Stafford Loans during a Chapter 13 bankruptcy presents a problem for the student.  You will need permission from the bankruptcy trustee and bankruptcy court to incur additional debt.  These requests are handled on a case-by-case basis, so consult with your bankruptcy attorney if you want to take loans to attend school during a Chapter 13 bankruptcy. 

Credit-based financial aid is a different story.  This type of financial aid includes student loans from private lenders such as Sallie Mae.  Applying for credit-based loans is the same as applying for an unsecured personal loan.  Your credit history is considered and your bankruptcy will play a part in the decision to give you the loan. 

Your credit is also considered if you are a parent applying for a parent loan like the PLUS (Parental Loan for Undergraduate Students) Loan and the Graduate PLUS (a loan for Graduate students) Loan.  These federally guaranteed parent loans are credit based and federal regulations state that a parent with a bankruptcy within the past five years is automatically disqualified from obtaining a PLUS Loan for his or her child, unless there were extenuating circumstances or the borrower obtains a creditworthy endorser.  However, if you are denied a PLUS Loan, your child qualifies for increased unsubsidized Stafford loan limits.  Stafford loans remain in forbearance while the student attends school, while a PLUS Loan is subject to immediate repayment. 

If you are a student or parent who needs money for school after a bankruptcy, speak with your student financial aid advisor and your bankruptcy attorney.  Bankruptcy can help eliminate your personal debt and free money for college, or college loan repayment.

Debt limits for Chapter 13 will increase on April 1, 2010, from $336,900 to $360,475 of unsecured debt and from $1,010,650 to $1,081,400 of secured debt.  This change represents an increase of about 7% over the prior Chapter 13 debt limits. 

This could be good news for the increasing number of people who have second or third mortgages that are completely “underwater” (when the home is worth less than what is owed on the first mortgage) due to the decline in home values.  When a second or third underwater mortgage is deemed unsecured, it can increase the amount of unsecured debt by so much that a Debtor is no longer eligible for a Chapter 13.  Since the limit on unsecured debt has increased, more individuals will qualify for a Chapter 13 plan that allows them to get rid of a mortgage that holds no equity.