Disbursement of student loan refund

[basketsbears]

Hi,

My student loan will disburse on 8/10 and usually I receive a refund for a few thousand dollars a couple of days later. My 341 meeting is scheduled for 8/14. Will the trustee take the money?

Thanks!

Lynn

[ValleYum]

Do you get a separate check or is it direct deposited? I would NOT co-mingle the funds.

This had a pretty decent explanation:

Can I Lose My Student Loan Money In My Bankruptcy Case?

by Craig Andresen, Minneapolis, MN, Bankruptcy Attorney

If you are considering bankruptcy and happen to have the proceeds of your recent student loan sitting in your bank account, what happens to this money? Is it subject to being taken by the trustee to pay your creditors? If so, your education plans could be derailed: you could be unable to pay tuition, or to pay for books or important living expenses.

Fortunately, however, there is a federal non-bankruptcy exemption law protecting student loan proceeds from garnishment. If you select the state, or non-bankruptcy, exemptions in your bankruptcy case, this federal exemption ought to prevent the loss of your student loan proceeds, even if you file bankruptcy while the funds are still on deposit in your bank account. This exemption also contains no dollar limit, so it shouldn’t matter how much of your student loan is still on deposit.

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.

Claiming your student loan proceeds as exempt pursuant to 20 USC section 1095a(d) could save you from the significant problems which would arise if student loan proceeds were not exempt, and you were forced to quickly spend the money before filing the bankruptcy.

http://www.bankruptcylawnetwork. com/can-i-lose-my-student-loan-money-in-my-bankruptcy-case/ <---remove the space by .com in order to view this article.

[basketsbears]

Hi VY,

As of now it is set up to be deposited into one of our checking accounts (we have 2), that we don't use very often. I could cancel the direct deposit and then they would mail me a check - which may take longer for me to get, which is OK and maybe I would receive it after the 341. I don't want to call any attention to myself by changing what I have done the last few years. The refund I receive is after the college has paid my tuition.

It sounds like my funds should be OK no matter what due to the federal exemptions. Indiana, I think, doesn't allow federal exemptions in BK, but it sounds like this law would protect them irregardless. So, I should be OK?

I have emailed my attorney too, but until she is back in the office on Monday, was just wondering.

Thanks!

[Drazil65]

Hi, a similar question came up on the student loan thread and I had answered with what happened to my husband. My husband had applied and was approved for his third Sallie Mae loan for the spring semester (Jan 2012). His loan was a private loan and maybe that made the difference but the disbursement was scheduled for January 8th and my husband filed chp 7 on 12/13. The week of the disbursement and because Sallie Mae had been notified as a creditor (even though the loans are not dischargable they had to be listed) they pulled the loan from him. They said they cannot send out a disbursement on an active bankruptcy status. We had to pay for the spring semester out of pocket, that hurt. You may want to find out ahead of time so you are not surprised in case they do the same thing to you. Good Luck!

[basketsbears]

Hi, a similar question came up on the student loan thread and I had answered with what happened to my husband. My husband had applied and was approved for his third Sallie Mae loan for the spring semester (Jan 2012). His loan was a private loan and maybe that made the difference but the disbursement was scheduled for January 8th and my husband filed chp 7 on 12/13. The week of the disbursement and because Sallie Mae had been notified as a creditor (even though the loans are not dischargable they had to be listed) they pulled the loan from him. They said they cannot send out a disbursement on an active bankruptcy status. We had to pay for the spring semester out of pocket, that hurt. You may want to find out ahead of time so you are not surprised in case they do the same thing to you. Good Luck!

Thanks for the information. That is what I am afraid of may happen. All my student loans are listed. The financial aid office said as long as they are not included in the BK then there should be no problem. They are listed, but not dischargable. I had sent that information to my attorney before we filed, and she never mentioned it, and I hadn't thought of it. My loans are all federal loans, none private.

[SMinGA2]

Be careful. You may need to sign a new promissory note, or other paperwork, since you've just filed. You might want to contact the school or the student loan lender now and find out. Better to do any paperwork now - than risk not getting your funds on time for the next semester.

[basketsbears]

Be careful. You may need to sign a new promissory note, or other paperwork, since you've just filed. You might want to contact the school or the student loan lender now and find out. Better to do any paperwork now - than risk not getting your funds on time for the next semester.

Thank you. I have emailed financial aid before we filed and yesterday. Each time they have said my federal student loans are in good standing, and I should not have any problems receiving my disbursement, even with the bankruptcy - so will wait and see.