Who Needs Student Loan Forgiveness?

In a recent Wall Street Journal (“WSJ”) (@WSJBankruptcyBeat) series on the Great Student Loan Debt Debate, several of their examiners discussed what to do about student loans in bankruptcy. Let’s start with the goal of bankruptcy, which is to help the HONEST BUT UNFORTUNATE DEBTOR, see the WSJ article here. This is a person who has more debt than they can handle and are overburdened due to medical issues, job loss, or the need to care for family members creates a financial hardship. Many, but not all debts are discharged in bankruptcy and student loans seem to be the hot topic lately because more than 40 million Americans have a total of more than $1.2 Trillion dollars of outstanding student loan debt.

The WSJ Examiners recently debated whether the bankruptcy code should be amended to allow for the forgiveness of student loan debt in bankruptcy. There were many viable solutions made.  Some, taking back the bankruptcy limitations set out in the 2005 BAPCPA Amendments, which allowed student loans to be discharged after a 7-year repayment period had elapsed.

I propose that we start with cutting the ridiculous salaries at colleges and universities throughout the country who have been soaking up Title IX funds for decades without anyone blinking an eye.  Next, we go after the likes of the lending industry because they have had the comfort of knowing their loans would survive bankruptcy for the past 10 years, so they have been loaning without limit like a crack dealer to a drug addict. I believe that simply limiting the total amount a student may borrower without forcing schools to cut their costs and lenders to reign in their underwriting, this mess won’t stand a chance.  Also, if all the parties involved don’t take corrective action, America will continue to lose its world education ranking.

In bankruptcy, I fight these issues and see that some of my clients could benefit from a hardship discharge, but simply do not have the resources to hire me to litigate an adversary proceeding to prove it.  The creditor push back is enormous and we must take these cases all the way to trial, or have the matters heard on summary judgment.  This is cost prohibitive for our overburdened debtors.  We also have some debtors who may be forced into continual Chapter 13 bankruptcies only to keep hundreds of thousands of dollars in student loan debt under control until their death, which doesn’t seem like a solution at all.

Here is the follow-up to the WSJ Student Loan debate and what its readers thought, here. Tell me what you think?  Do we need student loan forgiveness in bankruptcy?

Song About Bills Shows You’re Not Alone

With nearly 800,000 bankruptcy filings over the past few years and the folks over at Credit Slips (@CreditSlips) estimating the trend continuing, those that file for bankruptcy protection are truly not alone.  Then, we begin hearing this catchy new tune on the radio simply entitled “Bills” by an emerging artist named Lunch Money Lewis (@LunchMoneyLewis). It’s a lighthearted tune that might be good for Monday morning motivation, but do you really want to be on that hamster wheel forever? You can view the full song over at YouTube (@youtube) here.

I am an avid reader of the Credit Slips blog and when they posted about this song, I had a listen.  I agree that it’s enjoyable and I too always view things through the eyes of a bankruptcy lawyer. I think that there’s got to be another song that sheds light on a life after bankruptcy and without debts.  Sure, we’ll always have bills like utilities, healthcare and the like, but we don’t need to be burdened with debt.  After all, that is what bankruptcy is all about.

I am throwing down a challenge to Mr. Lunch Money to create a song about how happy those good people are after bankruptcy.  I’ll say that it’s like a country song in reverse where you get your life back, get the girl back, get that job you always wanted and go on to greater things in life.

Credit After Bankrutpcy Just Got a Bit Better

You Can Have an Excellent Credit ScoreThis just in!  As originally reported in the New York Times and posted through Consumerists’ (@Consumerist) blog, JP Morgan Chase and Bank of America have both agreed to clear debt from credit reports that was discharged in bankruptcy.  This is great news and about time the big banks acted in accordance with federal laws. These corrections would make a difference in improving the credit scores for millions of Americans.

Banks are coming under fire for their alleged practices in keeping consumers’ credit scores low in an effort to drive up interest rates on borrowed money.  This news is a real win for consumers everywhere who may be considering filing for bankruptcy protection, yet are concerned over their credit scores.

Unfortunately, the headline from New York Times is inaccurate because the creditors do not necessarily need to completely remove their trade lines for debts discharged in bankruptcy.  Rather, creditors are required to accurately report that the debts have been discharged in bankruptcy and the consumer owes nothing.  Wiping out the debt always has a positive impact and improves credit scores.  Even better is that the effect of a bankruptcy case on a credit score is usually offset by the benefit of wiping out balances owed on a credit report.

