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Bankruptcy Law, Debt Relief, Student Loans

Income-Based Repayment Plans – The Pros & Cons

Posted on June 15, 2018by Admin

Many individuals struggle to make their student loan payments, and for those borrowers facing six figures in student loan debt, that one monthly payment can be an overwhelming burden.

However, what happens when a borrower is facing over a million dollars in student loan debt?

For one orthodontist featured in a recent Wall Street Journal article, this was his reality. He owed $1,060,945.42 in student loans, with the interest accruing at a rate of $130 daily, which also comes to $3,900 monthly or $46,800 annually.

His income in 2017 was $225,000, and he is paying his student loans back under a federal government income-based repayment (IBR) program. It can seem hardly fathomable that a man of his income level would qualify for such a program. His monthly student loan payment is $1,600. At this rate, he is not making much of a dent on the interest accruing, and it is likely he will stay on his IBR program for the 25-year period allowed. However, after that time, even though he has made barely a dent in the total balance, his student loans will be forgiven with the negative income tax consequences following, of course.

Only 101 of approximately 41 million student loan borrowers owe that much in student loan debt, but for certain career fields, like medical or law, these debts can quickly add up to $500,000 easily.

The average law student debt varies depending on the school location and any discounts offered in the tuition for the student. However, taking the tuition, costs, and living expenses into account, a law student can come out with $200,000 plus in student loan debt. The law graduate’s dream is to land that high paying firm job, but most end up starting at a salary between $40,000 and $65,000. It is easy to see how someone can become stuck on an income-based program by paying the minimum monthly on a relatively small salary compared to what is owed.

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. 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.

Bankruptcy Law, Credit, Debt Relief, Timothy Kingcade Posts

Are Lawsuit Judgments Discharged in Bankruptcy?

Posted on June 14, 2018by Admin

Some filers enter into bankruptcy with collection cases already at judgment level, with the hope that these judgments along with their other debts can be discharged through bankruptcy. However, getting a judgment discharged is not always so simple, and it depends on a number of factors, including:

What kind of case the judgment was for; and
Whether the creditor who has the judgment over the debtor has already placed a lien on the individual’s property.

Bankruptcy Discharge for Most Judgments

Generally, a judgment from a lawsuit involves unpaid debts. If the bankruptcy filer has not paid his or her medical bills, personal loans or credit cards, the next step for the unpaid creditor is usually filing a lawsuit against the borrower. If a judgment is obtained, the creditor can garnish the borrower’s wages or even go after a personal asset and have a lien placed on it to satisfy the outstanding debt.

Filing for bankruptcy activates what is known as the automatic stay, giving the filer reprieve from further collection calls and attempts. It can also put a stop to wage garnishment and can wipe out the borrower’s obligation to pay back certain debts, even in a judgment. Once a bankruptcy case is filed, if a collections lawsuit is pending, the automatic stay in the bankruptcy will put a stop to the lawsuit. Even if a judgment has been entered against the borrower, the final discharge in the bankruptcy case will get rid of that judgment for most purposes, except in certain cases. If the judgment is for a debt that is considered nondischargeable, the bankruptcy will not get rid of the debt.

Nondischargeable Judgments

Some debt is non-dischargeable in bankruptcy. If the creditor has gotten a judgment against the bankruptcy filer for a debt obligation that includes one of the following debts, a bankruptcy discharge will not get rid of that judgment. These categories include:

Judgments connected to domestic support obligations, including child support or spousal support/alimony;
Judgments for criminal penalties, fines and/or restitution;
Most tax judgments;
Most student loan obligation judgments;
Judgments for any debts that were acquired under false pretenses or by fraud;
Judgments for injuries that were willful and malicious caused by the debtor; and
Judgments for any injury or death that was caused by the debtor’s drunk driving.

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.

Related Resources:

http://www.alllaw.com/articles/nolo/bankruptcy/lawsuit-judgments-discharged.html

Bankruptcy Law, Debt Relief, Timothy Kingcade Posts

Miami Bankruptcy Attorney Timothy S. Kingcade Named a Florida Super Lawyer 5 Consecutive Years

Posted on June 12, 2018by Admin

Managing Shareholder, Timothy S. Kingcade of the Miami-based bankruptcy and foreclosure defense law firm of Kingcade Garcia McMaken has been selected for inclusion in Florida Super Lawyers 2018, in the practice area of consumer bankruptcy. This is the fifth consecutive year Kingcade has been selected to the Florida Super Lawyers list (2014-2018). The prestigious honor is awarded to only five percent of lawyers in the state.

