Posts Tagged: ‘undue hardship’

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.

The Battle for Student Loan Debt Discharge

June 8, 2016 Posted by kingcade

Section 523(a)(8) of the Bankruptcy Code outlines a debtor’s ability to discharge student loan obligations. Under this section, student loans are presumably nondischargeable. However, there is a narrow exception if a debtor is able to show that repayment of their student loans will cause an “undue hardship.”

Two courts recently entered decisions on this issue within the same week, using the same standard for “undue hardship.”  The District Court for the Middle District of Alabama and the Bankruptcy Court for the District of Idaho issued largely opposite decisions based on similar facts.

In ECMC v. Alexandra Elizabeth Acosta-Coniff, the bankruptcy court initially held that the debtor was able to meet the undue hardship threshold and discharge her $112,000 of student loans. However, on appeal, the district court reversed the decision.

The case involved a 44-year-old single mother of two who took out more than $100,000 in student loans pursuing four degrees, including two master’s degrees and a PhD in special education. As a full-time public school teacher, the debtor argued that the student loans were an undue hardship, as she was underpaid with no prospects to increase her earnings in the near future.

The court used the test for undue hardship, where the debtor must establish:

(1) That he or she cannot maintain, based on current income and expenses, a “minimal standard of living for herself and her dependents if forced to repay the loans;

(2) that additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period of the student loans; and

(3) that the debtor has made good faith efforts to repay the loans.”

The district court denied the debtor’s discharge of the loans based on the second factor, holding that the debtor did not satisfy the burden to show that there are additional circumstances preventing her from fulfilling her payment obligations. The court reasoned that the debtor chose to earn four degrees with a general understanding of the cost versus benefit analysis and her multiple degrees enabled her to seek employment on a larger pay scale.

It reasoned that the debtor’s future ability to earn extra income was a realistic possibility, negating the need to discharge her student loans.

In Elizabeth M. McDowell v. Education Credit Management Corporation, and U.S. Department of Education, the court reached the opposite decision under the Brunner analysis.

There are essentially three criteria a debtor must meet under the Brunner analysis.

  • Continuing to pay the loan must cause the borrower to be unable to sustain a minimum standard of living;
  • The borrower’s financial situation must be unlikely to change in the future;
  • The borrower must have made a good-faith effort to pay his or her loans.

The debtor, a 43-year-old single mother of two, owed $93,000 in student loan debt for both her undergraduate and graduate degrees. The debtor was steadily employed as a social worker, but had recently taken a $6,000 trip to South America to attend training for a career switch to photography. The debtor also financed the purchase of a motorcycle for her ex-husband.

At trial on the issue of undue hardship, her doctor testified that her health was deteriorating, and it was likely that she would be unable to work in the near future. Due to this fact, the court found her health condition to be an additional circumstance that would persist, or worsen, in the near future, satisfying the second requirement of the Brunner test.

The court recognized that the debtor made certain financial errors in the past, such as her trip to South America and the purchase of a motorcycle. However, the court held that she otherwise lived modestly while working full time. Ultimately, the court held that the debtor could discharge most of her loans, except for $10,000 which the court determined to be frivolous spending.

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.

Related Resources:

http://www.lexology.com/library/detail.aspx?g=8b4f44fe-0baa-4e50-b4f8-d77adda86096

http://www.usnews.com/education/blogs/student-loan-ranger/2014/08/13/debunking-the-student-loan-bankruptcy-myth

Duxbury Father Wins Student Loan Debt Relief Settlement

April 19, 2016 Posted by kingcade

A federal appeals court this week has urged a bankruptcy judge to consider a settlement that would allow a Duxbury father to discharge more than $246,000 of student loan debt he borrowed to send his three children to college.

The case has generated national attention amid the growing concern about student loan debt and what it means for our nation’s economy. For the past four years, The Educational Credit Management Corp., a company hired by the US Department of Education, has vigorously fought the efforts to have the loans discharged in bankruptcy.

Four months after the US First Court of Appeals heard oral arguments in the case and urged the parties to try to settle, the company signed an agreement acknowledging that the debtor should be forgiven because he has proven that repaying the debt would pose an undue hardship. The following day, the appeals court sent the proposed settlement to the bankruptcy court.   The final decision lies in the hands of the bankruptcy judge.

Most courts rely on one of two tests when defining hardship.  These include: The Brunner test, which requires a borrower to show that he has made a good faith effort to repay the debt, cannot maintain a minimal standard of living for himself and his dependents if forced to repay the loan, and is facing additional circumstances that make it unlikely he will be able to pay in the future.

The second test, called the “totality of the circumstances” test, considers a debtor’s past, present, and future financial resources; living expenses; and any other facts and relevant circumstances surrounding each particular bankruptcy case. When assessing hardship, most courts require borrowers to show extraordinary circumstances, such as a serious illness, psychiatric problem, or permanent disability.

In this case, the debtor Robert Murphy lost his $165,000-a-year position as president of a Canton manufacturing company when it moved overseas in 2002, and had been unable to find another job. He depleted his retirement savings to pay bills, which included more than $61,000 that was applied to his student loan debt, which left him and his wife primarily dependent on her $13,200 teacher’s aide annual salary.

Murphy sought to discharge the $246,000 he still owed on a dozen Parent Plus loans he took out between 2001 and 2007 to send two of his children to Loyola University Maryland and a third to the University of Connecticut and Bridgewater State.

If he had it to do over again, Murphy says he would have never borrowed the money, even though he was unemployed when the government issued him the majority of the loans.  Like many in his situation, he believed he would be able to find another high-paying job and repay them.  He launched an exhaustive search and attributed his inability to find work to his age, a failing economy and the decrease in manufacturing jobs.

Murphy’s case was being watched by consumer advocates across the country, who hoped the appeals court would take a new look at what defines undue hardship. The settlement has the possibility to preempt a decision that could establish a precedent.

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

 

Student Loan Debt: The Next Crisis Facing Elderly Americans

December 23, 2015 Posted by kingcade

The number of student loan borrowers age 60 and up has increased to 2.2 million, from 700,000 in 2005, according to the Federal Reserve Bank of New York.  Twenty-seven percent of education loans held by people age 65-74 were in default in 2013, which means they have not made a payment in 270 days or more. In fact, more than half of education loans held by people 75 and older were in default.

The government has the ability to garnish wages for non-payment of student loans- even take your tax refund, but with seniors they have added leverage- their social security.  In 2013, 155,000 seniors lost part of their retirement benefit to repay education debt, up from 31,000 in 2002, according to the GAO.

This has left many seniors helpless, as most forms of consumer debt can be discharged in bankruptcy- student loan debt cannot.  Congress said in the 1970s that such debt can go away only if a debtor can prove repaying it would impose an “undue hardship.”

However, Congress never defined undue hardship, so it has been left to the courts discretion to determine just how desperate someone needs to be to qualify for relief. Bankruptcy judges have said that to get education loans discharged, borrowers must show their entire lives would otherwise be characterized by a “certainty of hopelessness” or that repaying the debt “strips [the debtor] of all that makes life worth living.”

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.