What to do After Bankruptcy

  1. Send credit report update letters to your credit bureaus via Certified Mail. I’ve provided them FREE for you here. Be sure to include with these letters:  (1) A copy of your valid driver’s license; (2) a copy of your social security card; and (3) a copy of your Bankruptcy Discharge Order.
  2. Keep copies of these documents for your files.
  3. After six (6) months, order and review your credit reports to be sure that all debts discharged in bankruptcy are accurately updated.
  4. If you suspect any errors, consult with a consumer protection lawyer in your area that has a practice in suing under the Fair Credit Reporting Act.  For a list of such attorneys, go to the National Association of Consumer Advocates (NACA).

Practice Tip for Bankruptcy Lawyers should include listing the major credit bureaus on a client’s bankruptcy papers and put them on Notice.  This not only will help get those credit reports cleared up more quickly for the consumer, but it also sets up Fair Credit Reporting Act Claims later should the credit bureaus fail to make necessary corrections after discharge. Be sure to ask your lawyer for this service.

The Startling TRUTH About Your Creditors . . .REVEALED!

People who file for bankruptcy all believe in playing fair and paying their bills when life somehow got in the way and life became unmanageable. I know because they tell me. Many clients believe that filing bankruptcy is somehow irresponsible; or that their not keeping their promises or obligations.  I get it.

After all, YOU decided to apply for that credit card.  YOU spent all that money. YOU made all those decisions about how to handle that disappearing budget and got yourself here.  Or did you?  What if I told you that your current situation is Not All Your Fault. Most people considering filing for bankruptcy have encountered events such as an accident, job loss, family emergency, or some other life event completely beyond their control that helped them get into financial trouble. Many of my clients turn to credit cards when emergencies happen and they saw that as their only way to handle these emergencies.  We all do the best we can.  Now, let’s look at it from the creditors perspective.

While you’re struggling to hang on, and pay your bills and thinking about whether you should file for bankruptcy.  Would you believe me if I told you the creditors are actually hoping you can’t and won’t pay them?  It seems counter intuitive, I know. Here’s the key:

The longer you take to pay your debts, the more INTEREST they collect!

Your creditors want you to go on forever this way.  They will get as much from you as they possibly can.  This is why you see so many adds about improving, keeping and maintaining your credit score. Your creditors don’t play fair.  They play on your vulnerability, guilt, shame and the stigma that goes with bankruptcy because THEY SOLD IT TO YOU. If you actually read the credit card agreement and understood the Usury laws, then you might flock to bankruptcy rather than avoid it. In fact, bankruptcy might be the best thing you’ve ever done! Get educated about your situation and consult with your local bankruptcy lawyer today. Click here to find an attorney in your area.

Insider’s Guide to Income Taxes in Bankruptcy

little financial advisorBy now you should be celebrating the end of Tax Season and you have either filed your tax returns or an extension of time, if you owe taxes.  Now that you know you owe the IRS, what are your options and how do you deal with the IRS? Well, that depends on a lot of different things and who you talk to.

One colleage, Nick Gebelt wrote on a niche topic, Discharging Taxes After a Substitute For Return is Filed. I have previously written on income taxes and the requirements to discharge them in a bankruptcy case here. My favorite article is here.

There are five conditions for discharging what the debtor owes to the IRS:

The Five Conditions are:

  1. The due date for filing the tax return was not less than three years ago
  2. The tax return was filed at least two years ago
  3. The tax assessment is at least 240 days old
  4. The tax return was not fraudulent
  5. The tax payor is not guilty of tax evasion

If the debtor meets the qualifications, then the tax liability is not a priority and is discharged in bankruptcy; 11 U.S.C. 523(a)(1).  Unsecured taxes that are deemed a priority, fall outside the scope of the conditions discussed by Mr. Greifendorf and cannot be discharged in bankruptcy.

Timing is a critical component in deciding to file for bankruptcy protection and the advice of a bankruptcy attorney will address this issue.  Best practices include filing all tax returns prior to filing a bankruptcy petition with the court.  Seek the advice of a CPA or tax attorney regarding IRS claims as well.

