Bankruptcy Law, Debt Relief, Timothy Kingcade Posts

IRS Found to Have Willfully Violated Bankruptcy Discharge, Ordered to Pay $175,000 in Damages

The Internal Revenue Service (IRS) has been found to have violated a bankruptcy discharge according to a recent decision by the First Circuit Court of Appeals. Despite the IRS’s argument that it acted under a good faith belief that it had the right to continue to collect debts that were otherwise discharged in a bankruptcy.

The matter was decided in the case of Internal Revenue Service v. Murphy, 65 Bankr.Ct.Dec. 195 (2018). In this case, Murphy had received a bankruptcy discharge in 2006. However, despite this discharge, the IRS still attempted to collect on the debt on the belief that his tax obligations were not discharged under 11 U.S.C. § 523(a)(1)(C). This code section allows an exception to discharge for any tax if the “debtor made a fraudulent return or willfully attempted to in any manner to evade or defeat such tax.”

Murphy fought back under Section 7433(e) of the Internal Revenue Code, which allows the individual filing bankruptcy to petition the bankruptcy court to recover damages against the U.S. when the IRS has willfully violated the automatic stay or the final bankruptcy discharge.

In its defense, the IRS argued that that Murphy filed a fraudulent tax return to evade or defeat a tax, they had a right to try to collect on the debt from that debtor.

The lower court found that the IRS failed to file an objection prior to the bankruptcy discharge, both before or appropriately after the order was entered. The IRS continued trying to collect on the debt. It got so severe as the IRS levying insurance companies that did prior business with Murphy. In response, Murphy pursued a proceeding in bankruptcy court to get an official declaration from the court that the taxes were discharged in the original order.

Even though the IRS insisted that they were pursuing the debt in good faith because of tax evasion by Murphy, they never actually submitted evidence of evasion. The bankruptcy court granted a judgment for Murphy in 2010, declaring that his debts were, in fact, discharged. Even after this order, the IRS did not appeal this ruling. Instead, they continued to try to collect on the debt.

Murphy later filed another complaint against the IRS in 2011stating that by the levies the IRS issued in 2009, they were violating the discharge under Section 7433(e). The IRS fought back by saying they were not willfully violating the discharge, insisting that they were acting under the good faith exception. The bankruptcy court found in favor of Murphy, ruling that a willful violation includes the person acting “with knowledge of the discharge,” intending to take an action to collect on a debt the entity or person knows was discharged. The IRS did appeal this decision to Federal district court, who vacated the bankruptcy court decision but agreed with the definition of willful violation.

Eventually, after the case was remanded, the IRS settled the matter out of court in 2017. In the settlement, the IRS agreed to pay Murphy $175,000 in damages, only if it lost an appeal on the question of whether Section 523(a)(1)(C) provides a good faith exception to willful violation under Section 7433(e).

The IRS lost on its bet that the appeal would go in its favor. Instead, the First Circuit ruled that a creditor has willfully violated an automatic stay if it knew of the automatic stay or discharge and took an intentional action that violated the stay or discharge. The court ruled that a good faith belief in a right to property did not matter when determining whether the creditor’s action was willful. The court considered bankruptcy discharge to be equivalent to a violation of the automatic stay.

Looking back at the procedural history, the appeals court did note that the IRS could have but did not file an objection to discharge during the original bankruptcy proceedings. Further, they could have filed an adversary proceeding prior to collection to get an official statement from the court that the debts were not discharged. None of this was done in this case. This is not to say the IRS must appear in every bankruptcy case to have the taxpayer’s debts excepted from discharge. It may wait until the discharge is issued as a defense to collection efforts, but the IRS must prove some evidence and factual basis for their objection.

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If you or a loved one 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.

 

Bankruptcy Law, Credit, Debt Relief, Timothy Kingcade Posts

What Bankruptcy Does to Your Credit Score

A common concern people have when filing for bankruptcy is the effect it will leave on their credit score and their ability to access credit, again. While bankruptcy does affect your credit score, it is sometimes the last resort to rebuild your credit and your financial future. In fact, it is oftentimes easier to reestablish your credit after filing for bankruptcy, because you are essentially given a “clean slate.”

It helps to sort through the myths and facts before making that final decision, and if you do choose to file for bankruptcy, this does not mean all hope is loss. There are proven ways to rebuild your credit score after bankruptcy, and our clients are proof!

My credit score said on all three reports 775, I couldn’t believe that I had such a great score before 10 years. Tim for me was the best move I have made for my situation. I have no regrets, I am glad the past is the past. – Bill T.

Hi Tim- I just wanted to send a quick note and thank you and your team for handling my bankruptcy case.  It is only a month or two after discharge, and my credit scores are already in the upper 600’s. – C.S.

