Separate Student Loan Payments in a Massachusetts Chapter 13 Plan

29 Dec Separate Student Loan Payments in a Massachusetts Chapter 13 Plan

U.S. Bankruptcy Judge Robert Somma ruled in In re Machado that a Massachusetts Chapter 13 plan may provide for separate payments to a student lender, depending on the particular facts of the case.

This opinion approved a below-median income debtor’s 60 month plan where the regular unsecured creditors at $26,000 shared $276 per month, a 4% dividend, and the student lenders at $21,000 shared $250 per month. (All figures are rounded off.) My colleague, Attorney Nicholas F. Ortiz, successfully argued that long term debts may be paid differently under the Bankruptcy Code, that bankruptcy’s fresh start policy encourages favoring payment of nondischargeable student debts, and that the voluntary 60 month plan shows good faith where only a 36 month plan was required.

In comparison, an alternate plan where all the payments went to all the unsecured debt, but merely for the required 36 months, would have only increased the 4% dividend by 2%, to 7%; a small $700 difference.

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L. Jed Berliner practices exclusively in consumer bankruptcy, foreclosure defense, and related consumer protection litigation such as credit card defenses and suing debt collectors. He established his Springfield, MA practice in 1988. Attorney Berliner is a regular and active contributor to the Bankruptcy Law Network, the Bankruptcy Roundtable, and the National Association of Consumer Bankruptcy Attorneys, three specialized consumer bankruptcy forums on the Internet, and is an informal mentor to regional practitioners. He is recognized by his peers as an expert in consumer bankruptcy issues. He thoroughly enjoys being rated "excellent" in his client surveys.

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