Under the current bankruptcy law, student loans are almost impossible to discharge in bankruptcy. Consumer law and bankruptcy protections for student loan borrowers started to be chiseled away beginning in the mid 1970s until 2005, at which time the last remaining bankruptcy protections crumbled away nearly entirely. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 which provides that no student loan--federal or private--can be discharged in bankruptcy unless the borrower can prove to the court that the student loan debt causes an "undue hardship," something much easier said than done. Many have tried but few have succeeded in convincing the court that their student loans should be discharged due to undue hardship.
Student loan debt is a problem, a ONE TRILLION DOLLAR problem. In 2010, America's outstanding student loan debt surpassed credit card debt for the first time. There is a rising advocacy movement that is attempting to tackle this problem by convincing Congress to pass legislation that would restore some bankruptcy protection to student loan borrowers. Progress has been slow, but at least the conversation has been started and I expect there to be more shouting as more and more borrowers find themselves adrift in an ocean of student loan debt with no way to get themselves to shore.
This is a question that is on the minds of many of my clients while they are deciding whether filing bankruptcy is a good option for them. This question is often NOT the most important consideration in deciding whether a bankruptcy is a good option, however it is a consideration that many of my clients want to discuss.
And the short answer is....12 months.
Recently, the U.S. Department of Housing and Urban Development issued a letter addressed to all FHA approved mortgagees (mortgage lenders) that outlines the “minimum underwriting standards and criteria for evaluating borrowers who have experienced an ‘economic event’ and ‘extenuating circumstances’”.
Here is an excerpt from the letter: "As a result of the recent recession many borrowers who experienced unemployment or other severe reductions in income, were unable to make their monthly mortgage payments, and ultimately lost their homes to a pre- foreclosure sale, deed-in-lieu, or foreclosure. Some borrowers were forced to file for bankruptcy to discharge or restructure their debts. Because of these recent recession-related periods of financial difficulty, borrowers’ credit has been negatively affected. FHA recognizes the hardships faced by these borrowers, and realizes that their credit histories may not fully reflect their true ability or propensity to repay a mortgage."
Therefore, the minimum elapsed time between a qualifying “economic event” and being considered for an FHA home loan has been reduced from 24 months down to 12 months
Of course there is additional analyiss and screening that needs to be done during the application process, but this recent announcement by the U.S. Department of Housing and Urban Development is good news for people who have been faced with an economic event that want to reenter the housing market someday sooner rather than later.
For more information go to www.hud.gov
. Morgan Spah is a Minnesota bankruptcy attorney and senior associate at Drewes Law, helping many clients navigate bankruptcy and bankruptcy-related issues. She can be reached by email at email@example.com
Although now remembered as the founding father of one of the worlds most endearing empires--an empire built on magic, imagination, and fantasy, Walt Disney was once just a regular guy with a great idea and too many bills.
In about 1920 the struggling filmmaker started his first animation company Laugh-O-Gram Studio in Kansas, with the dream of creating and producing animated fairy tails. Laugh-O-Gram found a financial investment firm in New York that helped the young company begin to grow. However that growth was short lived when the investing firm failed taking Laugh-O-Gram Studio down with it and by 1923 the studio went bankrupt. Around that same year Walt Disney formed a new company with the same dream with the help of a loan from his parents and his brother. The new company was called Disney Brothers Cartoon Studio. (It wasn't until 1986 that the company took on its current name of Walt Disney Company.)
In 1928 Walt Disney created Mickey Mouse, the character that would catapult Disney into the stratosphere of legends.
However, even after Mickey Mouse was born, Walt Disney still experienced financial setbacks in 1937 prior to the release of Snow White and the Seven Dwarfs, his first major film. During the making of that film the company ran into financial trouble that threatened to to doom the fairy tail film. Close to bankruptcy for the second time, Walt Disney approached the bank for a loan to complete the film. The bank took a chance......and he lived happily ever after.
This week the city of Detroit filed for chapter 9 bankruptcy protection and the news of the filing has left millions of news readers and viewers (including bankruptcy attorneys) scratching their heads. Chapter 9 bankruptcy? What the heck is that?