The effects of bankruptcy on a person’s credit score depends on the score the filer had before filing for bankruptcy. If you have a higher credit score, the effect the bankruptcy will have will be more noticeable. However, if you have a lower credit score to begin with, the change may not be as much after filing for bankruptcy.

According to data from FICO, for individuals who had credit scores of 780 or more, the average amount of decrease is around 240, with a resulting credit score of 540. If the filer had a fair credit score of around 680, the decrease is on average 150 points, resulting in a score of 530. Both scores end up at roughly the same point, but the drop that the filer sees in getting to that score is noticeably different.

The good news is the American credit scoring system allows consumers to rebuild their credit score quite quickly after filing for bankruptcy. Even with a credit score at 550, you can still get back to a respectable score within one to two years through demonstrating good financial habits.

These habits include monitoring your credit report on a regular basis, ensuring that any accounts that are at a zero balance. Many financial experts recommend using a secured credit card to use for purchases to rebuild credit. After some time has passed and you have successfully used the secured card for a period, you may be able to slowly take on new credit, although it is never recommended that you have more than one account opened within a six-month period.

Rebuilding your credit is important for many reasons, the main one being it will allow you to be able to borrow in the future. Many filers worry that they will never be in the financial situation to purchase a home or qualify for another loan- these are all bankruptcy myths. Stick to a budget and a sound financial plan following bankruptcy, and you will be back on your feet before you know it.

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.

 

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

Repayment Trick to Help Pay Down Credit Card Debt Faster

If you are struggling with credit card debt, you are not alone. As of September 2018, the Federal Reserve reported that Americans have more than 1 trillion dollars in revolving debt, which includes debt like credit cards. Many people are only able to make the monthly minimum payment on their credit cards each month. However, a new repayment trick is helping consumers get out of credit card debt faster.

The study produced by researchers at several universities, including Harvard Business School, University of Pittsburgh, the Ohio State University, and the Yale School of Management, show that a repayment by purchase method of paying off credit card debt can be even more successful when it comes to getting the balance down to zero.

This method is also known as a form of budget reckoning where you, as the account holder, review your credit card statement as soon as it is received to evaluate where most of your purchases are made. Rather than make one small payment based on the minimum payment quoted or even just a random lump sum, these researchers believe that by paying off certain expenses, you are more likely to make headway when it comes to paying off the balance.

The research recommends that you look at specific line items and see which items can be paid off each month. For example, instead of making a payment of a random amount, such as $100, add together the number of meals charged that month and pay that amount to cover all the food items purchased that month. You could also target a certain expense, such as a clothing purchase or a travel expense.

By paying off a specific item or type of expense, you are holding yourself accountable for what you spend every month. In addition, researchers argue that the cardholder feels more of a sense of accomplishment after paying off a specific item rather than throwing a minimum amount towards a large balance.

American Express offers a similar plan called “Pay It Plan It,” which lets cardholders split up large purchases of more than $100 to repay them over time. A fixed monthly fee comes with the use of this program.

We offer some important tips for eliminating credit card debt. Some utilize the snowball method whereby they focus all their efforts in paying a higher interest card down, focusing on one card at a time. Another method is through the “island” approach where the consumer has two credit cards: one which is paid in full every month and the other card, which is a promotional no-interest or low-interest rate for big purchases, allowing the person to finance those large purchases over time. Keeping to a strict budget is important if you are planning on using this approach.

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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.

Credit, Credit Card Debt

More than Thirty Percent of Homeowners Paying for Home Renovations with Credit

Despite the fact that American homeowners hold more equity in their homes than ever before, a growing number are using credit cards for major renovations. This trend has financial experts scratching their heads as to why these homeowners are choosing to use credit cards in lieu of less risky options to pay for major home expenses.

According to a recent study done by home improvement website Houzz and Synchrony Financial, of the home renovations completed in 2017, over 36 percent of them were funded by credit cards. This figure has jumped over 25 percent from 2011 where 29.5 percent of home renovations were paid with a credit card.  It appears as if this number is steadily increasing over the years.

In the survey, 85 percent of those who responded said that they utilized cash or savings to pay for their renovations, which is the ideal situation. However, 33 percent of them said they used credit cards to pay for the renovations, while only 15 percent of them used a home equity loan.

This new trend seems to be led by the millennial generation. These younger homeowners prefer to use credit in lieu of a long-term loan to pay for major expenses. Of the homeowners surveyed between the ages of 25 and 34 years old, 41 percent of them paid for home renovations with credit cards. Of the older demographic, specifically homeowners over the age of 55 years old, only 30 percent of them used credit cards for major renovations.

