Looking to "Get Out of Debt," but not sure who to call? With the information age in full swing, I bet you're as confused as a squirrel in the middle of the road with a car coming at you at 60 mph. Timing is crucial and one wrong turn can make road kill. It seems that the path to financial freedom from debt is paved with scams and scoundrels who will take you for your last dollar and leave you in a worse situation. Well, a debt relief lawyer may be the right solution and here's why:
1. Only a lawyer can provide legal advice. Anyone other than a lawyer may be practicing law without a license with the advice they may dispense;
2. If you started working with a debt settlement company, began making payments to them and later were served with court papers that you're being sued, you'll need to immediately consult with a lawyer to discuss your legal rights and options to deal not only with the law suit itself, but with whether that debt settlement company you hired was a scam;
3. A debt relief lawyer has many tools to work with that will assist you, beginning with creating a wedge between you and the debt collectors. You see, once you hire an attorney and advise the debt collector that you are represented by counsel, it is a violation of the Fair Debt Collection Practices Act ("FDCPA") for that debt collector to contact you;
4. A debt relief lawyer slows down the process of collections, which gives you the breathing room you need and puts time on your side to gather information, discuss your options, including whether to file for bankruptcy protection; and
5. Solutions that a lawyer can provide include determining whether you have rights to sue under the FDCPA, Rosenthal Act, Bankruptcy Code, or any other laws that protect consumers against unlawful debt collection practices.
Many debt relief attorneys offer FREE consultations and will explain options with your financial goals in mind. Here are some FREE books on the subject. Bankruptcy may not be right for every consumer and an attorney that also offers debt settlement plans can provide a wider array of solutions and a bankruptcy attorney might offer.
Americans are still swimming in debt in spite of the media and government shouting, "The crisis ended in 2009, let's get back to spending!" However, there is another crisis on the horizon that has quietly surpassed credit card debt and that is Student Loan Debt now more than $1.3 Trillion Dollars. How did we get here? Well my friend and colleague O. Max Gardner shared a historical perspective that I just had to share here with you.
In 1965, Lyndon Johnson signed into law the Higher Education Act (HEA) as part of his 'Great Society.' Millions of students are now able to afford college with Federally guaranteed loans and scholarships. It was his war on poverty. The federal loans were financed by commercial banks like Sallie Mae and Nelnet who lent the money directly to the student borrowers with the government assuming all the risk. If the students defaulted, the government guaranteed that it would cover the loan.
In 1978, after stories surfaced of some doctors and lawyers discharging their student loan debts in bankruptcy immediately after graduation, the Bankruptcy Reform Act went into effect, disallowing the discharge of student loan debts for 5 years after the First payment. The actual discharge rate at the time was 1%. In 1990, Congress extended the non-discharge period to 7 years.
Fast forward to 1998 when Congress completely eliminates the ability to discharge student loan debt in bankruptcy. The same rules apply to debts for criminal acts (you murder someone and are sued) and debt from fraud. Federally backed education loans are the only type of loans with this Federal 'no escape' clause. Education costs began to skyrocket faster than inflation to take full advantage.
Amendments to the Bankruptcy Code in 2005, known as the Bankruptcy Abuse Consumer Protection Act (initiated by MBNA Bank by the way) provided the same non-discharge protection to private student loan lenders. Now all student loans, government and private are nearly impossible to discharge absent proving a 'Undue Hardship.' Federal student loans are no longer protected from any statute of limitations and will now haunt you until you either pay in full or die!
Where else can a lender make huge profits without risk?
Source: HIstory of Student Loans
Does anyone remember the mortgage crisis that nearly caused the entire world economy to crash in 2008? Well, there's a new debt bubble that's ready to burst; STUDENT LOANS. With more than $1.3 Trillion Dollars in student loan debt, it's no wonder that National Collegiate Student Loan Trust is bringing a massive tidal wave of lawsuits in California and other states across the country due to the increasing defaults on student loan debt repayments from borrowers.
If you're being sued by National Collegiate Student Loan Trust, here are a few things you need to know:
- Consult with an attorney immediately to discuss your options in defending the lawsuit;
- National Collegiate Student Loan Trust is NOT THE LENDER and quite possibly not the proper party with the right to enforce or collect on the debt;
- Any Creditor that sues must prove ownership, with a legal right to collect on the debt.