Chapter 9 bankruptcy is a rarely discussed form of bankruptcy and it is even more rarely used as a debt reorganization tool. Only between 500-700 chapter 9 bankruptcy cases have ever been filed since the Great Depression. Contrast that figure to the 1.2 million bankruptcies that were filed in 2012 alone.
Chapter 9 bankruptcies are rare because unlike its more common relatives--chapter 7, chapter 13, and chapter 11--chapter 9 bankruptcy can only be used by "municipalities" to reorganize their debt. The Bankruptcy Code defines a municipality as a "political subdivision or public agency or instrumentality of a State". This is a broad definition but includes entities such as cities, towns, counties, taxing districts, and school districts. The chapter 9 bankruptcy process allows municipalities to reorganize their debt over a longer period of time than was otherwise available, refinance debt, or reduce principal and interest on existing debt.
You will probably never need to know much more than this about chapter 9 bankruptcy but like it or not we will all be learning a great deal more about this rare form of bankruptcy as we wait and see if bankruptcy can bring some relief to the struggling Motor City. Morgan Spah is a Minnesota bankruptcy attorney and senior associate at Drewes Law, helping many clients navigate bankruptcy and bankruptcy-related issues. She can be reached by email at firstname.lastname@example.org
This may not be a question that many people ask themselves, but the answer is important for people to know so they can better understand what bankruptcy is and why it exists.
Perhaps the first mention of bankruptcy--well at least the concept of it--is actually be found in the Bible. Deuteronomy/Exodus 15:1-2 says: "At the end of every seven years you shall grant a release...every creditor shall release what he has lent to his neighbor, his brother..." Throughout history, many laws, in many countries have been based on various religious teachings, including the Bible. The above Bible verse seems to lean in the favor of debtors, but debtors were not always treated with such understanding.
The word bankruptcy is derived from the Italian word "banca rotta" meaning broken bench because early tradesmen who couldn't pay their debts had their work benches broken as punishment. Debtors were also treated quite poorly throughout Roman and Medieval times. From the mid 1500's- the mid 1800's, various laws were enacted throughout Europe. One of the first, if not the first European laws to use the word "bankrupte" was enacted in 1542 under the rule of Henry VIII.
"Modern" bankruptcy law didn't arrive in the United States until 1841 when the first voluntary insolvency laws were enacted (the laws up until this point were laws that provided for the punishment of debtors rather than relief to them). From 1841-1978 these bankruptcy laws evolved and laid the foundation for The Bankruptcy Reform Act of 1978 which is the first true modern bankruptcy law that tried to balance protections for both debtors and creditors.
In 2005, Congress revised the 1978 law by enacting The Bankruptcy Abuse and Consumer Protection Act (commonly referred to BAPCPA-"bap-see-pa"). Many bankruptcy practitioners and judges are critical of BAPCPA and say the law is more complicated, unclear, and slants more in favor of creditors than the prior modern law. This criticism aside, filing for bankruptcy under the current law of the land, BAPCPA, is still a hugely beneficial tool to people who would otherwise find themselves hopelessly buried in debt. With BABCPA--there's not only hope--there's a solution for many of these people. Morgan Spah is a Minnesota bankruptcy attorney and senior associate at Drewes Law, helping many clients navigate bankruptcy and bankruptcy-related issues. She can be reached by email at email@example.com
Here is an excerpt from a recent article titled :"5 Stupid Ways to Pay off Your Debt-Expensive and Credit-Score Damaginig Ways to Get Out of Debt",
written by LaToya Irby on About.com. DON'T! 1. Borrow from your 401K.
