Acceleration clause and bankruptcy

[Gauche1967]

Can a student loan creditor legally claim a non-dischargeable student loan is in default and accelerate the full balance because of a Chapter 13 filing?

[HHM]

Is it a private student loan, or a government/non-profit student loan? Could you fill in some of specifics of the loan, i.e. how much, what was it used for etc.

[lrprn]

Can a student loan creditor legally claim a non-dischargeable student loan is in default and accelerate the full balance because of a Chapter 13 filing?

Is the student loan government or private? Was the student loan included in the Ch 13 filing? Did the debtor refuse to place the loan in forebearance during the bankruptcy and then not make the payments? What was the loan used for?

[Gauche1967]

It is a private student loan guaranteed by a non-profit organization. It is clearly non-dischargeable. It was included in the plan. They filed a proof of claim. However, now that the Chapter 13 is complete, they claim it is in default and they can accelerate the full balance--unless I refinance on their terms.

[HHM]

It is a private student loan guaranteed by a non-profit organization. It is clearly non-dischargeable. It was included in the plan. They filed a proof of claim. However, now that the Chapter 13 is complete, they claim it is in default and they can accelerate the full balance--unless I refinance on their terms.

This is a tough situation for any of us to comment on with any sort of specificity, mainly because there are many detailed legal aspects to student loan lending that you don't get with other types of lending, but at the same time, that may help you because you generally have enhanced rights with student loans vs other types of loans.

First question, what are they specifically claiming as the "event" of default. Second, when you say it was "included" in the plan, do you mean simply that you listed it like any other creditor, or was the trustee going to pay some of the loan through plan. Typically, a debtor continues to pay student loans directly (outside the plan) during a chapter 13, OR, starts making payments until the forbearance period expires (on a side note, forbearance can only last up to a total of 36 months for the life of the loan).

As for what to do, I would demand a complete accounting of the loan. I imagine there is some law that allows you to do this (kinda like RESPA allows a debtor to demand a complete accounting of mortgages), but I don't know what it is.

[Gauche1967]

These loans were listed as "long-term debt" and were paid through the plan, although not paid in full. They allege that the mere filing of the bankruptcy petition constitutes the default act, so now that the plan is over; the full remaining balance is due and payable on their terms.

[HHM]

Out of my own curiosity, I tried researching this issue, but couldn't really find anything helpful.

Although, as a general matter, if you have not missed a payment and that the lender has received all payments they were contractually due, I do not think a court will allow acceleration.

Do you have a copy of the original note. In any event, I think your first step would be to demand, in writing, a complete accounting of the note and a copy of the note document.

Here is a list of attorneys that are supposed to deal with Student Loan Collection issues from National Association of Consumer Advocates. Perhaps you can get a consult with one to help answer your questions.

[Gauche1967]

Thanks for your help. Unfortunately, I have found attorneys unwilling to even broach these issues. I get responses like: "Well it may be the case that that clause of the contract is invalid, but I am not interested in doing anything about it--just file another Chapter 13."