In the bankruptcy case of Miller v. Sallie Mae Inc. (In re Miller) a disabled debtor who owed $20,624 on Parent Plus loans for her children’s education was denied a bankruptcy discharge of her student loans because she could not prove that continuing to pay the student loan payment would cause her to fall below the minimal standard of living.

The details of the bankruptcy case:

The debtor is severely handicapped mentally and physically and her only income comes from an $846 social security check.  She lives with her husband and two daughters. Her husband’s monthly net income is $2,572 and her youngest daughter receives $471 each month from Social Security due to the debtor’s disability. In addition, the debtor and her husband received, on average, a $2,861 federal income tax refund each year. Also, the debtor and her family live in a 5 bedroom, 3 bath home worth $280,000. Based on the information provided by the debtor, the bankruptcy court determined that the debtor’s expenses were excessive according to the IRS Local Standard used in the Means Test.

The bankruptcy court said:

“The seemingly unnecessarily large size of the home, combined with evidence offered that the debtor’s actual ex­penses exceed the IRS housing, utilities and other expenses allowances, by an amount ($866.54) substantially in excess of the $122.68 student loan payment that the debtor seeks to discharge…”

For debtors considering bankruptcy and hoping for a discharge of their student loans, proving that their expenses are reasonable or even more than reasonable is essential to increasing their chances of a student loan discharge.  Unfortunately, many debtors are living in homes, driving cars and have accrued other expenses that may be viewed as excessive in the eyes of the bankruptcy court.  Before you file for bankruptcy speak with your bankruptcy attorney to find out if your expenses will be considered reasonable in the eyes of the bankruptcy court.

(Consumer Bankruptcy News, Volume 19, Issue 18, page 6)

What To Expect When Filing Chapter 11 Bankruptcy

For individual debtors and businesses considering Chapter 11 Bankruptcy, there are few things you should know about the process.

#1 – Chapter 11 bankruptcy allows a debtor to restructure their debts.

#2 – Chapter 11 bankruptcy has no maximum or minimum debt limits.

#3 – If a debtor has had a bankruptcy petition dismissed due to their failure to appear or follow court orders in the prior 180 days, the debtor cannot file for Chapter 11 bankruptcy until after that time period has passed.

#4 – Chapter 11 bankruptcy can be voluntary, (initiated by the debtor) or involuntary, (initiated by certain creditors).

The Chapter 11 Process:

The paperwork required for a Chapter 11 bankruptcy include:

**Schedule of Assets and Liabilities – similar to a balance sheet, it details a financial list of the debtor’s assets and debts.

** Schedule of Current Income and Expenditures – documents the debtor’s sources of income, exactly how much income the debtor receives and the debtor’s expenses.

** Schedule of Executory Contracts and Unexpired Leases – summary of debtor’s contracts such as leases, labor agreements, equipment rentals, etc.

** Statement of Financial Affairs – a questionnaire the debtor fills out, which is designed to get a clear picture of the debtor’s financial history.

To find out more about Chapter 11 bankruptcy, speak with a qualified bankruptcy attorney.