Student Loans Payments included in Disposable Income Calc?

[Frodo]

My assumption is that your student loan payments get put on hold up to 5 years after filing for BK. I read this somewhere.

If that's the case does the calculation of monthly disposable income include that payment even though your not paying it at the moment?

So if you had ....

$900 disposable income without SL payments

and....

($300) disposable incomde with SL payments

The other problem arises that while your SL loans are on hold for up to 5 years while your get your finances together, they are still accruing interest.

On $120K in SL, the interest alone after 5 years would push that too $160K. If that's the case, it seems kind of counter productive. Instead of paying $1200 a month now, you may have to pay closer to $1600 a month.

Ofcourse, neither is doable.

[lrprn]

If that's the case does the calculation of monthly disposable income include that payment even though your not paying it at the moment?

We owed $21K of Parent Plus student loans when we filed. This amount is listed on our Schedule F as an unsecured non-priority claim. Because these student loans were automatically put into forebearance when we filed, in our district, our Ch 13 trustee did not allow us to include a monthly payment in our expenses.

However, I've read that some districts allow student loans to be placed in a special, non-priority status when you file that does allow payment, at least of the loan interest, while in Ch 13. Check with your lawyer to see what's accepted in your district.

[$$only4ever]

We also have a Parent/Plus Loan. However, Sallie Mae filed a proof of claim, so the trustee makes a monthly payment and even though the loan is on an administrative forebearance until the bankruptcy ends, we were allowed by the trustee to show a monthly payment in our expenses. It really does depend on the district and the trustee.

[treehugger1]

This is very interesting since I am holding $75K in student loans (GSL and Parent Plus). My attorney said my student loans would definitely be included in my BK13 payment plan. If they are not, then there is no way I will file. I will really gain nothing. Currently, my monthly student loan payments are $580.00 for the next 20 years! If I include them in my BK13, then I can be free of them in five years. I've read horror stories about student loans, but most of these dealt with BK7. You might call the clerk of your court and ask how student loans are handled in your district. I don't think this would be asking the clerk for advice; just asking for clarification.

I've heard of others in BK13 who have had their loans counted as expenses. They pay their monthly payment outside the plan.

lrprn: If your studwent loans are in forbearance, don't they tack on interest?

[Frodo]

treehugger1,

Does that mean your only paying back a percentage on the dollar of your total student loan debt since it's included in your payment plan. Or, does the paymeny plan include all of the $75K? Thanks.

[lrprn]

lrprn: If your studwent loans are in forbearance, don't they tack on interest?

Yes, the interest on this loan will continue to accumulate.

Let me explain our situation more fully...our ParentPlus lender put in their claim on our Ch 13 creditor pay-back list for the whole $21K. Just how this is going to settle out over the next five years with our trustee is still up in the air until our case is confirmed (long story - nothing to do with the student loans though so don't worry!)

[treehugger1]

Frodo,

My understanding through legal counsel is that the trustee here (Oregon) will treat the student loans (consolidated) as a "priority" unsecured. They will be paid first in the plan (every dime). The other "priorities" paid first in the plan are the trustee (10% or so in Oregon) and the remainder of my attorney's fee. After that, I'll the payments get divided up amongst the remainder of unsecured. If you think about it, this makes great sense. In a nutshell, my dispoable income will go first to the student loans, truste percent, and attorney. Then the remaining life of the plan wil apply my disposable earnings to the other debts.

lrprn,

Can you suggest to the attorney that your payments satisfy the student loans in full during the plan?

Boy, it sure seemes to me that there are no standards among the various BK districts as to how debts are paid off.

[Frodo]

treehugger1,

I think I understand. With the ch 13 you will be paying the entire $75K in student loan debt in full. The only difference is that you will have all $75K paid off in 5 years as opposed to 20?

So your monthly payment plan will be atleast $1250 (75,000 / 60 mo)? Otherwise, some portion of your student loans will get written off.

[treehugger1]

Yes, my understanding is that the paid the student loans will be paid as a "priority" unsecured. That still leaves me with 68K in other unsecured. If I file now, I'm looking at 2500 - 2800 monthly payment. If nothing changed in my income, I'd go for this and file to amend the plan later. However, I expect a healthy tax refund, and currently my overtime/overload is high for the next 6 months. I think I can whittle my non student loan unsecured down to 35K to 40K. Then, it is my best guess that my income will crash in July and I will seriously need to consider BK13 Fall, 2007. My hope is to get payments down to 1800 - 2100. This still allows for 100% payback. I can live with fluctuations of 400 - 500 per month income if my payback is 2000.00 per month. I don't think I could do it if my payback were 2500 - 2800 per month. Does this make sense? Many ob this board have asked why worry about BK13 is you are in 100% payback. My answer is simple, my credit card debt went to high interest, as did other signature debt through places such as Citi, etc. I'll be paying back for 10 - 20 years. And, my student loans were consolidated before the low interest rates and they are fixed at 8%!!!