Chapter 13 payment impossible

[Janetdoe]

im so confused about what happens if we are in a chapter 13 and the payment is just not doable. the paperwork says $903 a month. We are currently not paying any unsecured debt and can't make ends meet. I'm not sure where we would get $903 a month. I'm freaking out. I meet with the lawyer tomorrow afternoon to have her help explain it. I was certain we would be chapter 7 but some unexpected short term disability payments push us over the limit. I'm devastated.

[justbroke]

Does that $903 include your home and car payments? I would not freak out until you sit down with the attorney and see just what is included in that payment. I had a payment that was over $7,000/month, but my house payment (and arrears) of $5,000 a month was included in that amount. My payment included car payments as well. So, it was money I would have paid anyhow in order to keep those items.

[Janetdoe]

I'll ask. I admit to just freaking out and not knowing what is included in That. I'm really really scared of not paying student loans for 5 years. We only have 5 years left and if we have to put it off for 5 years then it goes to 10 years until payoff plus added interest. Anyone knows how that works? I thought I remember that they put them in default while you are in chapter 13. It seems backwards that it's one of the few things not wiped out but they don't consider it a priority payment. Does it being a private loan matter?

[justbroke]

Student loans are placed into "FB" status, forbearance, until the end of the Chapter 13. Your Chapter 13 may or may not pay "something" towards those loans since they are treated as any other unsecured creditor (unless you're in a 100% plan, the amount paid is truly insignificant).

In exceptional cases, you can have student loans discharged. That requires a separate lawsuit within the bankruptcy known as an adversary processing (AP), also called a complaint.

For a Chapter 13 bankruptcy to not pay off a student loan is not "so" backwards. The reason they are treated no differently than any other unsecured creditor is simply that they are just like any other unsecured creditor**. They enjoy no special priority when it comes to repayments. If you were in a 100% Chapter 13 then this would not matter as the student loans would be paid off alongside the other "general" unsecured creditors. I thought about paying "some" (at least the interest) on the loan during the Chapter 13 (and FB period) so that I would not have extra interest piled on to the loan.

It does not matter if the student loan debt is private, federal, or federally insured.

(** The non-dischargeable exception is the difference but they are still just unsecured creditors. The reason that student loans are non-dischargeable without exceptional cause, is that the Federal government backs most of these loans 100%. Congress chose to make them non-dischargeable unless there is a truly exception reason. There are arguments on whether the availability of easily obtained educational loans combined with the inability to discharge those same loans in a bankruptcy, is really worth it. On the other side, many people would not be able to attend college without these loans. Several States, including Florida, have exceptional in-State tuition and 2+2 programs which help to alleviate some of the high cost of education. But, alas, going to Harvard undergrad is $63-$72K a year. Attendance for four years at Harvard is the price for a decent (new) home in central Florida along with a $1,500/month payment. Incredible.)

[dmc-2008]

I pay my student loan thru out the whole bk! I just sqeezed it out somehow because I couldnt imagine it sitting out there and growing! I am almost done in Oct and my student debt is considerably less now as welk.

[Janetdoe]

My problem is that the payments are $795 a month. I have a feeling it would be hard to get that in there. I just wish my appointment wasn't in the afternoon. I get to have this sick feeling all day.

[lvmilizia]

My student loans are in our chapter 13, and are paid from our chapter 13 payment, now that the secured creditors are paid. Seeing how they are my highest unsecured they actually get the bulk of my monthly payment, so my hope is when we are done they will be paid down quite a bit, and then we can work on paying them off after the chapter 13. I figure we are paying about 70% of our unsecured debt so it should work out pretty good, I know there is interest so it won't quite be 70% of the student loans principal balance paid but they should be a good bit lower when we come out.

[dmc-2008]

I wish mine were added to the BK. To the OP thats a big payment, both the trustee one and you student loan payment. You might have to defer. 😩 There are student loan forgiveness programs out there? Maybe check to see if yours has one? Best of luck! Xo

[Janetdoe]

Fingers crossed I won't have to worry about it. After meeting with the attorney there were some numbers that were off, and a few expenses I forgot to list. It looks like we might pass the means test. I'm extremely cautiously optimistic. I really don't want to pay nothing towards a student loan we have already paid about $120,000 to. Having it sit unpaid and interest piling up would be devestating. I think I figured it would add about $10,000+ onto the loan.

Thank you all so much for your advice. This board is fantastic wealth of information and experiences.

[LadyInTheRed]

Janetdoe, I think the reason student loans go into deferment during Chap 13 is because the lender decides to do that instaed of filing a proof of claim in the BK case. If you end up in a Chap 13 and the lender does not file a proof of claim, ask your attorney to file a proof of claim for the debt, which is allowed by Bankruptcy Rule of Civil Procedure 3004. It's not likely that what gets paid on the loan will be as much as your regular payments, but it should at least get some of the loan paid along with other secured creditors. You can still make additional payments if you are able.

[dmc-2008]

This bkforum has been such a saving grace for me! 8 months to go! I has not been a picnic but it has been doable and the end result is the prize! Yes keep coming here! Xo

[Janetdoe]

Good news is that we filed tonight with a Chapter 7. After correcting the figures and adding a few things I left off we passed the means test!

[justbroke]

Very nice Janetdoe.