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What happens if I Default?

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    What happens if I Default?

    My plan originally had my past due mortgage debt (main reason I filed)and past due auto loan debt on 2 cars. Last year I was able to modify my mortgage with my lender, so that debt is no longer in my plan. I also had both cars in the plan totaled by a hail storm and the debt was paid off form the insurance proceeds.

    Thus, my remaining plan balance is all unsecured debt. $25k of credit card and student loan debt. I have 14 months left on my 5 year plan. I also have 2 cars with loans outside of the plan since the others were totaled. Monthly plan payment is $1,700.

    My son will be starting college in the fall and it will be extremely, actually impossible, for me to continue making the plan payment and also pay for college expenses.

    What happens if I do not complete the program to discharge and stop paying at this point? Just curious. Thx


    #2
    I would consult with your attorney. The stay will be lifted. I believe any late payments/interest will be added onto those accounts. You will owe more than $25K. You should not sacrifice your financial health to put your son through college. Let him go to community college or take out loans himself.

    Comment


      #3
      With just 14 months left in a 60 month plan, that's a big thing to do. As Aeneas wrote, you will owe the $25K plus accrued interest for 46 months (nearly 4 years), plus all the legal fees that the credit cards can collect. (The student loans went into deferment so, hopefully, much of that debt is student loan debt.)

      Regardless, you have to think long and hard about this. Not completing the plan may actually be worse than not affording college costs, as the creditors may start lawsuits and then garnish and/or levy. (I think Texas has some special protections, but I don't know Texas law on judgements).

      As Aeneas wrote, I would send my son to a two-year community college. Here in Florida we have the Florida College System (FCS) which grants those, that earn their AA there, guaranteed admission into one of the schools in the Florida University System (FUS). I would think that Texas has a similar program. I actually did this with my stepson; two years in a Florida state college, and now he's in the FUS. When he'll graduate... we'll never know! (I also wanted to mention that his in-State tuition rate in the FUS is twice as much as his in-State tuition as the FCS.)
      Last edited by justbroke; 04-05-2019, 09:31 PM.
      Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
      Status: (Auto) Discharged and Closed! 5/10
      Visit My BKForum Blog: justbroke's Blog


      I am not an attorney. Any advice provided is not legal advice.

      Comment


        #4
        14 months left time to stick with it unless your attorney finds another option. This was before our bankruptcy, but our daughter went to the community college taking classes that would transfer to the state school at a much lower rate of tuition (the same exact classes/textbooks in some circumstances). This saved her from borrowing as much money. Can your son get by with loans for his first year or take a year off and work and start next year or go part time the first year? You can always help him in the subsequent years and even help to pay back the loan he takes out. On another thread here someone stated you can't take out parent plus loans during Chapter 13, but there was a loan the student could take out. You can talk to the financial aid office and see what's available. I would stick out the Chapter 13 and then help him with tuition or help to pay off the loan.

        It seems not wise to default on the Chapter 13 since your creditors will be looking for their money and adding more fines. You said your house was outside the plan, but my understanding is even if the mortgage is paid outside the plan it's still part of the plan, just not paid via the trustee. Talk to your attorney for sure, but from where I stand as just a regular person in a Chapter 13 it sounds like a dangerous thing to default. You may not be able to help your son at all at that point.

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