Consumer’s Guide to Asset Protection and Bankruptcy

I sat in on a recent panel discussion entitled, “Busting Trusts,” held by the Orange County Bar Association Commercial Law & Bankruptcy Section. With a bankruptcy judge and two trustees on the panel, the discussion turned on how the Court and trustees go about “busting trusts.” As a consumer protection attorney, it is my job to protect my client’s assets to the fullest extent of the law, while striving to eliminate as much debt as possible.  Given that objective, I always find lively discussions with my office mate and colleague, Anna Serramabana of A & R Law Group when we discuss asset protection before bankruptcy.  However, after this panel discussion, is anything safe from the reach of the trustee or bankruptcy court?  Sure, but it’s Caveat Emptor; buyer beware. Remember the golden rule:  Act in Good Faith, always.  The creating of a trust must always have a purpose other than to hide assets from potential creditors.  The same goes for filing bankruptcy.

Spendthrift Trust

Beware of the enforceability of the spendthrift provision in a trust.  In re Kim, 257 B.R. 680 (9th Cir. BAP 2000), states that the enforceability of a spendthrift provision is determined on the date the bankruptcy case was filed. and subsequent changes in the right to receive principal or income likely do not enlarge a bankruptcy trustee’s ability to reach payments from a trust. It may be wise to file a motion to abandon assets held in a spendthrift trust to put an end to the court’s reach, or at least to set an end date.

Fraudulent Transfers

I get this question a lot.  How do we protect ourselves from potential creditors, when we know they are after us for debts?  Can I just transfer my home to my children and then file for bankruptcy?  NO!  Intentionally trying to hide assets from creditors is FRAUD and this may create the risk of loss of a bankruptcy discharge, or criminal charges.

The next time you’re faced with creditors breathing down your neck and you think of the many ways you can protect your stuff and lose the debt, be sure to consult with both an estate planning attorney and a bankruptcy lawyer

Exposing the Dark Side of the Personal Fiancial Industry: Pound Foolish

pound foolishI have been reading the book, Pound Foolish by Helaine Olen (@helaineolen) and I couldn’t get past the first fourteen pages without thinking that here is a woman who is a writer and journalist, who once wrote  for the Los Angeles Times (@LATimes) Money Makeover series, with no financial education and referring to a book entitled, Personal Finance for Dummies. Her book discusses all these fraudulent personal financial gurus making millions on the backs of the working class and she’s one of them!  I am outraged. Then, I read on.

According to Helaine herself, the book tells the story of how Americans were sold on a dream, “a dream that personal finance had almost magical abilities, that is could compensate for stagnant salaries, income inequality, and a society that offered a shorter and thinner safety net with each passing year.” She works her way from the inventor of Personal Finance, Sylvia (“S.F. Porter”) and the self-help movement brought mainstream out of the Depression Era of the 1930’s to concluding with a chapter called, “We Need to Talk About Our Money.”

As you can see from all the tabs on my copy of her book, this review will turn into several blog articles. In the end, I highly recommend this to the entire 99% of Americans, save for the 1% who created this mess. We’ve been lied to about MONEY and made to believe that we are at fault and created our own personal financial troubles.  This book exposes the FRAUD and names names of those whose lies nearly destroyed us all. No one is safe from the truth; Suze Orman gets an entire chapter for her selling out to FICO and the Approved Card fiasco.  Dave Ramsey wasn’t lucky enough to get his own chapter, but if you haven’t read my previous article about these two, then check it out, here.

I noted that in Chapter 3 alone, there are at least 23 references to bankruptcy.  This chapter, interestingly discusses the MYTH that Americans who are fiscally promiscuous with their money end up in bankruptcy.  The truth is that we are all just one medical disaster, job loss, or accident away from bankruptcy. The truth is that the income gap continues to widen and the Have Nots are bombarded with the temptation to have what they cannot afford and the lure of easy credit tells them they’re worth it.

In the end, Olen urges us all to talk about money honestly. We need transparency with our financial advisers, banks those that hold our investments. Financial literacy is a lie sold to us by the financial sector that doesn’t want government regulation.

Obama Student Loan Forgiveness Starts Here

With so many companies guarantying student loan debt forgiveness and using Obama’s words to market and sell their offerings, I thought I would set the record straight!

