Student Loans in 13

[treehugger1]

I spoke with an attorney again yesterday. It appears that the student loan issue (used in means test, paid in plan, paid outside of plan, paid at end of plan, etc) is still all over the place. One big issue rearing its ugly head, is that if student loans are "forced" into a situation where the loan is large with older 6 - 9 % interest rates, a person might not gain anything at the end of their payment plan, as the compunded interest will be huge. In my case, my student loan debt would bulge from 75K to 113K at the end of 5 years. My debt is very old (at 8.5%) and was consolidated long before the new low interest loans and consolidations appeared. The attorney said this issue is showing up in many high wage earner 13's. They are hoping for a court case to bring a decision at the national/federal level. It sounds as if trustees, judges, and attorneys are very confused with the student loan issue. The attorney thinks there might be a decision in the next year. One more reason for me to hold out as long as possible. I would be crushed if the loans are stalled until the end of the plan (five years of 8.5% interest compounds very quickly).

Anyone hearing other information?

[Yankeegirl]

I filed Chapter 7 3/1/07 and am now currently fighting the US Trustee on 3 issues - Student Loan payments being one of them. We are a high income filer and the UST is attempting to force us into Chapter 13.

Like you, we have older student loans - high balance and high interest rate. The total monthly payment is $560/month. Our attorney ran some numbers and if we convert, we're looking at a total monthly payment in Chapter 13 of $342/month. That amount would go to all creditors AND the student loan. We calculated that doing this would actually increase our student loan balance by about $30k!!

Therefore, we have filed a rebuttal motion to the UST's assertion of abuse and will be letting a judge decide this issue (among others). We're in Southern Texas so I don't know if that will help you or not, but know that there are others out there with the same situation!

[treehugger1]

That is very similar to what the attorney told me yesterday. And, as I said, if I were to file where the student loans are forced out five years, I would not have gained anything through the 13 in terms of financial relief. I would come out of BK owing as much as I did going in LOL. Why would I submit myself to a forced payment plan, if there is no gain. Its the dumbest thing I've ever heard of. As I've mentioned in other posts, I at least have the "luxury" of having no assets, other than wages and safe pension and other tax deferred retirement accounts. The student loan issue is a big part of my problem; without the student loan payment $585 month, I could make things straight with the other creditors. As a result, I will keep stalling until some major ruling comes down the pike. The attorney also told me the issue seems to be more involved at the US Trustee level, rather than the local trustees. This could get very interesting.

[Yankeegirl]

We should have a court date on this issue within 45 days. I'll keep you posted on the outcome.

You're right, we had no issues with the Trustee. However, the US Trustee has argued with us about everything. We even had to attend a 2004 exam - the first one our attorney had done in 11 years - so that we could more fully explain our situation.

In our situation, we have alot of credit card debt on top of the student loan. If we convert to chapter 13, we will actually pay less money every month than if we stay with chapter 7! However, the UST is arguing that we are attempting to give preferrential treatment to the student loan even though the law has given it preferrential treatment by deeming it to be non-dischargable.

I agree that this could get very interesting.