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Archive for December, 2009
Private Student Loans in Bankruptcy: Dischargeable?
My question of the week comes from a client who wanted to know if private student loans he owed on were discharged in a bankruptcy case he filed in 2002.
For bankruptcy cases filed PRIOR TO October 17, 2005, if the PROGRAM under which a student loan was issued, insured, administered was a FOR-profit, PRIVATE (non-government) entity, the loan/debt may have been discharged. However, if the program itself, such as LAL, GSL, etc. received nonprofit funding by participation of nonprofit entities, the loan is not dischargeable in bankruptcy.
To see a ninth circuit case which examines the private vs. government distinction on student loans in bankruptcy, see In re Pilcher
For bankruptcy cases filed after October 17, 2005, the only way a student loan is dischargeable is if the debtor can prove “undue hardship” as that term is interpreted by the courts in whatever district the case is filed in. It
How Bankruptcy Can Help With Foreclosure
Foreclosure document
You can avoid foreclosure completely, or at least delay the process by seeking the protection of the bankruptcy courts. But it shouldn’t be the first thing you do!
Forbearance
You should first attempt to work out an alternative payment plan with your lender before seeking further assistance, but if they will not work with you and you can’t get them to agree to a different plan of action, filing bankruptcy may help. Once you are behind on your house payments, your lender can take the necessary steps to enforce the terms of your loan by selling the house at a sheriff’s sale and recouping some or all of its money from the proceeds of the auction price.
Many people think that missing one payment will cause the lender to foreclose. This is not all the case. Most lenders will try and get you caught up and in fact won’t typically foreclose until the loan is at least 90 days in arrears. When you realize you will have difficulty making your payments, the first thing you should do is call your lender and see if they will help you work something out short of foreclosing on the home. Forbearance agreements at this stage are fairly common, and they generally mean that the lender will stop any accelerated action on the property as long as the terms of the renegotiated contract are met. Perhaps they will allow you to pay your arrearages a little each month, or add the missed payments to the end of your loan.
Short Sale or Deed in Lieu
In more advanced situations, a short sale or deeds in lieu of foreclosure are a couple of alternatives that can be tried. A short sale is selling the house for less than what is owed on the loan, and the lender must approve the sale at the lower price. Though the lend
From time to time in my Indiana bankruptcy blog, I answer reader questions that I think will be of interest to my Indiana bankruptcy clients and to other blog readers. Last week, a reader asked whether Chapter 13 bankruptcy rules will be changing in 2010.
The answer – yes and no.
Chapter 13 bankruptcy in Indiana will mostly be same-old, same-old going into next year. By way of explaining the general way Chapter 13 works, here are some basic factors which will remain “business as usual” in 2010:
- Chapter 13 begins by filing a simple form with the Indiana bankruptcy court, and when a “docket number” is assigned by the court to identify the case.
- The Automatic Stay then goes into effect, and creditors are prevented from making any collection efforts: they can’t call or write to the debtor, repossess assets, or garnish wages.
- A list of all creditors, with name and address of each, plus paperwork showing all the debtor’s assets, liabilities, income, expenses, financial history, and a plan for repaying debt is turned in to the court. (A very big and important part of the work I and the Columbus bankruptcy lawyers who work in my offices there, plus the work done by the professionals in the Indianapolis, Bloomington, and Anderson bankruptcy law offices of Mark Zuckerberg consists of preparing and filing this paperwork.)
- The Creditors’ Meeting is held, presided over by the bankruptcy court trustee. (This is us
Use Online Access Keep Track of the Disbursements in Your Chapter 13 Case
Once you file a Chapter 13 bankruptcy and begin contributing monthly to the payment plan, you may wonder where your money is going, who’s being paid and how much money you still owe until you get your Chapter 13 discharge. As a Chapter 13 debtor, you can have access to much of the same information that the Trustee and your attorney have.