Attorney Kingcade practices exclusively in the field of bankruptcy law, handling Chapter 7 and 13 filings and foreclosure defense cases for the Southern District of Florida. As an experienced CPA and proven bankruptcy attorney, Timothy Kingcade knows how to help clients take full advantage of their rights under the bankruptcy laws to restart, rebuild and recover.

Super Lawyers is a listing of outstanding lawyers from more than 70 practice areas who have attained a high degree of peer recognition and professional achievement, representing the top 5% of Florida lawyers. The annual selections are made using a patented multiphase process that includes a statewide survey of lawyers, an independent research evaluation of candidates and peer reviews by practice area. The result is a credible, comprehensive and diverse listing of exceptional attorneys.

Miami-based Kingcade Garcia McMaken, P.A. was established by managing partner and bankruptcy attorney, Timothy S. Kingcade in 1996. The firm represents clients throughout the State of Florida in Chapter 7 bankruptcy and foreclosure defense cases. The firm is committed to providing personalized service to each and every client, clearly explaining the options according to the unique circumstances of his or her life. The office environment and the service provided are centered on a culture of superior client care for the financially disenfranchised. All partners and associates at Kingcade & Garcia, P.A. specialize in consumer bankruptcy and foreclosure and have dedicated their practices to this area of the law. Additionally, all attorneys and staff members at the firm are bilingual speaking Spanish.

Bankruptcy Law, Credit, Credit Card Debt, Debt Relief, Timothy Kingcade Posts

Floridians Hold Some of the Highest Amounts of Credit Card Debt in the Nation

Posted on June 8, 2018by Admin

Credit card debt is a problem for many Americans, but according to a recent study, it seems to be a more significant problem in Florida. In fact, the Sunshine State has been ranked among the top three states where residents hold the highest amount of credit card debt.

Florida residents carry a total balance of $59.2 billion in credit card debt, as of the end of 2017. The State of California tops the list with its residents holding $106.8 billion in credit card debt, followed by Texas at $67.3 billion.

Interestingly enough, California has traditionally been known to be a state where individuals need to earn the most income to be considered “wealthy” by most standards. Considering the high level of credit card debt residents in California carry, this leads one to conclude that this “income” involves resorting to the use of credit cards, instead of solely relying on earnings.

According to the report, the states with the highest amounts of credit card debt in 2017 were:

California $106.8 billion
Texas $67.3 billion
Florida 59.2 billion
New York $58.1 billion
Pennsylvania $33.2 billion
Illinois $32.2 billion
New Jersey $29.6 billion
Ohio $26.7 billion
Virginia $26.5 billion
Georgia $26.3 billion

Florida residents were also in the top ten for credit card delinquency rates, meaning balances were left unpaid for 90 or more days. Nationally, approximately 7.5 percent of credit card debt was delinquent by these standards. Florida was above this average figure and ranked third in terms of delinquency reported.

The report stated that credit card balances on a national level declined between the years 2008 and 2013 but began to rise again in 2014. As of 2017, more than 470 million credit card accounts were open, totaling $3.5 trillion. The total debt figures were compiled by the Federal Reserve Bank of New York. The full report can be viewed here.

If you are struggling with credit card debt 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.

Related Resources:

https://patch.com/florida/southtampa/florida-among-states-highest-credit-card-debt

Timothy Kingcade Posts

Why Are Robocalls Getting Worse?

Posted on June 7, 2018by Admin

For any person with a phone, it seems like robocalls are becoming more frequent and more annoying. Despite the creation of the “No-Call” lists offered by many states, these calls have persisted. In response to this increase in calls, the Federal Communications Commission (FCC), through its Chairman Ajit Pai, has recently announced that ending illegal use of robocalls is a priority of the FCC.

In March 2018, Ajit made an announcement that the FCC issued over $200 million in fines for these harassing calls made in the previous year. The problem is these phone calls have continued to happen regardless of these fines. In fact, according to the screening service, YouMail, approximately 3.4 billion automated calls were made in April 2018, which was up 900 million per month compared to the prior year.

In November 2017, the FCC issued new regulations which allowed phone companies to block calls from invalid numbers or to show evidence of what is referred to as “spoofing.” Spoofing involves the caller tricking caller ID into hiding his or her identity. The FCC has also issued a proposal in March 2018 which will create a database of reassigned numbers so that business do not continue to call the wrong people.

