We have run across a confusing predicament for Chapter 13 cases filed in the Northern District of Georgia that involve student loans. According to one of the assistant trustees whose identity we will protect, the judges in the Northern District have not yet decided how debtors should treat student loans in Chapter 13 case.
Pre-October 17, we could either pay the principal balances in full within the Chapter 13 plan, with accrued interest surviving, or we could pay student loans directly and not include principal in the plan.
Under the new law, however, we have been advised that the trustee will object to either treatment – we can't pay the student loans in the plan nor can we pay them directly. What should we do? "See if you can get the student loan into deferment status" was the reply.
On the other hand, an assistant trustee assigned to another judge takes a different, more reasonable perspective. In cases assigned to her judge, we can pay student loans directly, outside the plan, or we can pay them in full as a special class in the plan, or we can pay them as general unsecured creditors, with the balance surviving the bankruptcy. This approach gives me, as the debtor's lawyer, the most flexibility in crafting a repayment plan that might actually work.
Unfortunately there is a lack of consistency among the trustees. Presumably this student loan purgatory will come to an end at some point, but for now, the cases will just be reset.
[tags] student loan in Chapter 13, special class [/tags]