The National Data Center allows Chapter 13 debtors to access their case at no charge through its website: www.13datacenter.com. In order to view your case on-line, you must first register for a user name and password. Just go to the www.13datacenter.com website and locate the box that asks for User Name and Password. If you are a new user, click the link “New Debtor Access – CLICK HERE” to register for a user name and password.
Step 1: You will be asked a series of questions to verify your identity. Make sure to enter your name exactly as it appears on your petition, your social security number and your case number.
Step 2: Once you’ve entered all information requested in the first screen, you will be taken to the second screen. Select on Read more…
Am I liable for my spouse’s debts? About “community claims”
Most community property states are in the South and West. That’s because the idea of community property came from Civil Law in continental Europe rather than from Common Law in England. Some of the Southern and Western states originally were Spanish or French territory. So these states have some legal heritage from those countries, including the idea of community property.
Wisconsin adopted the idea of community property recently. So it comes as a surprise to many Midwesterners who move to Wisconsin from neighboring states like Michigan, Minnesota or Illinois to find out that their marriage has different economic consequences in Wisconsin.
This can be important in bankruptcy cases. That’s because bankruptcy allows a debtor to get rid of debt. And strictly speaking, debt means claims held against a debtor by a creditor.
Who is a “creditor” in bankruptcy? A creditor is someone who holds a claim. Claim includes a community claim.
So if you are married in a community property state, you are just as liable for your spouse’s debt, incurred during marriage, as your spouse is. That comes as a surprise to many people. The good news is that in bankruptcy, community claims are claims against your bankruptcy estate, even if you are the only debtor who files a bankruptcy case. You’ll eliminate claims against you by reason of your marriage to your spouse in a bankruptcy case because claims include community claims.
For more information about community claims click here.
Lakelaw represents people in bankruptcy cases from Chicago to Milwaukee in Wisconsin and Illinois.
Budget to Stay Debt Free
–> Money budgeting is very essential in a person?s life in order to live debt free. The simplest way to begin is to track down expenses and record them faithfully. This could be the beginning of a very good financial path irrespective of whether you are in the habit of keeping track of your receipts in an envelope or keeping a list on a computer software program. Only after the first month of keeping a track of your expenses will you realize how much your daily coffee adds up to in a month and how fast these things build up. You will get a taste of how budgeting will help you keep your life debt free.
In order to graduate to the three-month period, one can start by averaging expenses and determining financial lifestyles. Here the importance of budgeting money will come through. It could be determined that you spent $1800 on groceries in the last three months and so it would be good to allot $600 for each month on just buying groceries alone.
After six months of consistent financial tracking, you should have a good idea on how to budget money appropriately and then graduate to accumulating some real savings. Read more…
Editors note: In this compelling guest post, Charleston bankruptcy lawyer Russ DeMott describes what he calls “financial repression” – the tendency of honest, hardworking men and women to delay or forego bankruptcy protection because of the administrative and expense burdens added to the bankruptcy filing process by the 2005 BAPCPA changes to the bankruptcy laws.
When you meet with your bankruptcy lawyer, you’ll be given a lot of information. You’ll also be given many tasks to complete before you file your bankruptcy case.
Our new bankruptcy law, BAPCPA (Bankruptcy Abuse Prevention and Consumer Protection Act), created a tremendous amount of busy work for debtors. You must complete a credit counseling session prior to filing your case, you must provide the trustee with the last tax return you filed, and you must give your bankruptcy lawyer six months’ worth of pay stubs, just to get started. There’s lots of work to be done.
Debtors are already stressed out when they come to their lawyer’s office. The law is often confusing. There are many new terms thrown around: CMI, DMI, discharge, First Meeting of Creditors, 341, 362, median income, means test, trustee, and on and on. Even if they have a lawyer who explains things well, there’s a large amount of new information to absorb.
On top of all this, they must provide their lawyer with numerous documents. Some of these are easily accessible; some are not.
