bankruptcy

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bankruptcy

Postby jwalker180 » Tue May 05, 2009 5:33 pm

My husband and I are in Chapter 13 bankruptcy. On my son's financial aid letter, there was an amount given for a PLUS loan. We can not even apply for credit or loans while we are in bankruptcy. The financial aid office at the college said for us to give them permission to run a credit check on us, which would come back declined, therefore allowing my son to take out an unsubsidized Stafford loan. Well, the college did a credit check on us and we were approved! Approved for a loan while in bankruptcy! We can not legally take out this loan. How do we get our son qualified for the Stafford loan?
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Re: bankruptcy

Postby Ms. Stafford » Wed May 06, 2009 5:54 am

Wow....do you know what lender they ran your credit through for that plus loan? I would recommend reapplying with a different lender. Let me know who they used and I can give you some other suggestions. It sounds like a fluke to me...I am willing to bet if you reapply with a different lender it would be denied...therefore making your child eligible for more in the Stafford loan. Also...they don't run your credit jointly...only one parent's credit is checked, so be sure to use either your name or your husbands, depending on who's credit score is the lowest. I recommend looking at both of your credit reports to see which one clearly shows the bankruptcy before you reapply with a lender.
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Re: bankruptcy

Postby jwalker180 » Wed May 06, 2009 12:09 pm

They ran the credit check on me. They are supposed to be getting back to me to let me know what lender approved me and to let me know if we can reapply under my husband's name. I checked our credit reports and the bankruptcy shows up on both of us.
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Re: bankruptcy

Postby Ms. Stafford » Wed May 06, 2009 12:54 pm

yah, a simple phone call to the lender to "point out" your bankruptcy might make them retract the approval. Just let them know why you want the denial...and how it is illegal for you to borrow any more loans...I am sure they can work something out with you. Good luck.
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Re: bankruptcy

Postby jwalker180 » Fri May 08, 2009 8:32 pm

Here is the e-mail I received from the college when I asked what lender approved this:

We have dealt with situations like this before, and the regulations are clear about how we can proceed. The lender is the U.S. Department of Education via the Direct Loan Program. We submit your information to Direct Loans and they perform the credit check.

Regulations from the Department of Education provide circumstances where a student could borrow the additional unsubsidized Stafford when the PLUS Loan has been approved. The regulation is as follows:

The parent has filed for bankruptcy and has provided a letter from the bankruptcy court stating that as a condition of the bankruptcy filing, the parent may not incur any additional debt.

Regarding having the father apply and see if we can get a denial, there is also guidance on that situation:

Only one parent must apply for a PLUS and be denied based on adverse credit. However, if both parents apply independently and one is approved and the other denied, the dependent student is not eligible
for the increased loan amounts.

At this point, we need a letter from the bankruptcy court stating that as a condition of the bankruptcy filing you may not incur any additional debt. Without that, we can not replace the approved PLUS Loan with unsubsidized Stafford. Please let me know if you have any questions.
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Re: bankruptcy

Postby Ms. Stafford » Mon May 11, 2009 10:22 am

thanks for sharing that. That is truly amazing that Direct loans approved it. Of all places I would think they would be the first to deny it based on a bankruptcy. My guess is they just didn't see it when you applied. Anyways, will you have much trouble getting that letter? It might be less trouble just having your husband apply and hope that he gets denied.....but they will probably just make the same mistake all over again. (your child goes to a DIrect lending school, so they are your only choice for a lender in most instances).
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Re: bankruptcy

Postby jwalker180 » Tue May 12, 2009 7:39 am

I supplied the college with a letter from my attorney advising me not to take on new debt and forms that we had to sign for the bankruptcy trustee saying we will not take on new debt, and the college still says they need a letter from the bankruptcy court. I requested this with no reply from the court. My attorney checked into getting a letter from the court and they will not do it. We are completely stuck in this dead end situation. We will look into other options for funding. Thank you for your replies.
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Re: bankruptcy

Postby Ms. Stafford » Tue May 12, 2009 7:49 am

Well good luck. You could try calling direct loans directly at 1800-848-0979. Its worth a shot. If that number doesn't work you can try 1800-433-3243.
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Re: bankruptcy

