Does Bankruptcy Eliminate Student Loans?

Using Bankruptcy to Eliminate Student Loans

Unless lawmakers take other action, the temporary coronavirus student loan forbearance program is set to end on September 30, 2021. At that point, student loan borrowers who have been skipping payments for over the past year must somehow find the money to meet these obligations. As the COVID-19 economic crisis persists, that won’t be easy to do.

In terms of bankruptcy law, student loans are unsecured debts, like medical bills and credit cards. Before 1980, student loans were always dischargeable in bankruptcy. But then, Congress added an “undue hardship” provision to this portion of the Bankruptcy Code. Pro-lender law quicky developed, and as a result, many student loan borrowers do not think bankruptcy is an option.

As outlined below, that’s normally not the case. In almost all jurisdictions, a generous partial discharge is usually available. Additionally, in many jurisdictions, a full and almost immediate discharge in a Chapter 7 bankruptcy might be on the table.

The Brunner Rule

That pro-lender law included In Re Brunner (1985), a still-controversial decision from the Second Circuit. Marie Brunner, who had made no effort to repay about $9,000 in student debt, asked the Bankruptcy Court to discharge it. The court denied her request and further stated that the debtor only had an “undue hardship” if:

  • The debtor cannot repay the loan and maintain a minimal standard of living,
  • This situation would persist for the life of the repayment term, or at least most of it, and
  • The debtor had previously made a good faith effort to repay the loan.

Essentially, the Brunner rule, which almost immediately became the majority rule in the United States, limits student loan discharge to cases which involve a physical disability that did not occur until after the debtor graduated from school. Even then, discharge is not guaranteed, mostly because of the minimal standard of living requirement (i.e., a net income above the poverty line).

The Eleventh Circuit, which includes Georgia, has shown little interest in revisiting the Brunner rule, even in light of the current student loan crisis. So, many Georgia bankruptcy lawyers do not bother to file a motion seeking discharge. However, as one of our law school professors stated, you do not get anything unless you ask. Many people who ask at least receive a partial discharge, mostly thanks to the mediation process.

Totality of the Circumstances

In the neighboring Fourth Circuit, which includes North Carolina, South Carolina, and Tennessee, the law is different. In Erbschloe v. U.S. Department of Education (2013), a Fourth Circuit panel relaxed part of the Brunner rule. This decision opens the door for arguments concerning the totality of the circumstances test, a minority rule which is quickly gaining traction.

As the name implies, the totality of the circumstances test takes all loan and repayment circumstances into account, and all these factors have roughly equal weight. So, a bankruptcy attorney only needs to find one factor which is compelling, and press that issue before the court.

If your client is unwilling to commit to this course of action, mediation is also appropriate. A negotiated settlement, which usually includes a partial discharge, might be better anyway, since a bird in the hand is normally worth two in the bush.

Bankruptcy Mediation

If the bank objects to a motion for student loan discharge, which is a near certainty, a Georgia bankruptcy lawyer can file a motion for mediation. Judges normally grant such requests.

During mediation, both parties have a duty to negotiate in good faith. This phrase is rather ambiguous, but it normally means that each side must compromise in order to reach an agreement. In other words, if the bank takes a hard line “sorry Charlie” approach, claims the debt is not dischargeable, and refuses to budge, the judge, who will probably not be too happy, will most likely intervene.

A split-the-difference 50 percent discharge might not be available, but a noticeable 30 percent discharge is probably available. Additionally, everything is negotiable during mediation. That includes loan repayment terms, such as the interest rate. As a result, the client could save even more money.

Christopher Ross Morgan, who has helped bankruptcy clients since 1997, is a principle in Morgan & Morgan, a consumer bankruptcy law firm based in Athens, Georgia. The firm also practices disability and workers’ compensation. Click here for more information.

Can I File Bankruptcy and Keep My Home?

Can Bankruptcy Preserve Home Ownership?

Because of the COVID-19 pandemic, FHA mortgage delinquency rates recently hit an all-time high. Observers do not expect delinquency rates to decrease significantly until at least the spring of 2022. As a result, as coronavirus financial protections end, many people will need to take measures to save their homes against banks which are eager for money.

