Filing Chapter 7 while in school - financial aid refund

[kkevi]

A close friend of mine is considering filing for Chapter 7 bk to discharge significant medical bills accumulated while uninsured. He is presently being sued by one creditor and probably will be soon by another. He is a full-time student (about a year and a half until graduation). I know that loans themselves are not-dischargable. My question is about continuing to receive financial aid while in school and filing for bk, say in the next month or two. I've tried searching the forum and googling the issue, and I've found very few sources regarding current students - most are either considering going back to school or have been out for a while. I know that he will still be able to get federal student loans, but for purposes of his income, is the refund that he is given after tuition and fees are paid considered income? That seems incorrect to count it that way since it is money that he will eventually have to repay, but since the forms ask for all funds the debtor relies on for support . . . I'm wondering how that is viewed? Has anyone filed while currently a student?

[jennordhavn]

A close friend of mine is considering filing for Chapter 7 bk to discharge significant medical bills accumulated while uninsured. He is presently being sued by one creditor and probably will be soon by another. He is a full-time student (about a year and a half until graduation). I know that loans themselves are not-dischargable. My question is about continuing to receive financial aid while in school and filing for bk, say in the next month or two. I've tried searching the forum and googling the issue, and I've found very few sources regarding current students - most are either considering going back to school or have been out for a while. I know that he will still be able to get federal student loans, but for purposes of his income, is the refund that he is given after tuition and fees are paid considered income? That seems incorrect to count it that way since it is money that he will eventually have to repay, but since the forms ask for all funds the debtor relies on for support . . . I'm wondering how that is viewed? Has anyone filed while currently a student?

I filed Ch. 7 BK while in law school in 2000. I don't believe I claimed my excess student loans (after they deducted out tuition and fees) as income. It is a loan, not income. However, that was under the old laws, not sure if anything has changed. I also had a job, so I had income from that.

[jbr12]

I am a full time student as well and will be filing in the next week or so. I just received a large refund as back of my financial aid package. My lawyer said what jennordhavn said, that the money is part of a loan, not income. I was told I didn't have to include any of my tuition reimbursements or refund checks as part of my bk case.

[kkevi]

I filed Ch. 7 BK while in law school in 2000. I don't believe I claimed my excess student loans (after they deducted out tuition and fees) as income. It is a loan, not income. However, that was under the old laws, not sure if anything has changed. I also had a job, so I had income from that.

Thanks very much for the answer. If you don't mind my asking, did you experience any trouble with bar admission or legal employment following law school with the recent bankruptcy?

[jennordhavn]

Thanks very much for the answer. If you don't mind my asking, did you experience any trouble with bar admission or legal employment following law school with the recent bankruptcy?

No problem. I haven't yet taken the Bar Exam (I have no money, two kids and no time to study so I've been putting it off). I know I have to disclose the BK on the moral character application, but you also have to disclose any account that is over 30 days past due so either way they know you have bad credit or a BK. From talking with attorneys and others in the field, I have been told it probably won't be a problem as long as there was no objections or fraud in the BK.

I have, however, worked in law offices for the past 10+ years and I have never had a problem. I am working at one of the top law firms in San Francisco now, and they did run a background check, but it was to verify SSN and criminal history, no credit check. I also worked for the biggest law firm in Sacramento for a year and had no problem getting that job either.

Good luck to you!