Parents want to pay off my student loan

[mnvikingfan]

Here are the facts:

1. Filed Chapter 13 eight months ago. We are on a 36 month plan where we pay $200 per month.

2. My parents, who do not know that we filed, have offered to pay off all of their children's students loans. My student loan has a balance of about $9,800.


If I let my parents pay off the loan, could this hurt my bankruptcy? What is the best strategy?

[lrprn]

Your student loan is listed in your bankruptcy as a non-secured debt just like a credit card. Your lender cannot ask for payments during the length of your plan, although they can continue to charge interest (the only non-secured creditor who is allowed to do so - thanks a lot, 2005 Congress )

Your loan was put into deferment when you filed, so no payments need to be made throughout the length of your plan (although you can make payments yourself if you have sufficient $ left over after building up your emergency fund).

There's nothing in the bk law that prevents you from accepting a cash gift from your parents during your active case. Post-filing money gifts from others are not considered income.

To give yourself complete peace of mind, run this by your bk lawyer first to be sure all is fine. Also keep in mind that if your trustee is disbursing funds to your student loan lender as a part of your plan, he/she will have to be notified about the loan payoff by your parents so those payments can stop once your loan is paid off. The extra $ each month that would have gone to your SL lender each month will be divided up and disbursed to your other creditors who filed claims. Your Ch 13 payment will remain the same.

Congratulations on having such wonderful parents willing to give you such a generous gift!

[PhillyExpung]

if that's the case, would it make a difference whether the parents paid off the loan now, or waited for the 13 to be over? seems like it would be the same difference, since his payments will be the same

Your student loan is listed in your bankruptcy as a non-secured debt just like a credit card. Your lender cannot ask for payments during the length of your plan, although they can continue to charge interest (the only non-secured creditor who is allowed to do so - thanks a lot, 2005 Congress )

Your loan was put into deferment when you filed, so no payments need to be made throughout the length of your plan (although you can make payments yourself if you have sufficient $ left over after building up your emergency fund).

There's nothing in the bk law that prevents you from accepting a cash gift from your parents during your active case. Post-filing money gifts from others are not considered income.

To give yourself complete peace of mind, run this by your bk lawyer first to be sure all is fine. Also keep in mind that if your trustee is disbursing funds to your student loan lender as a part of your plan, he/she will have to be notified about the loan payoff by your parents so those payments can stop once your loan is paid off. The extra $ each month that would have gone to your SL lender each month will be divided up and disbursed to your other creditors who filed claims. Your Ch 13 payment will remain the same.

Congratulations on having such wonderful parents willing to give you such a generous gift!

[sunshinepa]

Since it doesn't affect your payments, it is to you (or in this case, your parents) advantage to get it paid now. If you wait, it would be extra interest.

That's a wonderful gift your parents are providing, congratulations. When you are discharged, you really will have a wonderful fresh start!