These creditors are likely to be even more aggressive than ever before in 2021. In many states, lenders can begin foreclosure proceedings after just one missed payment. Because the Supreme Court has recently watered down some protections in the Fair Debt Collection Practices Act, that may become the majority rule very soon.

Bankruptcy, and especially Chapter 13 bankruptcy, is the best way for distressed homeowners to stay in their homes. As a bonus, bankruptcy does more than stop foreclosure proceedings. It also makes homes more affordable, at least in many cases, so home ownership becomes more sustainable.

Automatic Stay Issues

Simply filing the bankruptcy petition does not automatically stop foreclosure. The parties handling the foreclosure, which is normally the loan servicing company and the local county sheriff, must receive actual notice via the creditor matrix. If foreclosure is imminent, best practices dictate direct notice as well.

Buying and selling mortgage-backed securities (MBS) is not as common today as it was before the 2008 financial crisis. But it still happens. As a result, the homeowner might not know the current servicing company’s identity, even though the servicer is legally required to divulge this information.

So, when preparing the matrix, do not exclusively rely on the information the debtor provides. Check the county deed records as well. Then, if things go sideways, you can at least prove you did your due diligence.

The local sheriff is usually not part of the paperwork until the foreclosure sale itself. So, review the foreclosure sale notice, if the client provided it, and deliver notice, including the bankruptcy case number, to the person in charge of the sale.

Maximizing the Homestead Exemption

Georgia’s homestead exemption is rather limited. Single filers can exempt up to $21,500. If the client has lived in the home for more than ten years, the equity amount probably exceeds that ceiling. To maximize the exemption and therefore keep the trustee from seizing it, it’s important to understand the difference between fair market value and bankruptcy value.

Assume Duane has $40,000 of equity in a home worth $200,000, according to the tax assessor’s website. According to those figures, which do not account for the fact that the house needs substantial foundation work, the trustee is free to sell Duane’s home, pay off his $21,500 equity exemption, and distribute the remaining proceeds to creditors.

But not so fast. The COVID-19 pandemic has depressed the real estate markets in many places, driving already low home investor offers even lower. And these are the offers that matter in this context. Schedule A requires debtors to list the as-is cash value of a particular asset.

So, at least one home investor’s written offer for Duane’s $200,000 house would be as low as $50,000. After the trustee pays the equity exemption and bears all other costs, mostly the cost of repairs, there might be almost nothing to distribute to creditors. According to the Bankruptcy Code, that fact makes Duane’s house untouchable.

Bankruptcy Affordability Options

These same valuation principles apply to some advanced bankruptcy options which a Georgia bankruptcy lawyer can unlock. If these options apply, the homeowner could save a considerable amount of money.

Lien stripping is a good example. This option is usually available if the homeowner used 80/20 financing to buy the home and the home’s value has decreased at least 20 percent. In that situation, the house’s value is not high enough to secure both liens. Therefore, the junior lien is an unsecured debt which is subject to discharge.

Other options, which are often available if the UPB (unpaid principal balance) of the loan is below $20,000, include a cram-down. If the homeowner makes accelerated payments and remits the home’s current fair market value to the lender, the bank might have to forgive the rest of the loan.

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What Do I Need to Know and Do Before Filing For Bankruptcy in Texas

There is a chance that you’re flooded with anxiety when contemplating filing for bankruptcy. Having challenges with debt can be a stressful period in one’s life. Creditors will be on your case and a simple mistake could make you lose your assets. That is why you should be getting in touch with an experienced bankruptcy attorney for a smooth process. The process itself is complex and confusing and isn’t something that you’d want to do on your own. Before you can start filing, here are a couple of things that you need to know about bankruptcy.

It is Not an In and Out Process

If you’ve never had any experience with bankruptcy cases, it is easy to assume that they’re similar to normal cases. A bankruptcy case can last up to a year. If you’ve filed for Chapter 7 bankruptcy, you can expect a shorter time but other types of bankruptcy could take more than a year before the cases are finalized. If you’re unsure of the process, it is imperative that you’re getting in touch with a Dallas bankruptcy lawyer.