National Collegiate Student Loan Trust is counting on the fact that most people don't fight these lawsuits because they borrowed money and feel morally obligated to repay it. It's a helpless feeling, but not a hopeless situation. The law requires anyone that sues must prove their case and if they fail to do so, they will not get a judgment. Your options are to (1) Do nothing and they will get a default judgment against you, which will permit them to levy bank accounts and garnish wages; or (2) Lawyer Up and fight them by making them prove their case and negotiate a meaningful settlement and repayment plan, or eliminate the debt all together.
Generally, a Chapter 7 bankruptcy case is a liquidation bankruptcy where the debtor has no means ("money") to repay any of their debts. For the most part, since there is not enough money in the debtor's budget to repay their debts, the Chapter 7 trustee looks for assets to take to pay creditors. It's important to keep in mind the following Don'ts when preparing to file a Chapter 7 bankruptcy case:
- Don't lie to your attorney;
- Don't forget to list EVERYONE you owe money to;
- Don't forget to list EVERYTHING YOU OWN;
- If your income is greater than your expenses, don't file and talk to your lawyer;
- Don’t forget to tell your attorney about your small business, sole proprietorship, partnership, LLC, LLP, LC, corporation, or hobby;
- Don't borrow any money, take out payday loans, or otherwise dig deeper into debt;
- Don't bank where you owe money. Close the account and reestablish it somewhere else. CAUTION: If you have direct deposit(s) or regular withdrawals from the account you are closing, be sure to allow sufficient time to make the changes to the new account if such deposits and/or withdrawals are to continue;
- Don't get married before filing if your spouse has a high income;
- Don't hide assets or debts, or money in your kid's accounts;
- Don’t cash out retirement plans or 401k’s.
The court has provided Chapter 7 Basics information for those that want to learn more about filing Chapter 7 Bankruptcy. Most lawyers offer free consultations and explain if bankruptcy is right and if so, which chapter to file and benefits of bankruptcy. Remember that the most powerful tool available in bankruptcy is the timing of the filing of the case.
Would you hire these people? Well, someone might, but according to a recent article in USA TODAY, “age discrimination remains a problem even though we can’t tap into specific numbers.”
And this unhappy couple looks like they didn’t save enough money for their retirement, so they may be looking for a job and the going will be rough. While 60-80% of retirees say they want to work, the reality is that only18.2% of people over 65 were working in 2012.
What’s the answer? Planning. Susan Fulton, president and founder of FBB Capital Partners in Bethesda, Md, says, "Ninety percent of Americans will not be able to retire on savings and Social Security." Here are a few tips.
1. Increase savings and reduce expenses. Using the strategy now also accustoms you to living on less. This is not rocket science, but it is often hard to be honest with your spending.
2. Delay taking Social Security benefits. In another retirement article David Richmond, president of Richmond Brothers in Jackson, MI. Says that “there are 81 different strategies on how to claim Social Security, and that the difference between the best and worst strategy is $100,000 to $125,000 over their lifetime.” Go to this Social Security website to see your Social Security earnings, and estimate your retirement disability and survivors benefits.
3. Stay in your current job, even if it’s for fewer hours, or in a lower-paying version of it. Remember that age discrimination is an issue if you’re over 65 and unemployed.
4. Try turning a hobby into a job or business. Get new skills if you need to. See the Small Business Administration’s website for help.
5. Do not turn to credit cards. According to a survey released by CESI Debt Solutions, nearly 40% of retired Americans said they’ve accumulated cred-card debt in their twilight years — and aren’t worried about paying it off in their lifetime. But because people are living longer, their clever plan may backfire.
Bankruptcy in retirement is on the rise. According to AARP research, the number of Americans age 55 and older who filed for bankruptcy increased threefold from 1991 to 2007. The number of bankruptcy filings for people 75 to 84 years old quadrupled in the same time period.
Plan more, spend less, work longer, and “live shorter.” Not sure if you can control that last one, but it’s certainly huge part of the problem these days.
IMPORTANT DETAILS ON NEW FHA CHANGES: ECONOMIC EVENT
For purchase money transactions only, FHA is allowing consideration of borrowers who have experienced a verifiable “Economic Event” which resulted in foreclosure, deed-in-lieu, short sale, or bankruptcy, with a minimum of 12 months seasoning since event. This program is effective for case numbers assigned 8/15/2013 thru 9/30/2016.
Four key components must be documented:
1- Satisfactory Credit History:
a. Borrower must have a previous history of making payments on time prior to Economic Event.
2- Economic Event:
a. Document that an occurrence beyond the borrower’s control resulted in a
Loss of Employment and/or a Loss of Income.
