[music] Hi there. This is Jonathan Ginsberg. I would
like to talk to you about bankruptcy and student loans. Now I’m not
talking about discharging student loans. That’s a whole different issue. Discharging
student loans in bankruptcy is very, very difficult and you
have to really show some significant medical problems generally to
be able to discharge student loans. But bankruptcy can be a useful tool
when you have student loans that you need to pay which is again most of the
time and I am going to refer you to a very interesting blog post by my bankruptcy
law network colleague Andy Miofsky and Andy talks about in this post
and here’s a link on the screen here about how student loans can be used or
can be dealt with in bankruptcy in a number of different creative ways and
a couple of things Andy talks about I think he’s absolutely right is first
of all if you can discharge your other debt then you’ll have more money
available to pay a student loan. So if you’ve got a huge student loan debt
and maybe 50,000 or 60,000 dollars in credit cards as well then you can
use bankruptcy to discharge your credit card debt, now you have more disposable
money. You can make a better deal to get rid of the student loan
debt. In fact, I had a case just like this where I had a client of mine who
had, it was actually a husband and wife, they had probably 300,000 dollars
in student loan debt. They also had 150,000 dollars in credit card debt. I
put them in chapter 7. The trustee was a little concerned about the fact
that we were using so much of their disposable income to pay the student
loans but I made the argument that the student loans are not dischargeable,
we have no other choice. They can’t afford a chapter 13. He basically agreed and so we were able to
discharge 150,000 dollars in credit card debt and now they have enough
money where they can at least make a dent towards the student loan debt.
So if you have a lot of student loan debt chapter seven may be an option.
Even if you are above median by the way, even if you have more money than
the median income table show because student loan payments can be in many
cases written off as necessary expenses on the means test and therefore qualify
you for chapter seven. So bottom line is that if chapter seven can get
rid of the other debt that will allow you the money to make the student
loans payable and as many people have noticed, student loan debt is
sort of like the tax debt of the current generation in that it never goes away. The bankruptcy code and the student loan laws
basically give a lot of rights to student loan creditors. You’re never
going to get rid of it. You’ve got to pay it. So the sooner you can
get it paid off the better. They’re not going to make any deals. So rather
than being in economic slavery the rest of your life go ahead and
figure out where to get the money to pay these student loan debts. Now
chapter 13 is a little bit different story because chapter 13 of course
is a payment plan and you’ve got a couple of options here. One is which
I typically do is I’ll pay the student loan directly during the term of my
chapter 13 and then five years later when the case is over again my client
should have more disposable income that can continue making payments on
it and make it go away that way. Other people take a little different tact
and what they do is they will include the student loan debt in the chapter
13, make ongoing payments of principal and interest during the course of
the chapter 13. Some may survive the bankruptcy but regardless they’ve
made a nice dent on it. So that’s another possibility for dealing with
student loans in chapter 13. Now the one thing you have to be really careful
about is in chapter 13 if you pay your student loan debt as part of
the chapter 13, the interest will continue to accrue and it will come due afterwards.
So I’ve had people with some really nasty surprises. They pay their
principal in the chapter 13, don’t really address the interest. After the
chapter 13 is over, lo and behold, there is a big interest payment due. So depending on where you live and depending
on the type of plan you put together student loans can leave you with
a nasty surprise. Again, I typically pay them directly in the chapter
13 and then once the case is over, we continue making payments and try
to get it paid down but the big picture here is use the bankruptcy process
to get rid of other debts so that when you’re bankruptcy is over, you will
have money to pay your student loan debt. So student loans aren’t
going away in bankruptcy. They’re going to be around forever. So the key is to figure out a way to use your
bankruptcy to get some disposable money long term to get these things
paid down and make them go away and not have to deal with them when you
are 40 or 50 years old. Hope this has been helpful. Again Jonathan Ginsberg
here. Until next time. I’ll talk to you soon. [music]