You’ll Be Open For Financial Scrutiny

If you’re never the person to discuss your finances with friends and family, you should be prepared for financial scrutiny. This could sometimes mean that your financial life will open to the public. Once you’ve filed for bankruptcy, you’ll be required to attend the meeting with creditors in person. There are no restrictions on the kind of questions the creditors can ask provided they’re related to the case. This will mean that anything to do with your finances can be questioned.

Honesty is Required

It is crucial that you’re being completely honest with the information presented when filing for bankruptcy. This is because a bankruptcy court will be of the opinion that only an honest individual should be entitled to a debt discharge. The first thing you’ll be required to do is to list down all your creditors, debts, and property. If it is discovered that you’re being dishonest at any point, there is a chance that you might lose the bankruptcy discharge. The FBI could be involved as bankruptcy fraud is a serious offense.

Bankruptcy Forms Are Complex

A lot of people are of the assumption that filing for bankruptcy is a simple and straightforward process. This couldn’t be further from the truth. There will be complex questions that need answers and will mostly be centered on your financial affairs. It is important that you’re taking your time as you’ll not want to provide the wrong information. Having an experienced attorney will help you fill the forms correctly so that there are no chances of making mistakes.

The Discharge is Personal

For any filing of bankruptcy, the ultimate goal will be to have the debt discharged. This is because it will prevent all the creditors from collecting debt from you. The bankruptcy will only protect you as an individual. It doesn’t include shared debt. A good example is when you’re the co-signer of a loan. There is nothing that will be stopping the lender from collecting debt under such circumstances.

The Process is Not Cheap

You could be in a bad place financially but filing for bankruptcy could be costly. The cost of filing for bankruptcy will be determined by the attorney you’ll hire and if the fees will be waived. Doing the filing on your own could still attract substantial fees.

It Will Impact Your Credit

It could take up to 2 years before you can start recovering from a Chapter 7 bankruptcy. There are not a lot of creditors that will be willing to work with you. You’ll first have to rebuild your credit score. Don’t take on huge credit that you’ll have issues with repayment. The last thing you should be doing when still recovering from Chapter 7 bankruptcy is to accumulate more debt.

You Might Lose Property

It is possible to keep property when filing for bankruptcy but not all of it. Any property that isn’t exempt can be claimed by the bankruptcy trustee. The kind of property that you get to keep will be determined by the bankruptcy option that you go for. The exemptions will also vary from one state to the next.

Conclusion

Filing for bankruptcy will affect your credit for years to come but it could sometimes be the only way out. If it comes to that, you’d want to get an experienced bankruptcy attorney that will ensure that you’re getting the best out of the case.

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Things You Need to Know When Filing for Bankruptcy

Filing for bankruptcy is often seen as a scary proposition. As an individual or a business owner, you might never have imagined things taking that route but life is never short of surprises. The focus should be on getting back on your feet. It is important that you’re familiar with the process of filing for bankruptcy even if you’ll be working with an experienced attorney. Having a deeper understanding is crucial so that you’re aware of the steps to take.

There Are Two Main Options

When filing for bankruptcy, you’ll be faced with two main options. You will have to consult with the attorney in order to determine the one that is best for you.

Chapter 7 bankruptcy: Also referred to as liquidation bankruptcy, this option will mostly discharge all your unsecured debts. Such debt will include credit cards and personal loans.

Chapter 13 bankruptcy: With this type of bankruptcy, you’re required to come up with a repayment plan so that the creditors are paid over a period of time. There will generally be no liquidation of the property with this process but it could take up to five years before everything is finalized.

Bankruptcy Will Open You Up to Financial Scrutiny

If you’ve never gone through a bankruptcy case before, one might assume that it is a normal process and the court system is the same. It should be noted that such cases could last for longer than 90 days and entail complicated legal matters. That is why it is important to have a bankruptcy attorney by your side for the best possible outcome of the case. When you file for bankruptcy, it will be mandatory that you attend the meeting of creditors. During such a meeting, you will be asked many of questions in a public setting and under oath. There are no restrictions on the questions and any creditor that is present is allowed to probe. You should expect your finances to be scrutinized.

