Heidi Mcleod Law Office PLLC
San Antonio Bankruptcy Law Office.
San Antonio Bankruptcy Law Office.
Student Loans
Chapter 7 Bankruptcy Solution for Student Loans
Are you unsure if you qualify ? Schedule your free review and low cost consultation today and find out!..
Since 1990, student loans have essentially been non dischargeable in bankruptcy. That changed in November 2022. While the Bankruptcy Code has not changed, the US Department of Education has changed its approach to defending the lawsuits filed to determine if a federal student loan debt can be discharged in bankruptcy.
The process still requires a separate lawsuit within the Bankruptcy case called an adversary proceeding.
The Department of Education is also willing to negotiate a partial discharge if the full amount does not fit within the new guidelines to be discharged.
STUDENT LOANS
Overwhelmed by debt? Turn to Heidi for guidance.
Call Heidi today! 210-853-0092
STUDENT LOANS
Overwhelmed by debt? Turn to Heidi for guidance.
Call Heidi today! 210-853-0092
Chapter 13 Bankruptcy Solution for Student Loans
Are you unsure if you qualify ? Schedule your free review and low cost consultation today and find out!..
The treatment of student loans in Chapter 13 depends on the jurisdiction.
There are several options depending upon the amount of debt and amount of disposable income. The debt can be provided for in the general unsecured pool or paid directly.
The Biden administration has changed the rules on Chapter 13 treatment. The Department of Education will now accept payments during Chapter 13. Borrowers can apply for Income Based Repayment plans. Be sure to discuss these options with your lawyer.
All of the changes in Bankruptcy treatment are policy changes that depend on who is in the White House. There is no guarantee they will survive a change in administration therefore time is of the essence. If you have student loans now is the time to act.
End of COVID Student Loan Pause
As a result of the Debt Limit Deal between the House of Representatives and the Biden Administration, the student loan pause will come to an end August 31, 2023, with the first payment due October 1, 2023. There are a lot of details of the repayment resumption that will help borrowers.
Repayment Schedules
Balance Based Repayment:
- Pays the entire debt over time:
- Either by normal equal loan payments over a specific time frame or
- a lower initial payment increased later to complete within the time frame.
Four Main IDR Plans Subject of Income Driven Repayment
- Income contingent repayment (ICR)
- Income based repayment (IBR)
- Pay as you go (PAYE)
- Revised pay as you earn (REPAYE). REPAYE has changed into SAVE. (Saving on a Valuable Education Plan)
Each plan has advantages and disadvantages. Schedule a consultation to determine if you qualify for any of the plans.
Why Income Driven Repayment Plans:
- Not all income is counted such as food stamps. Formulas based on the borrower’s AGI and family size.
- Affordable payments even for large loans.
- Progress towards loan forgiveness.
- Downside – potentially longer payment term, negative amortization and potential tax consequences for loan forgiveness after 2025.
Default Prior to Pause
If you were in default prior to the COVID pause the road to redemption was long and difficult. The Biden Administration has instituted an automatic reinstatement and you just have to request reinstatement and an Income Driven Repayment Plan. The program sunsets a year after the pause.
Public Service Loan Forgiveness (PSLF)
- Only on Direct Loans
- Must work W-2 and at least 30 hours per week
- Must make 120 payments but they don’t have to be consecutive
- Forgiven amount is not taxable.
Teacher Forgiveness
There is specific loan forgiveness for teachers. Specific requirements with limited amounts and can’t do both teacher loan forgiveness and PSLF.
Disability Forgiveness
If you become disabled after taking out the loans there are methods to forgiveness.
Not all Federal Loans are the Same
- Older loans are FFEL and Plus Loans
- Newer loans are Direct Loans.
- Why do we care?
- Most of the best programs are reserved for direct loans. FFEL can be consolidated into direct loans. But be careful what loans are being consolidated because rolling in PLUS can ruin everything.