In my Charleston, South Carolina bankruptcy practice, I have noticed that many clients seem worn down by this process. We regularly check on open files to notify the clients of the information we need to file their cases. Sometimes they respond, but sometimes they don’t. It’s as if they believe that if they ignore the financial mess they are in, the problems will magically disappear. They won’t, of course. In fact, they’ll continue to get worse.
I call this financial repression. Like any other repression, it delays a resolution. Whatever the problem is, it doesn’t get solved.
I know financial problems are stressful. And I also know clients feel overwhelmed and beaten down. To be honest, I hate asking my clients for many of the documents I have to request. Much of the information is, as my high school history teacher would say, merely academic. I need the information to fill in a spot on a form, even though it’s really not relevant to their financial situation.
But I didn’t make these rules. And your bankruptcy lawyer didn’t, either. Think of the process as just a bunch of hoops you must jump through. The Credit Industrial Complex, as one of my colleagues calls it, wrote much of our bankruptcy law. The goal of the new law—or at least one of its primary consequences— was to make the process expensive and miserably labor-intensive. But if you allow yourself to repress your financial problems, you will be letting your creditors win.
Roll up your sleeves, start digging for those documents, and give your lawyer what he or she asks for. The sooner you do that, the closer you are to getting the fresh start you need and deserve.
About Russ DeMott: Russell A. DeMott is a bankruptcy lawyer representing clients in Chapt
Bankruptcy And Student Loan Debt Grow Side By Side In Indiana
As a debt consolidation lawyer in Indiana, I help clients with many different kinds of debt. Unfortunately, one category of debt for which filing bankruptcy has not been able to be of much help is student loan debt. The Columbus bankruptcy lawyers who work in my office there report having exactly the same frustration when former students turn to them for Indiana bankruptcy help with student loans.
Student loans are unsecured loans. As money-zine.com comments, unlike a car loan or 
home mortgage, where the property itself serves as collateral for the loan, with a student loan there is no collateral – “You cannot unlearn what you were taught, and no one is taking your college diploma from you.”
In an effort to prevent graduates from simply walking away from their student loans, the government made a big change in the law back in 1998, making it extremely difficult to have a student loan discharged in bankruptcy.
In fact, only in cases where three things can be proven is there a chance for a discharge of student loan debt:
- If you repay the student loan, you would not have enough money left over to lead even a minimum lifestyle.
- Your financial hardship is likely to continue for a significant period of time.
- Before filing bankruptcy, you made a good faith effort to make payments on the student loan over at least a five year period of time.
According to the Indianapolis Star,” Indiana students are leaving school with more debt than ever before.” The nonprofit Project on Student Debt reports Indiana students graduate with debt ranging from $25,000 to $36,000. My
Can I Keep Two Houses If I File Chapter 13 Bankruptcy?
Can you keep two houses if you file for Chapter 13 Bankruptcy?
Like so many questions in bankruptcy, the answer is: It depends.
When most people file a Chapter 13 bankruptcy they are generally doing so to either save a house from foreclosure, or because the person is an “over means” debtor which requires them to file a Chapter 13 bankruptcy rather than a Chapter 7 bankruptcy.
When you file a Chapter 13 bankruptcy your creditors cannot get less toward what they are owed than if your non-exempt assets were liquidated in a Chapter 7 bankruptcy. Generally speaking, a second house is going to be a non- exempt asset.
As a result, when a Chapter 13 bankruptcy is filed it is necessary that a Chapter 7 liquidation analysis be performed.
So how does this affect whether you can keep two houses in a Chapter 13 bankruptcy?
The answer is that if keeping the second house will mean that you are paying an unsecured creditor less than they would have received in a Chapter 7 bankruptcy if the second house was sold (liquidated), then the bankruptcy trustee is likely to either sell the second house, or the trustee will require you to pay an additional amount to the unsecured creditors to account for the liquidation value of the second house.
If you are considering filing for bankruptcy and are dealing with multiple pieces of real estate, you should consult with an experienced bankruptcy attorney to determine the right bankruptcy for you.