Do you have to report student loans as income on a Chapter 7 bankrupcy filing?
I am preparing to file Chapter 7 bankrupcy and need to know if I need to report student loans received and will be receiving. I am in school and was told by a friend who filed that she did not report it and you don’t have too. If you don’t know the answer please don’t guess.
Tags: bankrupcy, Chapter, filing, Income, Loans, Report, Student, Student Loan
The question that’s asked on a bankruptcy is “what do you owe”. If you owe student loans then you need to state that. However federal student loans will not be discharged in any bankruptcy. But list them anyway.
The old rule of thumb was that if you don’t owe more than $65,000 then you should not file for bankruptcy at all. And a new law came in a few years ago that stated that in most cases a judge will change a Chapter 7 to a Chapter 13 and will make you pay back your loans thru a 3-5 year program. And because of this, prior to filing for any bankruptcy you’d need to go thru Consumer Credit Counseling (listed in your phone book and online) a federal group that will help you consolidate what you owe into one payment and maybe reduce some of the interest (you’d need to cut up your credit cards and it will be difficult getting credit again because there are tougher standards out there now because the card companies don’t want to lose again).
You don’t need to list student loan you will be receiving unless by the time this goes to court you get them. Chapter 7 is now for those who have had hefty medical bills and only then is that charged off, but Chapter 7 is not like it used to be for the general public, a complete wiping off of what you owe.
Your friend is wrong. You should be getting your legal advice from an attorney, not from a friend, and not from strangers on the Internet either.
You DO need to report student loans that you already owe as unsecured debts. They will NOT be discharged, but they DO need to be included in your bankruptcy schedules.
Loan amounts that you receive while you are in bankruptcy (i.e., while you have an open case) are NOT counted as income. However if you received the student loan and have that money in your bank account, and have not yet used it to pay your student expenses, you WILL need to report it as money in a bank account. Hopefully your attorney will be able to exempt it from being taken to pay creditors before you use it to pay your student expenses (this depends on the exemptions available in your state).
If not – you may need to time your bankruptcy filing to make certain this doesn’t happen.
Also, if you both apply for and receive a student loan while your bankruptcy case is open, you may need the trustee’s permission to obtain the student loan. This is should be routine and should not present a problem, but you do need to notify your bankruptcy attorney if this is the case so that he or she can make certain that all the i’s are dotted and the t’s crossed.