You shouldn’t borrow from your 401k (or any retirement account)...to pay off your debt. Let’s talk about what happens when you borrow from your 401K. First, your employer may not let you contribute to it anymore until you’ve repaid the loan. Second, your take home pay is less (because you have to pay back the loan) until the money’s paid back. Third, if you leave your job, you’ll have to pay the entire loan immediately or you’ll end up with early withdrawal fees and income taxes.2. Refinance your mortgage
Another bad idea, especially if your debt was unsecured to begin with. Tying bad debt to your home’s equity isn’t smart. When you couldn’t pay your credit card debt, you ended up with a trashed credit rating. Securing your debt with your home means you lose your home and get a trashed credit rating when you can’t make payments.3. Debt settlement
Though they seem like refuge in a troubled situation, debt settlement companies tend to make the situation worse. For the scheme to work, you have to stop paying your creditors. When the payments stop, the phone calls start and so do the negative credit report entries. Thirty days late, sixty days late. Before long your account’s charged off and your credit score is trashed. In the end, the may not agree to a settlement proposed by your company. Imagine going through all that and still owing the money.4. Consolidate with a high interest loan
Debt consolidation may be a solution if you can get a loan at the right terms. If the only loan you can get has a higher interest rate than the average of your credit card debt, leave it alone. Your monthly payments may look lower, but that’s only because the loan is spread over a long repayment period. If you add up the interest you’d pay over the life of the loan, you’ll see that you’re spending more money than if you hadn’t consolidated with that loan.5. Transfer your balances to other credit cards
Transferring balances to credit cards with those low introductory rates only makes sense when: you are financially able to pay off the balance before the introductory rate expires and you will not use the card to make purchases or take out cash advances. If you can’t transfer the balance under those conditions, it won’t work for you. And, forget about shuffling your balance to a new credit card with a new teaser rate, the balance transfer fees negate the interest savings.Morgan Spah is a Minnesota bankruptcy attorney and senior associate at Drewes Law, helping many clients navigate bankruptcy and bankruptcy-related issues. She can be reached by email at firstname.lastname@example.org
According to a recent CreditCards.com poll , credit card debt is the # 1 taboo topic that poeple avoid discussing with each other.
Although this poll reflects an understandable sentiment held by many people, discussing the topic of credit card debt can be
cathardic--especially when people realize they are not alone in their struggle with credit card debt.
Nonetheless, the findings and article posted on CreditCard.com are interesting.
Keep reading below for an excerpt from the Creditcard.com article.
"According to the old saying, you shouldn't talk about religion or politics in polite company. Add one more to the list of conversational taboos: Credit card debt. That's the topic people are least likely to want to talk about with someone they just met.
The only other topic that makes people hold their tongues that much? Details of their love lives. Americans are more comfortable talking about politics, their religious views and their ages than they are talking about how much debt they carry on their credit cards, according to a new poll conducted for CreditCards.com.
The poll also found Americans less willing to talk about their debt than they were five years ago, when the recession was just beginning to take shape. About 85 percent of Americans said they are reluctant to chat about their credit card debt with someone they first met, compared to 80 percent who gave the same answer in an identical poll conducted in 2008."
*****************************************************************************At Drewes Law, PLLC, your initial consultation is always free...and always valuable!Morgan Spah is a Minnesota bankruptcy attorney and senior associate at Drewes Law, helping many clients navigate bankruptcy and bankruptcy-related issues. She can be reached by email at email@example.com
YES! Drewes Law, PLLC, always offers a free initial consultation at our office.
Perhaps you've heard the adage that "Free advice is worth every penny you pay" in other words, free advice is useless.
Well, we at Drewes Law, PLLC don't believe that is always true. We believe that it is important to encourage people to come and visit with a well qualified and competent attorney to discuss possible solutions to their financial problems so they can make well informed decisions about their financial future.
These days, there is a lot of information available (free!) online about bankruptcy. The problem with having all of this free information available is that people mistake information for advice. Legal information can be dangerous if it is not supported with competent legal advice, so this is one reason Drewes Law, PLLC offers free initial consultations for all of our practice areas, including bankruptcy.
Another reason we offer free initial consultations for bankruptcy is that we understand that coming to the realization that it is time to visit with a Minneapolis bankruptcy attorney can be a difficult. It can be even more difficult to bring yourself to actually go and consult with a Minneapolis bankruptcy attorney if you're worried about getting a bill when you walk out the door from your consultation. At Drewes Law, PLLC you don't have to worry about being surprised with a bill after your consultation.
At Drewes Law, PLLC, your initial consultation is always free...and always valuable!Morgan Spah is a Minnesota bankruptcy attorney and senior associate at Drewes Law, helping many clients navigate bankruptcy and bankruptcy-related issues. She can be reached by email at firstname.lastname@example.org
In the last bankruptcy law post we discussed What are Bankruptcy Exemptions?
and redefined "bankruptcy exemptions" to mean "asset protections". So then what is an asset?