Postby jwalker180 » Fri May 15, 2009 6:36 pm

I called Direct Loans and they said the reason I was approved for the PLUS loan is because Ch. 13 bankruptcy is not considered an adverse action on my credit for this sort of thing. So, there we have our answer. This is what you call being stuck between a rock and a hard place, I guess. :x
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Re: bankruptcy

Postby Ms. Stafford » Mon May 18, 2009 7:39 am

Wow. I am really surprised by that. Thanks for the information though, and I hope it all works out for you. Sorry I couldn't be of more help.
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Re: bankruptcy

Postby swimteam » Fri Jul 10, 2009 10:12 pm

We too have the same problem as jwalker180. The government approved our parent plus loan and we are in chapter 13 for the past year. Last year we were denied with one parent plus loan and our daughter received the additional $4, 000. We were told that we had to reapply for the loan, get denied and then receive the additional money. This time, we were approved - called Direct Loans, they cannot retract it. Will call school AGAIN tomorrow and maybe someone in financial aid will help.

What ever happened with jwalker180? Did you have to seek additional private co-signed loans?
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Re: bankruptcy

Postby galaxy2020 » Tue Aug 18, 2009 3:40 pm

We are about to file Chapter 11. My husband wants to attend graduate school. Was it necessary to get the trustee/courts approval to take out these student loans? His graduate school tuition is about 23K/per year. I'm not sure that all of our creditors will allow us to take on the additional debt especially since we are looking to do a 5-year plan to reorganize our business. What is the max you were able to get for financial assistance?
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Re: bankruptcy

Postby zsox12 » Mon Aug 24, 2009 8:00 am

We had a Chapter 7 bankruptcy over two years ago and are trying to obtain a student loan for my son who is a Sophomore this year. He has been granted both a subsidized and unsubsidized loan through his college, but the amounts are small and we agreed that my son would take out a student loan to help with the costs. He has applied for several types of loans, private and through Sallie Mae and has been denied all of them. His credit is not established and he works during the summer. We have tried to cosign for him but with the bankruptcy showing up he has been denied. Any suggestions for how he can obtain a loan with these credit issues?
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Re: bankruptcy

Postby bzydebbie36 » Mon Jul 19, 2010 9:26 am

I wanted to follow up on this thread because we have been in the same situation as the person who posted originally. In the 2009-10 college year, our Freshman son qualified as an independent student (able to borrow $5500 plus an additional $4000) because of our late payments prior to filing our Chapter 13. One year later (this summer 2010) we were APPROVED for a Direct Plus Loan and found ourselves caught in no-mans-land between the Federal Gov't saying we must borrow money for our son's education and the Federal Bankruptcy Court saying no we cannot.

This situation has been resolved at the Direct Loans Level now. About a million phone calls later, and a lot of help from our son's college financial aid department, the Direct Loans program now allows the Universities to use "professional judgment" as to whether or not a student will qualify as Independent when their parents are in a Chapter 13. What that means is that we had to file an appeal with the school on the financial aid decision. We had to produce our Ch. 13 paperwork (which clearly states we cannot take on more debt without court order), shows the payment, etc. We provided the first 2 pages of our Federal Tax Return, along with a letter from our son stating the problems and why he's appealing. In addition, our attorney provided a letter. It only took about 4 days and the decision was made that he's Independent. He gets the additional $4k this year as well.

So this is good news for all of us parents who have been feeling a bit perplexed and helpless. This decision was only reached by the Direct Loans Program in the last week or two. So if you've been fighting an uphill battle so far, talk to your financial aid dept. and explain the above. It's new and doesn't affect a huge number of students each year. For instance, at our son's university, he is the only student with this issue. So be patient and PERSISTENT.

Good luck everybody.

Deb
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Re: bankruptcy

Postby franceR » Sun Apr 29, 2012 11:08 pm

Student loan debt is a very significant factor for numerous young adults leaving college. Now, bankruptcy attorneys are confirming what many college students had anecdotally reported - that these student loan debts are a serious factor in filing for bankruptcy. I found it here: Student loans becoming a major contributing factor to bankruptcy.

According to the National Association of Consumer Bankruptcy Attorneys, student debt is pushing more individuals into bankruptcy. About 80 percent of bankruptcy attorneys surveyed by the association cited a "notable jump in the number of potential clients with student loan debt." Bankruptcy does not discharge 95 percent of student loan debt, but the cost of paying off those loans is pushing more people into bankruptcy.
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