Currently, the Telephone Consumer Protection Act (TCPA) regulates robocalls. The law dictates that autodialers must have the prior consent of consumers to contact them, and that consumers have the right to officially opt out of the robocalls. If a company continues to make calls despite the consumer opting out, they are doing this illegally.

Not all robocalls are illegal. Some can be used as a way to remind the caller about an upcoming appointment, flight cancellation or emergency notification. Also, sometimes these calls are also a way to try to collect on a valid debt. The problem becomes when the calls become excessive or even harassing.

The FCC has recently fined a Miami man, Adrian Abramovich, $120 million for 96 million robocalls he was accused of making in one month. The FCC has been accused of sending mixed signals when these robocalls come from “legitimate” businesses.

Student loan company, Navient, has received 599 “communication tactics” complaints that were submitted to the Consumer Financial Protection Bureau (CFPB). One of the complaints stated that the company called one person more than 12 times a day, including contacting the individual’s past coworkers, friends and family. The complaint also stated that the company called the same number 14 times in a 30-minute time period.

In response, Navient, along with other businesses, have petitioned the FCC to allow them to be exempted from the number of calls they can make to a consumer. These petitions are currently pending. These companies argue that if an existing relationship is already there, then the consent requirements should not be as strict. Further, they say that the exemption should apply to cellphones, as well as landlines.

In March 2018, a federal appeals court rolled back a decision made under the FCC during the Obama administration which prohibited debt collectors from using auto dialers to reach cell phone numbers. In that past decision, the definition of an “auto dialer” was broadened. However, the recent legal decision ruled that the definition given was too broad. Now experts are waiting to see how this narrower definition will affect current regulations. It is also now up to the FCC to write a new definition if they wish to clarify what exactly an auto dialer is under the law. If the FCC chooses to make the definition narrower, experts worry that this will leave consumers not protected from excessive and unwanted robocalls.

Click here to read more on this story.

Bankruptcy Law, Debt Relief, Student Loans, Timothy Kingcade Posts

Understanding the Deceptive Practices of Student Loan Companies

Posted on June 6, 2018by Admin

Over 44 million Americans are finding themselves in over their heads when it comes to student loan debt. It can be hard to see an end in sight when facing six figures of student loan debt following graduation, but for many, student loans are almost considered a “given” if someone wants to pursue a higher education. Private student loan companies are now trying to make it even more enticing to take out more money to cover these costs.

In the grand scheme of things, government loans still constitute the majority of what is borrowed. Currently, private student loans account for less than 10 percent of all student loan debt, which is a relatively small percentage.

Private lenders have been hoping for this to change and have been actively lobbying for legislation that would lessen the restrictions the government has on student loans, specifically when it comes to graduate students.

This legislation, known as the Prosper Act, was written and proposed by Republican lawmakers last year. It caps the amount of federal student aid graduate students can receive. This cap on federal aid leaves a gap between what the students are able to borrow and how much tuition costs. Concerns have been expressed that students will have no choice but to seek private loan options to pay for the remainder of these costs not covered by government aid.

The next step is for these private loan companies to make their product more appealing to borrowers. What better way to do this than by making friends with the borrowers themselves? Many of these companies, in fact, are now making their product seem more like they are a lifestyle company than a lender.

One such company, Laurel Road, has partnered with MoviePass, a movie theater subscription service. The company has announced that if an individual refinances his or her student loans with Laurel Road, that person will be eligible for one year’s subscription.

Another private lender, Social Finance, Inc. (SoFi) has made small changes to its branding by changing how it refers to its borrowers. Instead of “customers,” these individuals are now referred to as “members.” It may seem like a small change, but this difference in designation also includes invitations to exclusive “member only” events, like cocktail parties and cooking classes. SoFi brands itself as more of a social club than what it actually is– a private financial institution. In 2017, SoFi offered 323 nationwide member events for its over 14,000 “members.” The company also offers an app that allows its members who meet at events to communicate to each other through the app.

The Laurel Road partnership is just one example of private lending companies trying to rebrand student loan debt as something more “fun.” The problem is further compounded when these loan companies do very little to educate their borrowers on the terms of the loans. When borrowers fail to pay back the debt as it becomes due, many of these lenders have been accused of illegally harassing their customers. Borrowers have become so desperate to pay back their debts, in fact, that some have even resorted to game show antics to find a way out. Recently, a new game show called “Paid Off with Michael Torpey” has offered student borrowers a chance to compete on TV with the prize being having their student debt paid off. The series is premiering on TruTV in July 2018. Many have criticized this new program, saying it trivializes a very serious, growing problem. However, it does demonstrate what lengths borrowers will go to in order to get some relief from their crippling debt.

