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Private student loan

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  • Private student loan

    Need to wait a few months to file. Citi student loan is the only pain with calls and letters. Got a letter saying they now want payment in full. Only about $3000 on this one and payments are $50 a month. Now behind $197 with fees.

    Would it be ok to pay this without it being a issue with preference. I figure they don't get discharged anyway.

    Have 1 fed and 1 other student loan (sallie may)

  • #2
    Yes paying your student loan would be fine. I paid mine up to my bankruptcy and it wasn't considered a preference.


    • #3
      Student loans are nothing more than general unsecured debt. Yes, they are not typically dischargeable, but they are general unsecured debt none-the-less. As such, payments by the debtor within the 90 day window that exceed the statutory amounts ARE recoverable by a Chapter 7 Trustee.

      In In re Reep, a 2010 case out of Ohio, the “bank of mom” transferred over $7,000.00 to her daughter’s account. The funds were loaned to the daughter for the purpose of paying off a student loan. The funds were utilized to pay the loan 3 days after the transfer:

      The parties do not dispute that the transfer at issue satisfied 11 U.S.C. § 547(b)(1)-(5). The transfer was for the benefit of a creditor, Nelnet, on account of an antecedent debtor owed prior to the date of the transfer. Under 11 U.S.C. § 547(f), for the purposes of the preferential transfer provision, a debtor is presumed to be insolvent in the ninety (90) day period before the petition is filed. The transfer was made in the ninety day period before the Debtors filed for bankruptcy relief and the payment resulted in Nelnet receiving more than it would have received in a chapter 7 case in the absence of the transfer. Thus, the issue is whether the payment to Nelnet was the "transfer of an interest of the debtor in property.
      Clearly if these funds originated with the debtor they would be recoverable. However, in this case they were loaned to the debtor for a specific purpose.

      Earmarking is an equitable doctrine created to except transfers borrowed from but directed by a third party to a creditor, for the benefit of the debtor, to be excluded as transfers of interests in a debtor's property. The premise of the earmarking doctrine as a preference defense is that the designation of the property of a third party to a particular creditor, even if it flows through the debtor, is not property of the debtor/estate.
      As a result and since the mother directed how the funds were to be utilized, the Trustee was Ordered to return the money he had recovered as a preference.

      Debtors have standing to contest Trustee's recovery of an alleged preferential payment from Nelnet, a student loan creditor. The funds used to pay the debt were bono wed from Debtor's mother, who directed the funds be used to pay Nelnet. The funds were paid to Nelnet and the Debtors' estate was not thereby decreased. As earmarked funds, the transfer was not a transfer of an interest in property of Debtors and therefore does not constitute a preference. Trustee's recovery of the transfer was therefore in error and should be refunded.
      So, if you make the payment and do not wait the 91 days your Trustee can recover the funds. If he chooses not to, that choice was not because the payment was not a preference.



      • #4
        In the OP's case, the total amount would probably be under $600.
        Does that change things?

        Keep On Smilin'


        • #5
          Originally posted by keepsmiling View Post
          In the OP's case, the total amount would probably be under $600. Does that change things?
          If payment is below the statutory amount ($600 in a consumer case) then not a problem. OP states that lender demands full payment of $3k but then states only $197 is needed to bring the account current. I'm not sure if OP wants to pay the 3K or just the $197 but I am assuming the higher amount.



          • #6
            Originally posted by despritfreya View Post
            If payment is below the statutory amount ($600 in a consumer case) then not a problem. OP states that lender demands full payment of $3k but then states only $197 is needed to bring the account current. I'm not sure if OP wants to pay the 3K or just the $197 but I am assuming the higher amount.

            Got 2 letters same day dated the same day. One says they now want payment in full (3000)due to being delinquent, the other says I need to get current and pay 197 including fees. Both letters say I should contact them. If I was to pay anything it would only be the $197. What kind of action can they take and the time frame? Trying to hold off to file for a few more months to let overtime drop off my pay.

            They are the only ones that are very aggressive (besides Navy Fereral with the mortgages) and if I pay the $197 it's only $50 a month to keep them off my back till I file. Unless I have a few months before they can do anything.
            Last edited by Jf24; 03-06-2012, 10:48 AM.


            • #7
              Since it will be under the 600 mark, and it's not dischargeable, and will wind up costing you more in the long run otherwise with interest and penalties; I'd be of a mind to pay it.
              Not sure what I'd do if it were over 600. It's so close to being paid off.
              It just seems wrong that you get screwed on these loans coming and going, even in bk.

              Keep On Smilin'


              • #8
                Keep in mind that as I pointed out above, a lot of us have had personal experiences with bankruptcy where student loans were NOT treated as a preferential payment. I realize that under the law the Trustee is allowed to treat them as such, but a lot of Trustees nowadays seem to understand that student loans don't go away in bankruptcy and choose not to look at payments to them as preferential. I had a couple of huge payments to my student loan companies just a couple of months before I filed my Ch 7 back in 2009. No one batted an eye during my bankruptcy. So it may depend on the customs of your particular jurisdiction. If you have an attorney who is helping you with the bankruptcy he or she may be able to give you advice as to how the Trustee will look at things.


                • #9
                  Well I payed Citi student loan to get current and 1 day later Sallie Mae is calling. Haven't heard from them in 2 months. Coincidence?


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