Posts Tagged: ‘student loan bankruptcy’

Student Loans and Bankruptcy: Fixing a Broken System

May 30, 2018 Posted by kingcade

Student loan borrowers have continuously run into roadblocks when it comes to their student loan debt being discharged in bankruptcy cases. Many students graduate with well over six figures in student loan debt, causing them financial hardship for years.

The Department of Education recently solicited comments and input on what loan holders should consider when making a determination on whether to discharge student loans in bankruptcy. As a result, the Department ended up receiving over 400 comments in response to this request.

Currently borrowers have to prove that paying the student loan debt would constitute an “undue hardship” to the borrower. Traditionally, this standard has been a very hard one to meet. For student loans issued by the government, borrowers have had to jump a rather high hurdle to show this undue hardship. In addition, no set standard has been issued for determining what an undue hardship is, resulting in different courts applying different standards.

Only Congress can modify how the law handles discharging student loan debt in bankruptcy cases, but the Department of Education does have some say in making a recommendation on how these cases are handled. An official memo from the Department may go a long way in providing guidance for judges when evaluating these cases.

One possible change is clear criteria will be given to help determine what an undue hardship is. One recommendation has been establishing whether a student loan borrower is near the poverty line, has been determined to be unemployable due to a disability or whether the person is a caretaker for someone who is disabled or chronically ill.

Another recommendation was to make the standard more lenient to allow for more borrowers to be able to discharge student loans in bankruptcy. Congress has never given a clear definition for what undue hardship consists of, but many courts have used the “Brunner” test to determine what this means.

The Brunner test requires that the borrower show that he or she has made a good faith effort in repaying the debt, that the financial circumstance is such that the person cannot have a reasonable standard of living if he or she has to repay the debt, and this financial situation is likely to continue in the future. The problem is this standard is not easy to meet with each court viewing it differently. It has been recommended that courts use a more lenient standard called the totality of the circumstances test, which looks broadly at the debtor’s financial situation to determine if paying the loan(s) back constitutes a hardship.

Other comments suggested that the Department and loan issuers also consider whether the borrower finished college and whether he or she was victim of fraudulent conduct before making an ultimate determination on whether the debt should be discharged. This recommendation follows the issues that have followed students who have attended for-profit colleges who have been accused of enticing students to attend their schools with inflated job placement figures and graduation rates.

The strict standards that have been used in not allowing borrowers to have their student loan obligations discharged have kept many from pursuing bankruptcy when they arguably need this relief the most.

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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. There are ways to file for bankruptcy with student loan 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.

 

 

Changes on the Horizon for Bankruptcy and Student Loan Debt

May 16, 2018 Posted by kingcade

In the past it has been nearly impossible to discharge student loans in bankruptcy. This issue has kept many individuals from filing for bankruptcy as they have seen it as not helping relieve them of the biggest debt they carry: student loan debt. That all could change after the U.S. Department of Education announced this year that it will be reviewing its policies and potentially changing the way student loan debt is treated in bankruptcy.

It is estimated that student loan borrowers in the U.S. owe a total of $1.5 trillion in student loan debt. According to the Brookings Institute, around 40 percent of these individuals will end up defaulting on their loans by the year 2023.

The current test for showing that student loan debt should be discharged bankruptcy is the undue hardship test. However, this standard is very subjective, and does not leave a definitive standard across the board of what amounts to undue hardship. Even Florida bankruptcy courts vary in their determination on what defines undue hardship.

The most commonly-used test is the “Brunner Test,” which requires the borrower to show that he or she cannot maintain a basic standard of living while making student loan payments. The borrower has to show that this undue hardship would last throughout the entire repayment period in a Chapter 13 bankruptcy, and he or she will need to show that efforts have been made to try to repay federal loans.

The Department of Education is looking for ways to clearly define the undue hardship standard. According to Clare McCann, a deputy director of higher education policy at New America, it is likely the Department will broaden the definition.

The Chair of the Federal Reserve, Jerome Powell, recently testified before Congress that the student debt crisis has the possibility of seriously hurting the economy if changes are not made.

A date has not been given for when the determination will happen, but it is one step closer to a change that will make a difference in the current student loan debt crisis in the country.