Click here to read more on this story.

Bankruptcy Law, Credit, Timothy Kingcade Posts

Steps to Take if Your Personal Debt Goes to Collections

Posted on June 5, 2018by Admin

When someone is facing serious amounts of debt, it can feel like there is no end in sight. Odds are the individual is fielding continuous calls from debt collectors, all of whom are threatening legal proceedings if the person does not pay the debt owed. However, certain steps can be taken to help handle personal debt issues and hopefully avoid a lawsuit.

1. Review the Debt in Question.
The first step is to review the debt amount. Do not automatically trust what the debt collector is telling you, the debt they are attempting to collect could be expired or past the statute of limitations. It is recommended that the person facing the debt collection action first examine the information provided, research the collection agency that is reporting the debt and see if any discrepancies exist. The debtor has 30 days to verify that the amount is correct after the collection agency has contacted him or her. Take advantage of this time and carefully review the debt before making any payments.

2. Dispute an Incorrect Debt.
If, during this 30-day period, the individual discovers any figure that is inaccurate or unusual, it is recommended that he or she report this and provide proof that it is inaccurate. It is possible that the debt collection agency will clear up any discrepancy and adjust it as necessary.

3. Be Aware of the Fair Debt Collection Practices Act.
Not many individuals are aware that they do, in fact, have rights when it comes to collections. Simply because someone has missed a payment and has fallen delinquent does not mean that he or she has no rights. The Fair Debt Collection Practices Act is a federal law that protects the rights of consumers against harassment and aggressive collection practices by third-party collection agencies. Take the time to review the law and to understand what these rights include.

4. Discuss Payment Options.
If the debt is valid, it can help to talk with the collection agency about payment options. At the end of the day, these companies would rather be paid than have the debt be discharged in bankruptcy. Talk with the company to see what payment options are available. The consumer should examine his or her household budget to see what can be done to make payments to repay this debt.

5. Negotiate the Debt.
Another option that many consumers do not realize they have is to negotiate the debt. Many debt collectors or creditors are quite open to discussing other options for payment. If the individual is facing extreme circumstances or hardships, the creditor or collector may be willing to at least reduce the amount of debt owed or extend the deadline for payment.

6. Know the Statute of Limitations.
Every legal matter comes with its own set deadline for when legal claims can be made. Every state has its own statute of limitation for how long debts can be pursued. It is important that the consumer research what his or her timeline is and know what actions affect this timeline.

7. Be Aware of the Timeline.
After the collection proceeding is over, the debt will stay on the person’s credit report for seven years. This seven-year timeline does not start from when the delinquent account was originally opened but rather seven years from the time it became delinquent. Being aware of this fact can help when negotiating a payment on the debt since a paid debt will be viewed more favorably than one that continues to remain unpaid.

8. Understand the Consequences.
It is equally as important that the individual know what the consequences are to leaving a debt unpaid for too long. It also helps to know what the consequences are of ignoring a legal action if one is eventually filed. If the person is sued, it is extremely important that he or she at least appear in court and respond. It can be tempting to just ignore the matter, but by not appearing in court, the individual is likely to lose by default judgment and could have their wages garnished.

Click here to read more on this story.

Bankruptcy Law, Debt Relief, Student Loans, Timothy Kingcade Posts

Study Finds Parent PLUS Loans to African American Families Can Be Predatory

Posted on June 1, 2018by Admin

College is expensive and finding ways to pay for tuition and associated costs can be difficult for many students, as well as their family members. When options are limited, sometimes parents resort to taking out loans themselves to help their children pay for the costs of a higher education. Recently, one such loan has been criticized, the Parent PLUS loan for its terms and conditions, and also the effect it has on the parents who sign on the dotted line, not fully knowing what they are agreeing to.

A study recently issued by New America reports that a higher percentage of low-income African American parents rely on the use of Parent PLUS loans more than low-income whites. The study recommends making the use of Parent PLUS loans off limits to any family of limited financial means and offering additional, and affordable federal loan options for lower income families.

Families often resort to the parent PLUS loans after their children have maxed out other federal loan options. Many of the features of Parent PLUS loans have given them the reputation of being a loan of “last resort.” The limits tend to be fairly generous, the underwriting limited and the interest rates high.

The repayment options that parents are given on these loans are very limited, which only increases the risk that the borrower parents will default on the loan obligation. By having parents take these loans out, creates a level of “intergenerational debt” that can be crippling.

