Posts Tagged: ‘undue hardship’

Dept. of Education’s Announcement Gives Hope to those struggling with Student Loan Debt

April 4, 2018 Posted by kingcade

With student loan debt at nearly $1.5 trillion, 40 percent of borrowers will default on their student loans by 2023, according to a recent study by Brookings Institute.  The staggering numbers have caused the Department of Education to take action and announce that it will review and potentially alter policies that make it exceedingly difficult for student loan debt to be discharged in bankruptcy.

The problem is that ‘undue hardship’ was never defined and the case law has never led to a standardized definition. Courts often use the “Brunner Test,” which requires you must show that you cannot maintain a basic standard of living while paying the student loans and that this difficulty would last throughout the majority of the repayment period.  You also must prove that you made a good showing of trying to repay your student loan debt.

The Department of Education’s latest actions indicate that they will broaden the “undue hardship” current definition – which is good news for student loan borrowers.   This change could also help streamline the bankruptcy process and help borrowers struggling with massive student loan debt rebuild their lives.

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.

Will Student Loans Be Discharged In Bankruptcy Under Trump Administration?

March 19, 2018 Posted by kingcade

For years, the fact that student loan debt stayed with bankruptcy filers kept individuals sinking in personal debt from filing for bankruptcy. That may all change with a recent statement made by the current administration.

According to the Department of Education, the possibility of borrowers having their student loans discharged in bankruptcy is becoming more of a reality. In fact, the Department is opening comments with respect to individuals requesting an undue hardship discharge of their student loan debt in bankruptcy.

Student loan balances have sky-rocketed over the past few years to an all-time high of $1.4 trillion. The average balance held is now at $34,144, which has gone up 62 percent over the past ten years.

As of September 30, 2017, approximately 4.6 million student loan borrowers were in default on their loans.  The Department of Education now has the national student loan default rate at somewhere over 11 percent. To be in default, a borrower has to have missed making monthly payments for 270 days.

Of course, the fact that the Department is opening the comment period does not guarantee a policy change, but at the least, the Department is interested in hearing what borrowers have to say.

Currently if a borrower is facing issues with student loan debts, the first steps he or she is recommended to take is to postpone payments with either a deferment or forbearance. A deferment will let the borrower put the loan on hold for a period of up to three years, allowing them to catch up on other debts. However, the borrower does have to qualify for a deferment, and if he or she does not qualify, a deferment allows the borrower to at least temporarily suspend student loan payments for a period up to one year. This allows some temporary relief in terms of the large payments student loans often incur, but remember during this time the interest on the loan will continue to accrue and be added to your total balance.

If deferment and forbearance are not options, working with the lender on an income-based repayment plan can allow the borrower to pay a percentage based on his or her income, rather than a flat rate. However, even this option requires the borrower to be at a certain income level.

Student loan discharge is not currently a complete impossibility, but it is an uphill battle. Two legal tests are currently used by courts to determine if a borrower qualifies for student loan debt forgiveness in bankruptcy. Under the Brunner test, the borrower has to be at a certain poverty level such that he or she cannot maintain a minimal standard of living for himself or his or her dependents, the financial situation is likely to persist for a significant period of the repayment period and the borrower has made good faith efforts in repaying student loans. The Totality of the Circumstances test allows courts to look at all relevant factors in the case to determine if forcing the borrower to repay back his or her student loan would be an undue hardship. Both tests require the borrower present evidence and testify in bankruptcy court to get the student loan debt discharged.

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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.

Potential Changes in Bankrupt Borrowers’ Ability to Discharge Student Loan Debt

February 26, 2018 Posted by kingcade

Prior to 1998, student loan debt (federal and private loans) were dischargeable in bankruptcy, but federal legislation enacted that same year removed the ability to do so—except in extreme circumstances, those that qualify under the “undue hardship” standard. Since the test is not regulated by any law, the courts must determine the severity of the debtor’s circumstances to qualify them for relief.

The three-pronged test to determine undue hardship:

  • You must prove that you are unable to maintain a minimal standard of living, while repaying the debt;
  • You must prove that your current destitute circumstances will last for a long time;
  • You must show that you have made “good-faith efforts” to repay your loan in the past.

Last week, the Education Dept. announced that it would seek public comment on how to determine whether borrowers have met the undue hardship standard to have their student loan debt forgiven in bankruptcy. Several Democrats, including Sen. Elizabeth A. Warren, Democrat of Massachusetts, have introduced legislation that would allow student loans to be discharged via bankruptcy.

There are ways to file for bankruptcy with student loan debt. Congress has yet to established what “undue hardship” means with regard to students’ having their loans forgiven in bankruptcy; still, courts have set legal standards for proving it.

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.

How To File For Bankruptcy with Student Loan Debt

December 26, 2017 Posted by kingcade

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

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.

Lawyers May Have Discovered a Way to Wipe away Student Loan Debt

February 17, 2017 Posted by kingcade

Student loans are some of the most difficult to get rid of – even in bankruptcy.  But some attorneys are challenging the laws and creating hope for millions of struggling borrowers.  Bankruptcy attorneys in Florida and New Hampshire are filing cases in the hopes of establishing “paths” to help bankrupt borrowers and their attorneys better manage, even eliminate student loan debt in bankruptcy.

Congress exempted federal student loans from discharge in bankruptcy, except in extreme circumstances. Lawmakers extended that exemption in 2005 to private student loans as well. In order for borrowers to have their student debt discharged in bankruptcy, they must prove that the debt is causing them to suffer “undue hardship.”

Although Congress never defined the phrase “undue hardship,” a series of court rulings have created an undue hardship standard that is notoriously difficult to meet. So instead of trying to meet the standard, attorneys are turning to other legal strategies that challenge private lenders’ ability to collect on the loan and in the case of federal debt help borrowers better manage the loans while in bankruptcy.

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, P.A. 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 website at www.miamibankruptcy.com.