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  1. #1
    Join Date
    Jun 2011

    Default Student Loans As Income

    My question involves bankruptcy in the state of: Az
    Unemployed a long time, student, living on student loans.
    Paid credit cards for years. How should the court or trustee regard the potential future and past student loan "income". Can it disqualify the bankruptcy?

  2. #2
    Join Date
    Sep 2005
    Behind a Desk

    Default Re: Student Loans As Income

    Loans aren't income, but money sitting in a bank account is an asset. You can discuss the details of your situation, and how to manage your student loans, with your bankruptcy lawyer.

  3. #3
    Join Date
    Jun 2011

    Default Re: Student Loans As Income

    Yes, I know that loans are not income. That is why I put "income" in quotes. Student loans have aspects of income in that they are income replacers, and they are used to budget the expenses for the year (or semester). What I really need to know is how a bankruptcy court or trustee views somebody who struggles to find work (has Asperger's Syndrome), who attends school, and who receives financial aid. On the plus side, the potential bankrupt-filing person has also paid most of the credit cards for over 10 years. I hear that banks have an index of profitability on which after somebody pays for a few years they have made a profit, and I have heard that this makes a difference when evaluating a bankruptcy. So, that is 2 issues: (1) unemployed and receiving financial aid, (2) paid cards for a long, long time.

  4. #4
    Join Date
    Sep 2010

    Default Re: Student Loans As Income

    Your initial question makes no sense as you have not put it in any context. Are you talking about receiving the funds within the six months prior to filing as it relates to "qualifying" for a Chapter 7? Or, are you talking about having the funds sitting either in your bank account or some other location on the day you file?

    As Mr. K pointed out, it is not "income" since there is a corresponding requirement to repay the loan. Therefore, receipt of the funds during the 6 months prior to filing are not included for “means testing” purposes. As he also points out, if the funds are in your possession when you file they are nothing more than $$ in the bank and will be taken by the Trustee. As it relates to this 2nd point since there is no allowed exemption in Arizona (assuming you have been living in the State for 2 years and, are therefore using Arizona exemptions) there is no way around the issue if you file a Chapter 7 regardless of your personal situation.

    If the funds are received after you file your Chapter 7 no one cares.


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