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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. There are ways to file for bankruptcy with student loan 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.

 

How Student Loan Debt Can Affect Your 401K

May 14, 2018 Posted by kingcade

Student loans and retirement planning may not seem like two things that would affect each other. Usually, the first thought after graduating is to get a job to start paying back student loan debt. However, student loan debt has become an increasing problem when it comes to saving and planning for retirement.

More and more students are graduating with student loan debt today.  And for those starting their careers fresh out of college, many are finding it hard to save for retirement along with meeting their monthly obligations, the biggest of these being student loan payments.

New research shows that families age 45 to 54 with zero student loan debt have an average 401(k) balance of $80,000. Take that same age demographic and add the issue of student loans, and the median balance for their 401(k) drops to $46,000. Families who have heads of household younger than 35 with student loans carry a median 401(k) balance of $8,000.

Some companies are helping their employees with student loan debt. In January 2016, Fidelity launched a program to help their own customer service associates pay up to $2,000 of student loan debt annually, with a lifetime maximum of $10,000. Fidelity employees responded well to the program with 8,400 employees taking advantage of it, the majority of them being in the younger demographic.

Another company, Gradfi, a fintech company, started a student loan repayment program, offering this service to 100 employers in 2016. Gradfi is now working with 350 companies across the United States, including Peloton and Pricewaterhouse Coopers. Employers can use these programs to draw in key hires, but also work on retaining employees once they are hired.

One downside to these student loan repayment programs, however, is the fact that these employer payments must be considered as taxable income to employees.

For the time being, it is advisable to factor in both payments on student loan debt and contributions to retirement savings. Every bit helps and making those smaller contributions today will build up to larger contributions over time as student loan debt decreases. Take advantage of employer-matched money when making these contributions, and speak with your financial advisor to see how much you can contribute comfortably.

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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. There are ways to file for bankruptcy with student loan 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.

 

 

Disabled Veterans Could See Their Student Loan Debt Cancelled

April 19, 2018 Posted by kingcade

The Department of Education announced this week that it will work together with the Department of Veteran Affairs to identify disabled student loan borrowers who are eligible for debt forgiveness. Borrowers will be notified of their potential eligibility in the mail and will also receive a Total and Permanent Disability Discharge application.

Many veterans are unaware that they may be eligible for student loan debt forgiveness.  There have also been recent changes in tax law that benefit those whose loans are discharged. A provision in the new tax code waives federal income taxes on forgiven education debt for permanently disabled people.

Previously, the IRS considered the cancelled debt as taxable income.  For example, in a 2017 case a veteran who had his $223,000 in student loan debt forgiven, received a tax bill of $62,000.

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There are ways to file for bankruptcy with student loan debt.  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.

Judge Finalizes $25 Million Settlement for Students Who Claim Fraud by Trump University

April 17, 2018 Posted by kingcade

A $25 million dollar settlement in the class action lawsuit against Trump University has been finalized by a judge, providing relief for thousands of former students who attended the now defunct real estate seminar.  Despite its name, ‘Trump University,’ which shut down in 2010, was not a licensed university.  It promised to teach students the “secrets of success” in the real estate industry.

The 9th Circuit Court of Appeals in San Francisco finalized the settlement after it was first approved by a judge last March following an appeal by Sherri Simpson, a Florida woman who said she spent approximately $19,000 on Trump University workshops. Simpson had wanted to opt out of a class action suit in order to pursue a separate suit against Trump, but the court rejected that.

Just days after the election, Trump agreed to settle three lawsuits filed against his real estate school that argued the program used false advertising and high-pressure sales techniques.  Students were allegedly lured into free investor workshops where they would be sold expensive seminars and told they would be mentored by real estate experts, leading to the loss of thousands of dollars in tuition.

Trump has always denied the fraud claims and said that he could have won at trial, but has said that as President he did not have time because he wanted to focus on the country.

“This settlement marked a stunning reversal by President Trump, who for years refused to compensate the victims of his sham university,” said New York Attorney General Eric Schneiderman, whose office filed one of the three lawsuits.

Click here to read more on this story.

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.