Student Loans

[ccgirl]

Hello-
Things are going along pretty smoothly. Next week I will have my confirmation hearing. I do have a question though. In my plan it states that I will pay my student loan payment outside of my bankruptcy plan. I recently received a call from my credit union where my loans are consolidated and they said that by law they have to sent the loan to the Michigan Student Loan office during the bankruptcy and after the plan is done the credit union will buy the loans back and things will go back to normal. I called the Michigan Gov't St. Loan office and they stated that during the bankruptcy I should not make any payments..it is in deferrment until my discharge. I am frustrated because during the next 5 years the loan will accumulate interest. Since the amount of the payment was already calculated into the schedule I have the money to make the payment each month. That is a lot of interest that is going to accumulate over the next 5 years. Also, since I am not paying the student loan amount will my plan payment go up?
Anyone have this happen to them?
I am thinking of opening an account and paying the monthly amount each month that I would pay and then when I am out of bankruptcy making a lump sum payment on the loan.

[woeisme]

You should be able to continue making payments on your student loan while in CH 13, it just is "voluntary", meaning they can't contact you for payment or ask you to pay, but if you pay it will keep the balance from being ballooned up when you get out of CH 13 and is great that your trustee allows it as part of your plan (as does mine, thank goodness!)

That being said, there's some difference in the way different student loan companies treat the money. Some are really unscrupulous and just accept the payments but don't apply them towards the balance until you are out of CH 13, so the interest accrues and compounds, quite a scam in my opinion! Others accept payments the same way any other creditor being paid outside the plan would (for example a mortgage paid outside plan would apply payments as they are made.) Hope you have one of the more decent student loan servicers. Ours won't apply any payments while we are in "default" which they define as while the CH 13 is open, so pretty much we will have the same balance at the end of our CH 13 as we had going in with the way the extra interest is accruing, but at least we won't owe a whole lot of extra, which would be the case if we had a hardnose trustee who didn't even allow us to include our payments in our budget.

[liz417]

CCgirl and Woeisme,
Can I ask what state both of you are from? Just curious because many trustees don't allow payments to school loan during a ch 13. Both of you are fortunate to have reasonable trustees....

Good Luck

[arkienurse]

Hello-
Things are going along pretty smoothly. Next week I will have my confirmation hearing. I do have a question though. In my plan it states that I will pay my student loan payment outside of my bankruptcy plan. I recently received a call from my credit union where my loans are consolidated and they said that by law they have to sent the loan to the Michigan Student Loan office during the bankruptcy and after the plan is done the credit union will buy the loans back and things will go back to normal. I called the Michigan Gov't St. Loan office and they stated that during the bankruptcy I should not make any payments..it is in deferrment until my discharge. I am frustrated because during the next 5 years the loan will accumulate interest. Since the amount of the payment was already calculated into the schedule I have the money to make the payment each month. That is a lot of interest that is going to accumulate over the next 5 years. Also, since I am not paying the student loan amount will my plan payment go up?
Anyone have this happen to them?
I am thinking of opening an account and paying the monthly amount each month that I would pay and then when I am out of bankruptcy making a lump sum payment on the loan.

I would call the state student loan office and ask them if they will apply the payments if you send them, or let them wait until the end as others have said sometimes happens. If they will apply the payments, find out what address
to send your payment to, and do it. If they tell you your payments will just sit there until your 13 is over, I would check with my lawyer and make sure it was ok to just set the money aside in a savings acct of some sort until such time as they will apply it properly. Key though, I would make it where I could not easily get my hands on it if you have to do this. There are going to be LOTS of times that you will be sorely tempted to dip into that fund.

Hope you are lucky enough that your state authority will take and apply the payments.

[woeisme]

liz, i am in ohio, southern district. I agree, am very lucky with my trustee. some here can't file for CH 13 protection at all because it would cause their high student loan debt to skyrocket to higher than their current debt that they're seeking relief from.

[liz417]

liz, i am in ohio, southern district. I agree, am very lucky with my trustee. some here can't file for CH 13 protection at all because it would cause their high student loan debt to skyrocket to higher than their current debt that they're seeking relief from.

Yeah, that's a big concern for me. My hubby has about $70k in school loans and before we put them in deferment (sp?) the payment was over $400/month!!!! I real concerned about the payment once we are out of ch 13 (haven't filed yet...)!!!!

Thanks for the info!

[ccgirl]

I am in Michigan's Eastern District. When I called Michigan's loan office the one person said I could send in money but there would be no paperwork. I just don't want my ch 13 plan to increase by the amount I was paying in the loans and go towards unsecured creditors when I could be making a big dent in the student loans. If I could even just pay the interest so it doesn't compound at the end of the five years. YIKES!