federal student loans Archives

Biden Administration to Make Process Easier to Have Debt Discharged in Bankruptcy

Posted on April 17, 2023by Admin

The road to having student loans forgiven in a bankruptcy case is certainly not an easy one, which is why so many borrowers forgo pursuing bankruptcy for fear that they will never be able to receive relief from their largest source of stress: their student loan debt. However, all of this could change very soon due to new guidelines issued by the Biden Administration.

In January 2023, the Justice Department updated the required attestation form that borrowers pursuing bankruptcy must complete before being able to seek a bankruptcy discharge of their federal student loan debt. The changes to the form include several modifications, including small changes as to how monthly household income is reported, instructions clarifying when a borrower needs to provide the court with additional information, and new questions looking for information on whether a school closure impacted the borrower’s ability to pay his or her student loans. The changes to guidelines also include more detailed information regarding the borrower’s student loan repayment history, including any consolidations made, deferments, or forbearances.

Do You Qualify for Student Loan Relief?

Posted on July 6, 2022by Admin

The subject of student loan debt has become a major topic of political discourse. While lawmakers have called for widespread student loan relief, a number of loan forgiveness programs have existed for several years.

One public method of student loan forgiveness is the Public Service Loan Forgiveness program (PSLF), although this program has come under fire in recent years. PSLF was created in 2007 with the purpose of helping borrowers working in nonprofit and governmental roles following graduation. If the borrower was able to pay consistently on his or her debt while working in a qualifying nonprofit or government job for ten years, making a total of 120 payments), the remaining debt would be forgiven.

student loan debt, Student Loans

Dispelling Myths about Private Student Loans and Bankruptcy

Posted on July 6, 2022by Admin

Federal student loans often are not enough to cover the costs of attending a university. Many times, student borrowers need to seek additional sources of funding, including private student loans, to pay for the costs not covered by their federal student loans. Borrowers often operate under the misconception that, like federal student loans, these private loans are also not dischargeable in bankruptcy. In fact, many misconceptions exist surrounding private student loans and how they are handled in a consumer bankruptcy case.

One of the biggest of these misconceptions is that private student loans can be discharged in a bankruptcy case. While student loans are harder to discharge in bankruptcy, it is not impossible. With federal student loans, the bankruptcy filer must start a separate adversary proceeding where he or she needs to prove that paying these debts would present an undue hardship. However, private student loans are not always subject to this extra step in a bankruptcy case.

Credit Card Debt

Which Debts Should You Pay First After Paying Off Your Credit Cards?

Posted on June 7, 2021by Admin

Credit card debt is not the only type of consumer debt people struggle with. Once this debt is paid off in full, it helps to have a plan on which debts to tackle next.

According to data from the Federal Reserve and TransUnion, American consumers paid off a total of $82.9 billion in credit card debt in 2020. Credit card balances continued to drop by $49 billion in the first quarter of 2021, which is the second-largest quarterly balance decline seen since 1999. Despite this fact, more than 20 million American consumers have their student loan debts in forbearance.

For the most part, financial advisors recommend that consumers pay down any debts they have that carry the highest interest rates, which is why credit cards are usually the first focus. With stimulus programs still in place, providing extra income to consumers temporarily, many financial advisors argue a different theory should be followed.

Instead of focusing on the debt with the highest interest rate, consumers should look at all their debts and consider other options, such as refinancing other debt sources to lower their interest rates or modify payments. Refinancing could be a possibility for unsecured personal loans, as well as for mortgage debt. With lower interest rates, consumers are encouraged to take advantage of this opportunity to save money and lower monthly payments, making it easier to pay off debts in full.

Once credit card debt is paid off, many financial advisors recommend that consumers focus next on paying off their car loans. A car loses its value significantly as soon as it is driven, which is why so many consumers find themselves owing more on the car loan than the vehicle is worth. The interest rates of car loans tend to be moderate to high, although not always as high as credit card debt, depending on the consumer. Many times, it is advisable to either sell the car and use the proceeds to pay off what is owed on the loan or to refinance the loan.

Once personal loans, credit card debt, and car loans are paid off by the consumer, it may then be advisable to pay off outstanding federal student loans. Since payments and interest is paused on federal student loans until September 30, 2021. During this time, any payment will go towards principal and not interest rate. Paying down this debt will only help improve the consumer’s credit score.

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If you have questions on this topic or are in financial crisis and considering filing for bankruptcy, contact an experienced Miami bankruptcy attorney who can advise you of all of your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade Garcia McMaken has been helping people from all walks of life build a better tomorrow. Our attorneys’ help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade Garcia McMaken website at www.miamibankruptcy.com.  

student loan debt, Student Loans

Do Student Loans Have a Statute of Limitations?

Posted on June 1, 2021by Admin

When it comes to most debts, any time the individual who owes the debt stops making payments, the debt will then go into collections. At that point, the original creditor can make the decision to sue the person owing the debt for the remaining balance. However, the creditor only has so long to file that lawsuit. Like any other cause of action, a statute of limitations places restrictions on how long the creditor has to pursue collection of what is owed.

Each state has its own statutes of limitations, but when it comes to federal student loan debt, federal law governs how this debt is collected. Federal student loans are not governed by the same rules as most consumer debts. In fact, federal student loans do not have a statute of limitations at all, no matter how old they may be.

student loan debt, Student Loans

What $10,000 in Student Loan Cancellation Would Look Like

Posted on April 30, 2021by Admin

Lawmakers have been calling upon President Biden to move forward with an executive order that would cancel up to $50,000 in federally backed student loan debt. Other amounts have been considered, the lowest amount being $10,000. How this cancellation would look across the country would vary, however, depending on the state and the borrower.