  1. YOU CAN HELP YOURSELF FOR FREE
  2. YOU CAN HIRE ONE OF THESE COMPANIES THAT MAY NOT BE LAWYERS; OR
  3. YOU CAN HIRE A LAWYER TO REPRESENT YOU

Don’t be fooled into thinking these companies can get you any better deal that you can get yourself.  In fact, you could end up actually paying more for these non-lawyer companies than you would seeking the advice of a student loan lawyer in your area.  For a legitimate attorney referral, contact the National Association of Consumer Advocates (NACA). First, you MUST separate your federal loans from any private student loans you have taken.

FEDERAL LOANS Help

  1. Gather your student loan information from National Student Loan Data System (NSLDS);
  2. NEVER GIVE YOUR PIN NUMBER TO ANYONE BECAUSE YOU APPLY FOR LOANS USING THIS NUMBER
  3. Review your options at Student Loan Borrower Assistance
  4. If your loans are in DEFAULT, you MUST bring them current through REHABILITATION first;
  5. Once your student loans are in good standing and current, then you can apply for a repayment program that you qualify for based on what you have learned from the Student Loan Borrower Assistance website
  6. IF you have applied for a repayment program and YOU CANNOT AFFORD THE LOWER PAYMENTS, contact a bankruptcy attorney for a FREE consultation to determine if you qualify for an UNDUE HARDSHIP bankruptcy discharge.

Don’t ignore your federal student loans because once in default, these loans generate painful fees and costs to collect, including income tax interception; and garnishments without a lawsuit.

PRIVATE STUDENT LOAN Help

  1. Pull a copy of your credit report: Private student loan will NOT be listed on the NSLDS website and may only show on your credit report. You may have legal rights under the Fair Credit Reporting Act for errors on your credit report;
  2. Private loans have a statute of limitations on their legal right to sue you to collect on this debt (4 years from your last payment in California);
  3. These loans may be easily discharged in bankruptcy for a variety of reasons:  (a) Disallow their claims to payment in Chapter 13; (b) Sue lender for loans that are not “Qualified Education Loans;”
  4. If you’re being sued by a private student loan lender, consult with a reputable Student Loan Lawyer immediately to protect your rights;
  5. You may be able to sue these lenders for violations of the Fair Debt Collections Practices Act if you are being harassed; inappropriately contacted; or you believe that amount you owe is not accurate.

The strategy or path you take is a personal one.  Whether you repay your student loans in full, or refuse to pay them and tackle them through lawsuits, or bankruptcy; it is important for you to know all the facts and your legal rights so that you can make a well informed decision.  You need to know what’s right for you, not what’s right for others.

Open Letter to the Bankruptcy Bar from Chief Judge Bluebond: Pro Bono Opportunities

From our Chief Judge:  Honorable Sheri Bluebond

March 3, 2015

An Open Letter to the Bankruptcy Bar

The Bankruptcy Judges of the Central District of California once again urge you to consider volunteering for one of the bankruptcy pro bono opportunities available in your area.  Over the past several years, notwithstanding the cyclical increases and decreases in our filing numbers, one thing has remained constant:  there are large numbers of low-income individuals in our court in need of representation.  Organizations currently assisting low-income people in our district see hundreds of families on the brink of foreclosure or in other economic distress each year.

Volunteer opportunities available range from commitments that require only a few hours every other month at a clinic to full representation in a chapter 7 case or adversary proceeding.  With a self-help desk in every division, you can easily volunteer close to home for only the number of hours that fit into your schedule.  Consumer bankruptcy training may be available for you. While most requests are for debtor assistance, low-income creditor assistance is needed as well.  The programs are structured so that attorneys who generally represent creditors may volunteer without concern about conflicts of interest or being designated a debt relief agency.  The vast majority of the people who come to these programs cannot afford counsel, but attorney referrals are also made through these organizations where appropriate.

Even a brief consultation with an attorney can make a big difference to an unrepresented party.  Attorney assistance also greatly helps the court and other litigants.  You can find contact information for an organization in your area, along with the types of opportunities available on the Court’s website (www.cacb.uscourts.gov), in the “Programs and Services” section, by clicking on “Pro Bono Opportunities.”  We encourage you to contact one of these agencies to explore whether there might be a way for you to contribute your time and expertise to someone in need.  To those of you who already volunteer or provide badly needed pro bono help in other ways, we say thank you. Your efforts help the court be more responsive to all litigants, regardless of income level and are truly appreciated.

