I recently met with a mom and her daughter. Nice people: smart, active, engaged. And very much in debt.
The daughter (let’s call her Mary) has graduated from college, has worked, but is currently on unemployment compensation. Mary’s mom is working. Neither is bringing in much money.
Here is the problem: Mary has student loan debt. A lot. And she isn't close to having the money to pay for it.No problem, you say. You've read our blog articles and seen our videos about student loan debt and you know that Chapter 13 is available to people like Mary to slice the paymentsdown to something she can afford for up to five years. And in fact, we are about to do so: her payments in the Chapter 13 will be $150 per month. That’s right, $150 per month on the$125,000 of student loan debt that the creditors wanted over $800 per month from Mary. And $800 per month would have been about 80% of her income. Mary was relieved, to say the least.
Don’t stop reading now, because we aren’t done just yet. It turns out that mom was so nice, she decided to co-sign all of Mary’s student loans. Yes, all of them. So what’s the problem? Mom is getting phone calls left and right with the creditors threatening her because Mary is unable to make the payments. And, yes, co-signing these student loans means that Mary’s mom is every bit as responsible for them as Mary is. Now what?
We can provide a similar solution for Mary’s mom, also. Hooray for Chapter 13! Mom is going to have to pay something on this student loan debt, and have coincidentally been able to
reduce her payment to the same $150 per month that Mary is paying. But now Mary’s mom will be freed from all collection activity for the next five years: no phone calls, no lawsuits, no wage
attachments. Mom will even be able to keep her tax refunds, which she may have lost if she did not file a Chapter 13. Does she think this is worth $150 per month? You bet she does.
As I have stated in prior blog posts, the interest continues to accumulate on the student loans during this five-year Chapter 13 plan, but lots of things can happen during that five years.
Mary will probably be making much more money and will be able to negotiate more favorable payments on the loans in 2020. Congress might even get smart about these and provide more
remedies. But for five years, everyone can breathe easier.
Is this a good remedy for you? Only one way to find out: give us a call at Steidl and Steinberg. We’ll do the numbers and see if we can get you to where you don’t have to cringe every time the phone
rings, or wonder if your bank account is going to be drained. Just because you are out of college doesn’t mean you are done learning