. I request that I be discharged from any further duties as trustee. Key information about this case as reported in schedules filed by the debtor(s) or otherwise found in the case record: This case was pending for 1 months. Assets Abandoned: $ 177378.00, Assets Exempt: $ 920.00, Claims Scheduled: $ 245082.36, Claims Asserted: Not Applicable, Claims scheduled to be discharged without payment: $ 245082.36. (Brown, Tracy)


The $245,082.36 includes the student loan debt of $45k. to me this indicates that the debt will be discharged without payment? Any additional thoughts????

[HHM]

Read the above post. Student loans are absolutely, positively NOT discharged absent a hardship finding resulting from an adversary proceeding. There are no "accidental" discharges.

All that discharge order is is a summary of your schedules. The discharge order does not take a position as to what debts are and are not discharged, the BK code does that.

[bjh317s]

Thanks, OK, I get it. Just got a little excited at the possibility that this may be included in the discharged debts. Thanks for the reply.

[bjh317s]

HHM - Thanks for answering my question above. I actually have one more question. I just called Sallie Mae, and they told me my account was considered paid in full as a result of my bankruptcy and that my account was closed. They said to call USA Funds, who they told me was the guarantor on the account. I know you said there were no accidental discharges and I believe you, so I assume I will be liable for this balance with the USA FUnds Guarantor. Does this souond like normal practice for a student loan in bankruptcy?

Thanks,

Bill

[HHM]

What has happened is that Sallie Mae has turned your account over to the Guarantor of the student loans. To understand what this means, let's back up.

Nearly all student loans except truly private loans are backed by some sort of federal or non-profit guarantor. When a guaranteed loan is significantly in default or is discharged in BK, the lender that originated the loan (in this case Sallie Mae) returns the loan to the guarantor. The guarantor pays the originator (because the loan was guaranteed). So, yes, from Sallie Mae's perspective the loan is paid in full and closed.

HOWEVER, the guarantor now has the right to come after you for their loss. USA Funds paid Sallie Mae because USA Funds is the guarantor; you now owe USA Funds.

Really, your attorney should have at least mentioned something about this. But again, for the third time (hopefully this one is the charm ), student loans are not discharged in BK absent a hardship finding (or some other technical defense).

Trust me, I wish it weren't the case. I do hope your loan falls through the cracks, administratively, but you should be aware that legally, the loan is not discharged.

[tcreegan]

Hi bjh,

....the glimpse of victory snatched away by the jaws of defeat.....

I was rooting for the bureaucratic error in your favor, releasing you from your indentured servitude.

Check with USA Funds and let us know what happens ?

Tom in Colo, indentured servant to the US Dept of Ed

[tyson24]

Ha!! Indentured servant! Me too Tom, me too

[bjh317s]

Are my student loans discharged? if not discharged have they just been written off???

I am really starting to think that I will end up owing nothing on my Sallie Mae student loans. I called Sallie Mae and they said my account was closed as it was paid in full by the guarantor USA Funds. That was about a month ago and today USA funds is showing up on my credit report for the first time, but it says that account status is closed and the balance is $0 and that amount was included or dischagred in bankruptcy. If USA funds was going to try and collect wouldnt it list a balance????? Is this just wishful thinking????

[olivies]

Ok- here's something interesting. Not sure how it'll fall into your situation. My student loan with SM was guaranteed by TX Guaranty. We were very delinquent on the loan prior to filing Ch13, so we got notified that TG now held our loan. We filed BK. We let our BK get dismissed for non-payment. SM picked up the loan again, and sent us statements after dismissal that our next payment of $xxx was due on whatever date. Hmmm....so if TG took over my loan (and paid SM I'm assuming this mean), why did SM submit a claim to our BK and then resume a payment schedule after the BK was dismissed? Strange indeed.

So my advice is- don't count on it just going away. It's "possible" that you'll slip thru the cracks, but not probable. As for the credit report, mine shows $0 balances and closed/included in bankruptcy and I'm not discharged yet. I believe they have to report it as such or else it could be a violation of the automatic stay. (someone correct me if I'm wrong please)

[tcreegan]

Hi all,

Just wanted to clear up a point; filing a claim just puts their name in the pool for any $$ the trustee is handing out.

Doesn't change the nature of the debt, who owns it, dischargeability, amount, etc.

Tom in Colo

ps: bhj, don't forget to update us on how it turns out!