According to the Student Loan Hero, $10,000 in student loan forgiveness would cost approximately $315 billion. This amount of loan forgiveness would erase outstanding student loan balances for 34 percent of all student loan borrowers, according to their review of Department of Education data.

student loan debt

What Borrowers Should Know About Refinancing Student Loan Debt

Posted on March 19, 2020by Admin

If you are facing reduced income as the coronavirus spreads, keeping up with your bills may become increasingly challenging—especially if you are among the more than 43 million people in the US who have student loan debt.

Student loan borrowers regularly receive email advertisements regarding the possibility of saving money on their loans by refinancing their student loan debt. The possibility of saving thousands in student loan interest paid on the debt is tempting, but not every refinancing option is legitimate. However, for borrowers who are paying on loans with rather high interest rates, refinancing through a reputable source can be an excellent way to lower how much interest they pay in the end.

Bankruptcy Law, student loan debt, Student Loans

Bankruptcy: Finally An Option for Student Loan Debt?

Posted on August 1, 2019by Admin

Student loan debt is at an all-time high with 44 million Americans carrying outstanding amounts of the debt. It is currently estimated that $1.5 trillion is owed in student loan debt. With that many people graduating with student loans, it should come as no surprise that many of these borrowers eventually default.

Approximately 11 percent of student loan borrowers have defaulted or were delinquent on their loans by the end of 2018. For the most part, consumer debt, including credit card and medical debt, can be discharged in a bankruptcy case. Only a very select list of debt is not allowed to be discharged at the end of a bankruptcy case, including child support, alimony, criminal fines and certain overdue tax debt.

Credit, Student Loans, Timothy Kingcade Posts

How To File For Bankruptcy with Student Loan Debt

Posted on December 26, 2017by Admin

For consumers struggling with significant debt, filing for bankruptcy may be your best option to provide you with a fresh start. If your debts consist of federal student loans, it is not an easy process to get these discharged in bankruptcy; however, it is possible.

The first thing you must do is to decide whether you will file for Chapter 7 or Chapter 13 bankruptcy. In Chapter 7 bankruptcy, the goal is to get unsecured debt wiped out. This means, you have little disposable income available to pay off your debts. If you choose to file for Chapter 13 bankruptcy, your plan is to get your debts restructured in order to repay some of it. This also means you likely have some disposable income to repay part of your debt.

The most important part of your case when you have student loan debt is that you must prove “undue hardship” to the court. This means that you must prove that you cannot pay back your federal student loans. In order to prove undue hardship, you and your bankruptcy attorney must file a petition called an adversary proceeding, which is unique to bankruptcy involving student loan debt.

In most courts, The Brunner Test is used to evaluate hardship. Below are 3 factors of The Brunner test outlined by the U.S. Department of Education’s Federal Student Aid office:

The filer cannot maintain a basic standard of living if paying back federal student loans
The filer can prove the hardship will last for a large percentage of the repayment period
The filer honestly tried to repay the loans before filing

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For borrowers who are struggling with student loan debt, relief options are available. Many student loan borrowers are unaware that they have rights and repayment options available to them, such as postponement of loan payments, reduction of payments or even a complete discharge of the debt. It is important you contact an experienced Miami bankruptcy attorney who can advise you of all your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade Garcia McMaken has been helping people from all walks of life build a better tomorrow. Our attorneys help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade Garcia McMaken website at www.miamibankruptcy.com.

Bankruptcy Law, Debt Relief, Timothy Kingcade Posts

What you need to Know about Student Loan Interest

Posted on November 14, 2017by Admin

Most college students are unaware how loan interest or capitalization works, according to a recent study. Opting to delay payments after college or graduate school can determine how much you pay over the lifetime of your student loans.

When the interest on a student loan capitalizes, the accrued interest is added to the principal balance, which is the original amount borrowed. For that reason, the interest charges increase because it is now based on the new higher principal.

Here are 5 examples of when capitalization occurs with federal student loans:

Not making interest payments during school and during the grace period. For undergraduate and graduate unsubsidized Stafford loans, interest begins to accrue immediately after the loan is dispersed. Subsidized loans are the best option for students, where the federal government pays the interest while the borrower is in school.
Switching from an income-driven repayment plan. It is important borrowers know that just because they are enrolled in an income-driven repayment, Income-Based Repayment Plan or Pay As You Earn (PAYE), this may not be covering all of the interest accruing on the loan. While some income-driven plans stop capitalizing interest after 10 percent of the original loan balance has been paid, there are consequences from switching out of these plans. For example, unpaid accrued interest will capitalize when a borrower no longer qualifies for a financial hardship, fails to provide proper documentation for the plan’s annual enrollment or exits the plan.
Forbearance or deferment. A borrower needs to be careful when selecting these options and know the consequences. Interest is still accumulating on student loans even though the loans are in forbearance or deferment. This loan interest can accumulate quickly.
Consolidation of federal loans. Consolidating multiple loans into one direct loan, means you are creating an entirely new loan. It is important to consolidate right after graduating as a measure to reduce the capitalization interest that comes with federal loan consolidation. Waiting longer to do so typically increases the principal balance.
Defaulting on a student loan. Interest that was outstanding at the time of default will be capitalized. The principal amount will not only become larger, but the entire balance will be due and payable immediately.

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