 

Sheri Bluebond
Chief Bankruptcy Judge

 

Here’s a link to the Judge’s letter:

http://www.cacb.uscourts.gov/open-letter-bankruptcy-bar

A list of organizations needing help:

PRO BONO ORGANIZATIONS SEEKING BANKRUPTCY VOLUNTEERS:∗

Organization: Public Counsel
Area served: Los Angeles County (Los Angeles and San Fernando Divisions)
Contact David Daniels, Pro Bono Director, at (213) 385-2977
or go to www.publiccounsel.org(link is external) and click on the “Volunteer” tab

Volunteers Needed for:
Self Help Desk – Mondays and Wednesdays 10 am – 12 pm and 2 pm – 4 pm
Reaffirmation Clinics, Chapter 7 Seminars, preparing chapter 7 bankruptcy petitions

 

Organization: Neighborhood Legal Services
Area served: Northern Los Angeles County (San Fernando Valley Division)
Contact: Jennifer Pham at Jenniferphan@nlsla.org(link sends e-mail)
or go to www.nlsla.org(link is external)

Volunteers Needed for:
Self Help Desk in Woodland Hills:
Thursdays from 9 am – 12 pm and 1 – 4 pm

 

Organization: Legal Aid Foundation of Santa Barbara County
Area served: Santa Barbara County (Northern Division)
Contact:  Jennifer Smith at JenniferSmith@lafsbc.org( link sends e-mail)
or go to www.lafsbc.org(link is external)

Volunteers Needed for:
Chapter 7 representation and Self Help Clinic – Weekly on Fridays 10 am – 12 pm

 

Organization: Riverside Legal Aid (formerly, Public Service Law Corporation)
Area served: Riverside and San Bernardino Counties (Riverside Division)
Contact: Diane Roth at droth@riversidelegalaid.org (link sends e-mail)
Phone: (951)682-7968
or go to www.riversidelegalaid.org( link is external)

Volunteers Needed in Riverside for Chapter 7 Self-Help Clinic
Tuesdays and Thursdays 10 am – 2 pm (pre- & post-filing issues)
Adversary Proceedings

Volunteers Needed in Cathedral City for Chapter 7 Self-Help Clinic
4th Monday of every month, 10:30 am to 2:30 pm

 

Organization: Public Law Center
Area served: Orange County (Santa Ana Division)
Contact:  Leigh Ferrin at lferrin@publiclawcenter.org (link sends e-mail)
or go to www.publiclawcenter.org( link is external)

 

Volunteers Needed for
Chapter 7 self-help clinic, Wednesdays 1:30 – 3:30 and Fridays 9 am – 11 am
Reaffirmation Clinic in Santa Ana; Chapter 7 and Adversary Proceeding Representation

Spring Cleaning For Your Finances

easter-bunny-2Some people make getting out of debt their New Year’s Resolution; while others wait for their tax refunds to either get out of debt or hire a lawyer and file personal bankruptcy.  We could even start this Springtime with a Money Makeover by facing and then taking bold action to eliminating our debt once and for all.

Bring the budget out of the attic and into the light and get determined, even “gazelle-like” about eliminating debt like the dust bunny that it is. I’ve been writing a lot about how bankruptcy is the cheaper, better, and faster way to financial freedom because it is when your debt repayment plan will take you more than five (5) years. Five years is the length of a court ordered repayment plan under Chapter 13 of the Bankruptcy Code. If you cannot afford to repay your debts at all, you may qualify to quickly and efficiently eliminate your debts under Chapter 7 of the Bankruptcy Code.

Your debt has been holding you back from saving for a home, college, and retirement.  It’s hard to plan and save for the future when the past still haunts you financially.  I know it takes courage and tenacity to overcome the fear of talking to a bankruptcy lawyer because I hear it from my clients all the time.  You know what else?  After speaking with me, they all wish they had done it much sooner because it would have saved them money.  There are bankruptcy attorneys like me all over the country and I know that many of them are members of the National Association of Consumer Bankruptcy Attorneys (NACBA).  Many provide free consultations.  What are you waiting for?  Hop into freedom from debt this Spring!

Image courtesy of Amelia’s Surf and Racquet Club

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