The bankruptcy law doesn't define the term "asset" in the definition section of the law. Defining that word for clients is left up to bankruptcy attorneys.
The Merriam-Webster dictionary defines an asset as "the entire property of a person, association, or corporation, or estate applicable or subject to the payment of debts."
Well...that definition doesn't clear things up so lets try it another way.
If you can sell
it, or save
it--then it is an asset!
The bankruptcy law requires you to disclose on your bankruptcy papers all of your assets. It doesn't matter if it was given to you, or you found it, or if its worth just a penny. If you can sell
it, or save
it--then it is an asset!
With that basic definition of what an asset is lets take a look at some of the different types of assets that you can have, because you DO have assets. Everyone who files bankruptcy has assets of some kind. I've never had a client yet who has had no
assets. Real Property (more commonly known as "real estate")
Basically, real property consists of houses/cabins/structures on land and just land.
Just as vehicles have titles that list who owns the vehicle, real estate has deeds or certificates of title that show who owns the real estate. Generally, if your name is on the deed to the real estate, even if your name is listed with some other person(s) then you have at least partial ownership of that real estate and it is an asset of yours. It is an asset of yours even if you don't live there or never go there. If you're unsure if you have real estate, your bankruptcy attorney can help you investigate that. Personal Property (more commonly known has "stuff")
Here is a list of common "stuff" people have that needs to be listed as assets:
- Cash on hand
- Checking/savings accounts
- Household furnishings
- Sporting/hobby equipment
- Mutual funds
- Retirement accounts/pensions
- College savings accounts
- Hot tubs/pools/pool tables
Here is a list of common assets people have that they don't always remember they have:
- Life insurance policies
- Tax refunds from prior years that are owed to you
- Tax refunds from the current year that you will get next year
- Any money owed to you (loans you gave to friends/family; even renters deposits)
- Accounts receivables owed to you or your business
- Money you are entitled to receive in the future (This one can include a lot of things like: money you could get from a personal injury lawsuit if you were hurt before your bankruptcy; back alimony or child support; royalties from a book you published before your bankruptcy.
Even though you are required to list all of these assets in your bankruptcy papers you still have those bankruptcy exemptions
("bankruptcy protections") to help you keep most, and usually all, of your assets.
So remember: If you can sell
it, or save
it--then it is an asset! Morgan Spah is a Minnesota bankruptcy attorney and senior associate at Drewes Law, helping many clients navigate bankruptcy and bankruptcy-related issues. She can be reached by email at email@example.com
If you are contemplating filing a bankruptcy and are doing research about the process or talking to a Minneapolis bankruptcy attorney it won’t be long before you encounter the words “bankruptcy exemptions”.
The words “bankruptcy” and “exemptions” can be intimidating words when used individually and even more intimidating when used together. So, lets fix that by replacing the words “bankruptcy exemptions” with the words “asset protections” because that’s exactly what they are. Bankruptcy exemptions are asset protections. (Look for a later post about “What is an asset?”)
But what are we protecting your assets from? In chapter 7 cases, we are protecting your assets from being liquidated (sold) to pay your debts. In chapter 13 cases, we are using asset protections to help minimize the amount of money that you have to pay into your chapter 13 plan.
Another way to understand the concept of bankruptcy exemptions (asset protections!) is to visualize a room full of cardboard storage boxes that are all different sizes. Each box has a label on it to indicate what can be stored in the box (i.e. equity in your house, household goods, clothing, jewelry, vehicle, retirement account, etc.). Each of these storage boxes represents a bankruptcy exemption (asset protection!) and the size of each box represents the value limit of what can be stored (protected) in the box. The goal is to “store” as many, if not all, of your assets in these boxes.
The majority of people
who file for bankruptcy in Minnesota fit all of their assets into these boxes and protect all
of their assets. Before you file your bankruptcy case, your Minneapolis bankruptcy attorney should be able to give you a good idea of whether all of your assets will be protected and what options are available to you.
Morgan Spah is a Minnesota bankruptcy attorney and senior associate at Drewes Law, helping many clients navigate bankruptcy and bankruptcy-related issues. She can be reached by email at firstname.lastname@example.org