Complete Disclosure Is Required

It is crucial that you’re completely honest and transparent when filing for bankruptcy. Leaving out important details could be detrimental to your case. You’ll be required to provide a list of all your properties, creditors, and debt. When dishonesty is discovered, you could be looking at losing your discharge, or worse.

Having looked at some of the most important elements when declaring bankruptcy, you might be wondering what is required in order to begin the process. There are some key steps that you should take and we’re going to highlight some of them.

Find an Attorney

This will be the first thing you’ll need to do if you’ve decided to file for bankruptcy. There is a lot of information on the internet about finding the right lawyer. Ideally, you should be looking for someone that is experienced with bankruptcy law and has handled a case similar to yours in the past. To get the right attorney, you can ask for references from your family lawyer or accountant that you’ve worked with.

Credit Counseling

It is a requirement by the Federal Bankruptcy Code that individuals get credit within 180 days before declaring bankruptcy. For married couples, both individuals will be required to attend credit counseling sessions. You’re not supposed to go to just any other counselor. There is a list of approved counselors by the U.S. Department of Justice.

Complete The Paperwork

This is the most time-consuming part of the whole process of filing for bankruptcy. Your attorney will need to prepare a petition. In addition to that, you’ll be required to provide detailed documentation of your assets, income, living expenses, and tax returns.

Meeting With Trustee

The court will appoint a trustee for your case once you file for bankruptcy. The role of the trustee is to oversee the case up to its logical conclusion. The trustee’s work is to look for assets to liquidate to pay your creditors with.  However, most assets are protected with bankruptcy exemptions.  For the process to be smooth, it is imperative that you’re cooperative with the trustee. You must furnish them will all the financial documents that they request.

Additional Considerations

There could be additional requirements for a married couple. You have the option of filing for bankruptcy together or separately. If you’re on good terms, it is recommended that you’re filing together to avoid filing fees. It might seem like a good idea for one spouse to file for bankruptcy so that their credit score isn’t being affected. It will be imperative to speak with an experienced bankruptcy attorney to determine if it makes sense to file bankruptcy together.

Conclusion

The process of filing for bankruptcy is complex and time-consuming. Once you’ve decided it is the best option for your situation, you’ll need to familiarize yourself with the process. There are potential pitfalls that can easily be avoided with the right information. It is also important that you’re working with an experienced attorney for your case. Take your time to do research. Look at all the available options before making any important decisions.

Butcher Law Office, LLC.

Butcher Law Office, LLC was founded on the premise of offering personal and one-on-one bankruptcy services for clients. You get to work with Tom Butcher who is an attorney with more than 12 years of experience and more than 1300 bankruptcy cases filed.

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You must know the advantages and disadvantages of bankruptcy before filing bankruptcy

Bankruptcy is a financial condition that a person and organization can declare when they cannot repay their creditors or lenders. Not as simple as it sounds. If announced bankruptcy, it badly affects your credit score, and you cannot get any credit from banks or any financial institution. A lawsuit is filed in court when a person declares bankruptcy. Then there is a legal process where all the entity’s outstanding obligations from the company’s assets are assessed and paid (in whole or part).

As we know, that declaring bankruptcy will affect your future earnings, credibility, and self-image. If a person filing for bankruptcy usually finds it difficult to restore their reputation and stable debts, it can be challenging to adapt to a scaled-down lifestyle. Nevertheless, Tucson Bankruptcy Lawyer often provides considerable relief to those trapped by dangerous debt levels. When bankruptcy is declared, the threatening phone and letters requesting payment will cease.

Tucson Bankruptcy Lawyer will help you evaluate the advantages and drawbacks of declaring bankruptcy so that you can make a choice. You must know the advantages and disadvantages of bankruptcy before filing bankruptcy is given below.

Before filing bankruptcy, you should know it depends on the situation you have; this blog will help you to address the pros and cons of filing bankruptcy to determine that bankruptcy is the right solution for you.

Disadvantages of filing for bankruptcy

As you know that bankruptcy filing can affect your financial status and social image for many years, you should consider all your options carefully before filing. Such drawbacks are:

Your real estate and personal property can confiscate. If you cannot exclude all of your personal property or real estate property from the bankruptcy exemption, the bankruptcy court may seize some of your assets and sell to pay your creditors.