1- Provide Verification of Employment evidencing termination dates, written termination notice,
public documentation business is closed or receipt of unemployment income.
b. Demonstrate that the event caused at least a 20% reduction in household
income for a minimum of 6 months.
c. Verify and document that all collections, judgments, foreclosures, short sales, Chapter 7 and 13 bankruptcies were a result of Economic Event.
3- Recovery from an Economic Event:
a. Document re-establishment of satisfactory credit for a minimum of 12 months
since time of foreclosure, deed-in-lieu, or Chapter 7 bankruptcy. For Chapter 13, must be
discharged prior to the loan application and all require bankruptcy payments made on time or
minimum of 12 month history pay-out period has elapsed and with all payments made on time.
b. Satisfactory Credit History: credit must show payments paid as agreed since Economic Event.
4- Housing Counseling:
a. All borrowers must receive housing counseling from a HUD-approved counseling agency.
1. Counseling must have taken place 30 days prior to application date, but no more than
6 months prior to application date.
2. List of approved counselors can be found here.
Now is the time to get a fresh start and help your own personal economy grow and flourish. Eliminating debt and saving for an affordable mortgage may just be what you need to achieve your financial goals this year.
Too often we hear tough economic times, but bankruptcy filings have dropped nearly 25% over the last year and home prices have risen at the same pace. This might not be a good thing because many who have needed to file for bankruptcy may have been too broke to file.
It costs $306.00 in court filing fees alone to file bankruptcy under Chapter 7 of the Bankruptcy Code. Then, there are two required courses that depending upon which company a debtor uses can cost nearly $100.00, let alone attorney fees that run in the thousands for adequate representation. This causes some consumers to be too scared to file bankruptcy when they really should.
These Myths Simply Are NOT True:
- · You Must Be Completely Broke to file Bankruptcy
- · You Have to Give up Everything—Cars and Homes Must Be Surrendered
- · Exhaust Retirement Accounts
- · Filing Bankruptcy will ruin Credit
- · Filing Bankruptcy is Financially Irresponsible
Timing is an important tool to bankruptcy attorneys. Looking ahead to the future and seeing beyond the current situation is important. Putting things into perspective and getting the opinion of professionals can provide important insights and perspectives that can be overlooked when you’re emotionally attached to the situation. Many tax professionals, bankruptcy attorneys and realtors offer free consultations and each has their area of expertise to bring hope to an otherwise dire financial position.
Want to be a Millionaire?
According to the Lancet Study of 2010, the people of the world, in general, are living longer. And although it is argued that the U.S. is behind the rest of the world in life expectancy percentage growth, the famous demographer James Vaupel, executive director and founder of the Max Planck Institute for Demographic Research, claims the general world population will have succeeded in delaying the aging process by a decade.
Another measure in the study says that for every year that goes by, 3 months are added to life expectancy. A person 60 years old now having a life expectancy of 78.7 years of age would have a life expectancy of 91.2 years by the time they are 70. If they reach 80, their life expectancy would be 103.7 years.
The bad news: we need to have a way for our money to outlive us rather than the other way around! One way is to decide today to save a million dollars, and the good news is that we will have longer to do so. Plus, the younger you are when you start, the easier it is.
To have $1million when you’re 100, starting at
20 years old— Save $529 per month, $17 per day.
50 years old— Save $1128 per month or $37 per day.
Use a website like this one if you’d like to change the inflation, tax, and interest rate assumptions.
Don’t forget, though, that a million dollars today will not be worth the same in 50 years or 80 years because of inflation. One million dollars adjusted for inflation of 3% (meaning you will be able to buy the same goods in the future) will be $4,256,219 in 50 years, and $10,330,962 in 80 years.
You may think you will never be able to have $1 million, but sometimes, it’s a matter of setting priorities, and knowing what to shoot for. For ways to think like a millionaire, go to this website for great ideas, and use the many online calculators. Here’s the deal: if you never put one dime into savings, you’ll never have money for emergencies, new homes, down payments on cars and of course, retirement, which is the subject of our next blog. Putting emergencies on credit cards is how people end up in trouble and in bankruptcy.
Quote of the day: “Discipline is remembering what you want.” ~ David Campbell, founder of Saks Fifth Avenue.
HOORAY and congratulations! You were just accepted to the college of your choice. Now all you have to do is pack your bags, buy some books and pay for the school. Nice. But wait. Few people can afford to pay for college out of their savings, or out of a paycheck, so they take out a loan.
