Expert: Mark J. Markus- California Bankruptcy Attorney - 8/22/2009

Question
QUESTION: Counselor, I am in the first stage of starting a Chapter 13 filing, my attorney is reviewing my case.  We are running into a problem on the debt ceiling, I am over that debt ceiling because of my student loan debt.  As you know they are not secured and cannot be discharged.  Are they counted in the debt differently?  With the type of debt I owe on student loans that would push me into a Chapt 11 ?  Do you know of any rulings on this type of situation where student loans caused an individual to go over the debt limit and where it was not counted as such ?

Help…


ANSWER: Student loan debt, as with ANY debt, factors into the debt limits for Chapter 13 under 11 USC 109(e).  

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---------- FOLLOW-UP ----------

QUESTION: Now, my studet loans are the elephant in the room for this filing, I owe more on my student loans than on any other secured/unsecured debt any suggestions what to do when the student loans are the most debt ? and what can i do with them in chapt 13 ?

Answer
If you qualify for a Chapter 13, they would just receive the pro rata portion of whatever payment you are making to unsecured creditors.   The only way I can think of to avoid the student loans putting you over the unsecured debt limit is to somehow convert them into a secured debt, by giving them a security interest in assets you have (like your home).  Assuming there is sufficient equity to do that, you could conceivably convert the debt like that and (possibly) qualify by being below the secured debt limit.  You'd need to wait at least 90 days after the security interest is perfected under your state's laws, and you really need to discuss all this with your attorney because it's most likely a bad idea and, in any event, is beyond the scope of this free service.