An additional problem with Parent PLUS loans have been the fact that lenders have issued these loans without evaluating the borrower’s ability to repay them. Without properly qualifying the borrower, issuing the loan simply puts them in a situation where he or she ends up falling behind on payments.

These loans were originally intended for families with more financial resources and in higher income tax brackets whose children may not qualify for need-based aid. In fact, most of the PLUS borrowers are from families earning more than $75,000 annually, many of them coming from upper class, Caucasian families with only 10 percent of Caucasian families earning less than $30,000 taking out these loans. However, for African American families, one-third of these individuals who have ended up taking out a PLUS loan earn less than $30,000, which is the opposite of what the study found with Caucasian families in the same tax bracket.

Because of the high fees associated with these loans, repaying the Parent PLUS loans can be difficult. If the parent is already struggling to make monthly payments, few options exist for that parent when it comes to repayment options. Currently the only income-based payment plan is an income-contingent repay (ICR) plan. To qualify, the parent must convert the loan into a federal Direct Consolidation Loan, and the minimum monthly payment in an ICR is normally 20 percent of that person’s disposable income. The monthly payment may be lower, but the interest rate does not decrease. At some point, it becomes nearly impossible for that parent to get caught up.

The study recommends making these loans off-limits to families in the lower-income categories and encourages the Department of Education to allow students from these brackets to borrow more from themselves rather than resort to having their parents take out these types of loans.

The study also recommends no longer allowing schools to characterize these loans as “aid” in financial aid award letters. They also recommend requiring parents who take these loans out to complete counseling that makes it abundantly clear to them that these loans are their sole obligation and not their children, as well as explain the terms of the loans so that they are clearly understood.

Click here to read more on this story.

Bankruptcy Law, Credit, Debt Relief, Timothy Kingcade Posts

When will a Bankruptcy be removed from My Credit Report?

Posted on May 31, 2018by Admin

Making the decision to file for bankruptcy is never an easy one. Many people hold off on filing for fear of what bankruptcy will do to their credit once all is said and done. However, having a bankruptcy filing on a credit report does not necessarily mean the end of your finances or your ability to access new credit in the future. It is possible to begin rebuilding credit after filing for bankruptcy.

What Type of Bankruptcy?

The most common types are Chapter 7 and Chapter 13 bankruptcies. Chapter 7 bankruptcy is also known as a liquidation bankruptcy. This type of bankruptcy involves the bankruptcy trustee liquidating assets that are not otherwise exempt and paying off the qualified debts with the proceeds. Chapter 7 bankruptcy allows you to get a fresh start financially and erase past debts, but a legitimate concern consumers have is the effects it will have on their credit score and their ability to take out credit again.

A Chapter 7 bankruptcy filing will take approximately 10 years from the date of filing before the case will come off of the filer’s credit report. On the other hand, a Chapter 13 bankruptcy is known as a reorganization bankruptcy. This case allows the filer to work with the bankruptcy trustee to put together a repayment plan to pay for some or all of the filer’s debts over the course of three to five years. A Chapter 13 bankruptcy case will be automatically deleted from the person’s credit report seven years from the date of filing.

Can the Process Be Faster?

It is possible to have the bankruptcy removed from the person’s credit report sooner than is normally allowed. There is a big misconception that bankruptcy cannot be removed from a credit report and that you will be penalized for 10 years, not being able to access new credit. The truth of the law or the way law is written, there’s a maximum amount of time a bankruptcy can remain on your report, but there is no minimum amount of time.

This is done by filing a dispute with all three of the credit bureaus. It is recommended that the person reviews the bankruptcy filing and the specific debts related to the bankruptcy that appear on the credit report. If any incorrect items are found, the person can file a dispute.

When a credit dispute is filed with one of the bureaus, it must be verified and validated for it to stay on that person’s credit report. If the disputed items are not verified within 30 days of the dispute, they must be removed from the credit report, including bankruptcies.

Getting Back on Your Feet.

Chapter 7 bankruptcy allows you to get a fresh start financially and erase past debts, but a legitimate concern consumers have is the effects it will have on their credit score and their ability to take out credit again.

One of the biggest misconceptions about filing for bankruptcy is that it will ruin your credit score and your financial future. To the contrary, after filing for bankruptcy you can begin restoring your credit right away.

Bankruptcy Law, Debt Relief, Student Loans, Timothy Kingcade Posts

Student Loans and Bankruptcy: Fixing a Broken System

Posted on May 30, 2018by Admin

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.

Click here to read more on this story.