Parents are Filing Bankruptcy

As the title says, my parents are filing bankruptcy. As a result of this a large number of expenses, including a lawyer to oversee the process, have come up and we are having difficulties coming up with money for my education expenses. I’m aware that if my parents have filed bankruptcy, I will qualify for higher loan amounts, but the problem is that the process of filing the bankruptcy will take months. By the time that the bankruptcy is filed away, I will be halway through the semester.

This is why i’ve come to ask, is there any to way verify to a school that you have a banruptcy in progress, and if so would it be possible to qualify for higher loan amounts before the filing is finished?

Yes. Have your parent apply for a Plus loan. If they are filing bankruptcy, it is likely that their debts are more than 90 days in arrears (like the mortgage). That will disqualify the parent who applies (only one) and that will qualify you for an additional $4k or $5k (depending on your year in school). There are several reasons why a parent can be turned down for the Plus loan, and filing bankruptcy is only one. You can also wait until they file before they file for the Plus loan. They also need to clear it with their lawyer if they CAN file for the Plus loan as the bankruptcy filing may prevent them from taking on any additional debt before the plan/discharge is issued.

This may not be the best plan for your family. Usually $4k more isn’t enough to pay for school, and you will be taking out $12k+ in loans for 4 years. That’s a lot of money for a 22 year old to owe. Is that extra $4k all you’ll need to fund your school? If not, you may need another plan like community college, a 4 year school in your town so you can live at home, scholarships, etc

I should have mentioned this in my original post, but I’ve gone over the criteria for Direct Plus Loan approval, and besides the impending bankruptcy we have no other circumstances that would disqualify us. The change in finances has been sudden, and as such we are not delinquent at this point. The reason we’re not chancing an application right now, is that being accepted could complicate the bankruptcy.

This is why I’m trying to see if there’s any evidence I could give to the school that would prove, or at the very least strongly imply, that we’ll be filing bankruptcy soon. My hope is that with this evidence given the school might be more willing to work with me in approving the higher loan amounts.

The loans would be paying for expenses after mandatory costs, my current financial aid is enough for tuition and fees. The extra loan amounts would be used primarily for transportation and food costs, which can be fairly high seeing as I live an hour and a half from my university.

@Friendlyschizo your post is confusing. Either your parents have filed for bankruptcy or they haven’t. Which is it?

Once they have filed, you can give the school that info. Until that has happened…they haven’t actually FILED for bankruptcy.

BUT if you have had a dramatic drop in income, you might qualify for some additional aid from your college. I would suggest you go and talk to the folks there. They can advise you what to do next.

It sounds like you are talking about paying for the second semester of this academic year. If there is really no way to pay these bills, see if your school will grant you a leave of absence, and give yourself the spring term to sort out the finances.

In an earlier post you inquire about transferring to UT Austin or Cornell. given your parents financial concerns transferring, especially out of stste, would not be a good idea.

The Plus loan application will be assessed as of the day it is filed. If they aren’t 90 days+ behind on major debts then no, they will not be denied and you will not get the additional amount on the student’s stafford loan.

Wait until they have filed for them to apply for the Plus. That might be 4-5 months from now if they are waiting 90 days to avoid claw back on some recent debts.

Regardless of the details you should talk to the financial aid office at your school today and ask for their guidance. The are going to be deciding on the changes so you may as well ask them what they need to see.

Search your university website’s financial aid section for “Special Circumstances” paperwork. That will give you a general notion of what is likely to be needed.

But don’t simply rely on that. Go see your financial aid office today. Make an appointment with the head of financial aid. Ask that person what steps you need to take. They have seen everything and will be able to guide you through your process.

You are able to submit documentation of active bankruptcy to the school to try to get the additional unsub. Talk to your aid office.