Unable to use the credit card- mostly credit card companies cancel your credit card when you file bankruptcy. After filing, you will likely receive several offers to apply for an “unsecured” credit card. That will help you restore your reputation but usually includes higher interest rates and annual fees.

Getting a loan or credit will be challenging – after filing for bankruptcy, you will not get a loan for your new house, study, and job.

Refusal of a tax refund- Due to bankruptcy, state, local and federal tax refunds can be dismissed.

Non-Refundable debts- Some forms of debt may not discharge bankruptcy. Commonly non-negotiable loans include alimony and child support, student loans, criminal reinstatement, fines, and any loans obtained by fraud.

Bankruptcy holds a strong stigma and personal bankruptcy more. However, to avoid embarrassment, it is necessary to enable oneself to take advantage of bankruptcy (see below)

Advantages of filing for bankruptcy

Issue stay against creditors – The court will immediately approve this stay against any debt collection practices after you file bankruptcy. It does not eliminate your mortgage and liability, but it suspends all debt recovery proceedings until the bankruptcy case completes or the moratorium is lifted.

Discharge your debts- You will be entitled to discharge or cancel the obligation to repay those debts. It is a debt that can be liquidated by bankruptcy. These usually include credit cards, medical and utility bills, and personal loans.

Credit Score- While filing for bankruptcy leads to multiple delays in credit ratings, and bankruptcy filings remain on record for 7-10 years, Tucson Bankruptcy Attorney eventually boosts your credit scores after filing for bankruptcy.

There is no need to worry about property seize – An exemption from bankruptcy may allow you to maintain over your assets after filing bankruptcy. If you file for bankruptcy, it means that you don’t have to worry about property seized in bankruptcy. These provisions play a significant role in both Chapter 7 and 13 bankruptcies.

No more financial burden- You can learn to live within your income without a credit card and avoid potential financial catastrophe.

Conclusion: A Tucson Bankruptcy Lawyer will help you decide whether to file for bankruptcy and what type of bankruptcy you should file according to your financial condition. When you plan to file, a Tucson Bankruptcy Attorney will help ensure that your assets/property are protected. All of your debts, financial obligations that can discharge and your creditors do not violate your rights so that you are on the right path to financial recovery when you do your bankruptcy to complete.

Note: Deciding to file bankruptcy is a challenging process for you because you do not know when and how to file. Therefore, you must consult with a competent Tucson bankruptcy Lawyer to decide whether bankruptcy is the best option for you.

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5 Kinds of Attorneys You Need at Some time in Your Life

Are you looking for an attorney that can be of great help for solving your legal issues? However, what type of attorney you are searching for. Now, there are several kinds of attorney. The legal field is really very complex as well as large. You will discover that different attorneys specialize in different areas. That’s the reason why there are different attorneys, and whatever may be your legal issue, there’s an attorney who is an expert in dealing with a particular issue. Read more

John Barret is a blogger with the Elder Law Center of Wisconsin from the past four years. He is a law graduate in the US and enjoys writing about different legal processes, aspects of the laws, and the significance of having an attorney.

What to Do if Your Vehicle is Repossessed

We all depend on transportation to get us to work, run errands, and more. For most of us, that means having a dependable vehicle that can get us from point A to point B. Unfortunately, vehicle repossession is a real threat for many families. Read more

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Know Your Rights if Your Wages are Garnished

Wage garnishments are no laughing matter. They can reduce your paychecks by hundreds of dollars each month, severely compromising your ability to pay rent, stay on top of other bills, and keep food on the table.

You don’t have to accept a low quality of life just because a creditor has started garnishing your wages. There are a few things you can do, according to a Columbus wage garnishment attorney, to stop your wages from being garnished. Read more

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Life after Bankruptcy: How to Recover

A lot of time, thought, and attention goes into deciding if filing for bankruptcy is right for you and your family. When you feel confident that you’ve made the right decision with the help of a bankruptcy attorney in Columbus, Ohio, a weight is taken off of your shoulders and you likely feel like you can finally move on with your life. Read more

Find top rated attorneys and law firms profiles with Find Attorneys Directory, the best and free online attorney directory. Guest bloggers can also publish their articles here as other bloggers are doing.