Chapter 13 debtors moved the court for authority to borrow money, specifically to incur student loan debt on behalf of their daughter. The Trustee Objected to the motion.
On July 17, 2015, Debtors filed a chapter 13 petition. Their gross annual income was approximately $118,000, making them above-median debtors. They identified secured debts totaling over $183,000, including a residence and two vehicles. Their residence was underwater, valued at $130,730 with two mortgages totaling $160,443. They were also underwater on a 2013 Chevy Sonic, valued at $8,000 on which they owed in excess of $18,350. The balance of the loan on the second vehicle was roughly equal to its $4393 loan value. Debtors had substantial unsecured debt, around $158,000. Approximately $1,500 was priority tax claims, the balance was primarily credit card debt and payday loans.
They confirmed a plan on December 31, 2015 and are paying Trustee $1,900.00 per month. Although the plan represents unsecured creditors will receive a seventy-two percent (72%) dividend, the parties represented at hearing that Debtors will pay unsecured claims in full over the life of the plan. In March 2017, the court granted them authority to borrow money to purchase a 2013 Chevrolet Cruz. The loan on the Chrysler was paid, leaving them funds for the purchase without altering plan payments.
Debtors are the parents of two daughters, one a recent high school graduate set to enter college this fall (“Daughter”). After several college acceptances, she desires to attend Case Western Reserve University (“CWRU”) to possibly study nutritional biochemistry or environmental studies. Debtors introduced the following figures in their post-hearing brief:
Costs Tuition $49,597 Housing & meals $15,190 ________ $64,787 Funding sources COW grant $36,000 Direct loans to Daughter 5,500 Campus employment 2,500 CWRU grant 5,050 ________ $49,050 Shortfall $15,737 Direct PLUS loan eligibility $18,553
Debtors want to obtain a PLUS loan to cover the shortfall. Debtors represent payments will not be due until 2020, after chapter 13 plan payments are completed. Debtors anticipate that they will have sufficient funds to make the payments considering they will no longer be paying the $1,900 chapter 13 plan payment when they need to start repayment of the PLUS loan.
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