For that reason, we are re-visiting the subject of student loans as on my June 25 post, Student Loans: No Way Around; Maybe A Way Through, because it is the time of year when many students just like you face that big decision. What’s new? An August 25, 2013 USA TODAY article headline screams ‘Caution! Student loans must be paid back!” The headline was taken from a brochure at the new student orientation at a Community College in Lewisburg, West Virginia, because students these days are defaulting on loans at a destructive rate. Destructive because not only can a defaulted loan ruin your credit rating, and cause collectors to make your life miserable, but also because the schools themselves risk losing access to federal aid for low-income students. It’s a lose-lose.
Wait. There’s more. If people default on their loans, the schools have to increase tuition. Then students will need higher loans to cover the heftier fees. It’s a vicious cycle.
Bottom line: DO YOUR HOMEWORK. What can you afford to repay? Where will you live? What job will you have that will support the loan payment? Did you know there is interest? If you don’t know what interest is, learn about it. Do your homework. Don’t shine it on, or the bill collectors will hound you, your wages you thought you were going to make will be garnished, and in the worst scenario, you’ll file bankruptcy, which will remain on your financial records for ten years.
Here’s an example of “stuff you should know.” Understand the difference between a subsidized loan [deferred no interest accrues while in school] versus an unsubsidized loan [deferred to payment, but interest accrues]. The Student Loan Borrower Assistance website is a great place to start learning.
For sure, having a student loan may mean you can have the education you want. Go for it.
But when you’re finally sitting in front of the online loan application, remember the warning label, do your homework, and think before you click.
Over at Fox News, a reader asked the question, Should I take Loan Modification While in Chapter 13? The reader was nervous about taking a loan modification that offered a temporary 2% interest with a cap at no more than 4% through the remainder of the mortgage. They also needed to know what would happen to their bankruptcy case, if they chose to take the loan modification.
If you're in an active bankruptcy case and are working with an attorney, you'll need to let your attorney know that you have applied for a loan modification. Accepting a loan modification will change your Chapter 13 bankruptcy case and your attorney will need to let the court know that you intend to seek a loan modification and that you no longer want the trustee to make payments to the lender for the mortgage past due amounts, if any.
In the article, it looks like the reader was able to eliminate their junior mortgage through what we call a lien avoidance motion during their bankruptcy case. Upon discharge, the lender is order to release their junior lien on the property and the second mortgage is completely removed. To qualify, the amount owed on the first mortgage must be greater than the current market value of the property, meaning the home is underwater.
Working with your Chapter 13 bankruptcy lawyer that understands the lasting effects of a loan modification and eliminating second mortgages can set you up for that Fresh Start, keeping you in your home.
Bankruptcy filings will continue to stay strong throughout the remainder of 2013 and beyond, why? The signs of a stalled economic recovery are everywhere, if you look. Student loan debt is a major burden on the economy as many struggle to stabilize the loans and obtain an affordable repayment program.
Have you read this article in the LA Times about first-time home buyers? With more than $1.1 trillion dollars in student loan debt, many cannot buy homes. This chokes the entire economic recovery when these buyers are missing from the market, according to the LA Times. If the student loan debtors are not able to repay their loans, they'll be forced into perpetual bankruptcy purgatory by filing repeat cases and may never own their own home.
Another trend to watch will be those eligible to file bankruptcy again. What about all those folks that filed bankruptcy in 2005 just before the bankruptcy laws changed? Back in late 2005, there was a mass run on bankruptcy filings that neared 2 million that year. These folks are eligible to file again after 8 years, which is 2013. We may see a bump in bankruptcy filings from those that filed in 2005 since they had to wait and may have new debt problems to eliminate.
So, as we drive off the student loan debt cliff and wonder what happened, just remember that you have a friend in your bankruptcy lawyer who can, for a fee, help you navigate through economic uncertainty and deliver a good dose of hope for the future that otherwise may take a while to arrive.
It's amazing to me to see so many bankruptcy cases winding their way to the Supreme Court these days. It's no wonder this is happening because the changes to the Bankruptcy Code in 2005, known as the BAPCPA have made no sense to many bankruptcy practitioners. Recently, the Supreme Court cleared up a definition for us where the appeals courts were split on its meaning.
Namely, In the recent decision of Bullock v. BankChampaign, N.A., 133 S. Ct. 1754 (May 13, 2013), the United States Supreme Court: (i) resolved a prior split among the Circuits concerning whether a "culpable state of mind" was required in order to come within the "defalcation" exception as set forth in § 523(a)(4) of the Bankruptcy Code and (ii) determined that such a state of mind was required in order to fall within this exception. In a unanimous decision, the Court held that "where the conduct at issue does not involve bad faith, moral turpitude, or other immoral conduct, the term requires an intentional wrong." Bullock, 133 S. Ct. at 1759. It added that defalcation could also occur with a conscious disregard for, or willful blindness to, "a substantial and unjustifiable risk" involving "a gross deviation from the standard of conduct that a law-abiding person would observe." Id. at 1759–60 (emphasis in original).
The Court concluded that the term "defalcation" must require a similar showing. Id. The Court also buttressed its decision by noting that exceptions to discharge must be "confined to those plainly expressed." Id. (citations omitted). The Supreme Court did not apply its newly settled standard to the facts before it; instead, it vacated the decision of the Eleventh Circuit Court of Appeals and remanded the case for a determination consistent with its findings. Id. at 1761. You can read a more in depth case analysis here.
This morning at a breakfast networking mixer, I met a gentleman who, after meeting me, asked me if there was a way around student loans. I replied, "There isn't a way around student loan debt, but there are a few ways through it." Ever since winning at trial, discharging more that $57,000.00 in student loans for my clients, I've been getting calls from all over the country. Apparently there's a crisis going on [check out this infographic] and not very many attorneys are doing anything about it. I've been working hard to encourage other consumer bankruptcy attorneys to take on these types of cases and recently spoke to colleagues on the subject.
First Things First: We've got to separate the 'herd' in terms of Federal and Private Loans. The reason for this is that the remedies, options and solutions are different for federal loans and private loans. So, to find out which loans are federal loans and to greatly help your lawyer figure things out, you'll need to go to NSLDS, get a PIN number and print out the information you get.
NOTE: NEVER, EVER, EVER, GIVE YOUR PIN NUMBER TO ANYONE!!!
Next, consult with your student loan lawyer to discuss options. Options only available for federal student loans may include administrative discharge, hardship discharge through bankruptcy litigation, Income Based Repayment, or Income Contingent Repayment. Many programs mentioned here do not require the borrower to file for bankruptcy.
Private Student Loans
Private student loans are not subsidized by the federal government, so there are no mandatory programs these lenders must adhere to. Outside of bankruptcy, they are treated like any other debt and must comply with FDCPA and other collections laws.
Possible solutions for borrowers, is to consider suing the lender to negotiate a reduced principal amount owed. Another possibility is a reorganization in Chapter 13 bankruptcy to force a repayment program based upon what the consumer can afford rather than what the lender mandates.
Welcome to the new "bubble." Student loan debt now exceeds credit card debt in the U.S. and what is being done about it? Well, President Obama is now fighting Congress to prevent interest rates from doubling on July 1st. Here's a great article about their plans to "fix" the problem. Schools of higher learning are cashing in on the boom, while lenders are issuing loans like they did during the housing boom on "easy" credit, forcing every family member to co-sign on America's future. I'm outraged.
At the heart of all this are the folks that are calling my office every day seeking relief from $200,000, $400,000 and one with more than $700,000 in student loan debt! You thought you had problems. I, and a handful of my colleagues are working to help, but it doesn't seem to come fast enough because we can only handle individuals and the student loan crisis involves many. Until we reach a critical mass ability to solve the bigger issue, here are steps you can take to hang in there.
1. You have to sort out the heard and know whether the loans are private or federal because each has a different strategy and set of solutions. To find out, go to National Student Loan Data System, get a pin (Don't Ever Share Your PIN) and pull the data.
2. Solving student loan debt problems begins with a visit to the Student Loan Borrower Assistance site. Whether you're going to tackle this on your own or hire a student loan lawyer, you've got to be prepared to have an educated discussion to create the right strategy for taming the beast, or even cutting off its head.
3. If your student loans are NOT in good standing, meaning you've defaulted, you need to rehabilitate them BEFORE you can even begin talking to the lender about other options such as deferment, forbearance, discharge, debt settlement, Income base repayment, etc. Once the loans are in good standing, you have options.
4. Look at the problem from as many angles as possible before setting out on a solution.
Recently, I spoke on a panel of experts on Winning and Losing the Student Loan Hardship Issue where we discussed repayment options in Chapter 13 Bankruptcy, seeking a hardship discharge through bankruptcy litigation and alternative approaches to bankruptcy. A consultation with an attorney can confirm your thoughts and possibly bring hope to an otherwise hopeless situation.
The worst thing you can do is NOTHING. Don't just sit there. Get in action. Do your own research and talk to professionals and you'll soon be on your way. Oh, and did you think to yell at Congress? Tell Congress to take action!
Photo Credit: Latexo Photos