This younger generation of homeowners is more likely to pay off these expenses over the course of time. According to the survey, over 60 percent of those individuals intend to pay those credit card balances over the course of time. In fact, many of these homeowners make these large expenses by using a promotional card, many of which offer low or no interest for a specific period. If the homeowner can pay off the expenses within that period, they will not have to pay on any interest. The problem arises when the homeowner is not able to pay the balance before the promotional period expires. If that happens, he or she will be paying a large interest rate on the remaining balance. This possibility of incurring interest is additionally why many older homeowners prefer to pay for renovations with a home equity loan.

Another reason these younger homeowners are using a credit card for payment is the quick access they have to the funds. Applying for and being approved for a home equity loan can be a much longer process, and if the homeowner needs the money quickly, a credit card may seem like the better option. However, the consequences of using a credit must be weighed against the benefits before determining which option is best for you.

Please click here to read more.

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.

 

 

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

What Happens to Student Loan Debt When You Die?

One of the more common questions asked by student loan borrowers has to do with what happens to the obligation if the borrower dies before the loan is paid in full. Does the loan die with that person, or will their loved ones be held responsible for paying it off after the borrower’s death?

According to the U.S. Department of Education, if the borrower of a federal student loan dies, the loan is automatically canceled, and the debt is discharged by the government. Unfortunately, private student loans do not offer the same liability protections. Whether or not your private student loans will be discharged when you die depends upon your student loan contract. It is important to check the terms regarding death and disability discharge in your student loan contract.

Some private loans, including Sallie Mae’s Smart Option Student Loan or New York HESC’s NYHELPs loans, do offer death and disability forgiveness in the event the borrower dies or becomes permanently disabled.  However, not all lenders are so generous.

If the student loan borrower is married, many believe that the spouse of the deceased remains liable for the debt. With traditional student loans, if the spouse is not listed as a joint account holder or a co-signer, the spouse is not legally liable for the debt. If the spouse did co-sign for the loan, he or she may still be liable for the student loan just as he or she would with any other co-signor obligation.

If the borrower lives in a community property state with his or her spouse, and the borrower dies, the spouse will be considered liable for the debt, regardless of whether the spouse’s name was ever on the original student loan unless the state has exceptions in its own laws. The states that are community property states include Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin.

The state of Alaska is unique in that married couples can choose to opt into a community property situation, but it is not required. For the other states that are not community property states, so long as the debt was never co-signed or jointly in the name of the deceased borrower, the surviving spouse will not be held responsible for the debt.

One important issue that should be addressed involves the tax implications of the student loan debt of the deceased being forgiven. Even if a student loan is cancelled or discharged due to a death or disability, the deceased’s estate may owe taxes on the amount that is forgiven before the estate can be closed. Therefore, while the surviving spouse or loved ones of the deceased may be in the clear when it comes to the actual debt itself, they may still owe something when it comes to taxes on the amount that was forgiven.

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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.

 

Credit, Credit Card Debt, Debt Relief

How Your Grace Period Can Save You from Credit Card Debt

Using a credit card for certain purchases doesn’t have to be a bad thing, but problems arise when these purchases pile up and the account holder is not able to pay off the statement balance every month. Successfully utilizing the credit card’s grace period, can help avoid this.

What Is a Grace Period?

The grace period is the time an account holder’s credit card billing period ends and when the payment is due, as indicated on the statement. It is during this period that the account holder will not be charged interest on any purchases made during the billing cycle so long as he or she pays the balance in full by the due date.

Benefits of Grace Periods

A card’s grace period can allow for the cardholder to make a large purchase interest free. If the consumer makes the purchase right after the closing date of a current billing cycle, he or she can leverage the grace period to avoid interest charges.

Word of Caution

One word of caution should be issued when it comes to grace periods. Not all credit cards offer them. It is important the cardholder review the fine print for the account to make sure that the grace period exists and for how long.

Can a Grace Period Be Lost?

If the account holder is not careful, he or she could lose a grace period. One misconception is if the person carries even a small balance from one billing cycle to the next cycle, the cardholder will lose the grace period. However, many cards offer initial terms that include zero percent APRs on purchases so long as they make these purchases within the period offered, which is normally 12 to 18 months. Even if the cardholder loses the grace period, many cards will reinstate it if the cardholder pays the card’s outstanding balance in full for two straight months.

Can a Grace Period Be Extended?

Sometimes it is possible to extend a grace period. Many companies will change the card’s due date if requested and push the due date back can allow the cardholder extra time. Not all cardholders will allow for it, but it does not hurt to ask if this is a possibility.

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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.

Bankruptcy Law, Credit Card Debt, Debt Relief

Study shows women struggle more with credit card debt than men

Credit card debt is a problem for many Americans but according to a recent study by WalletHub, it appears to be more prominent among women.

Credit card spending is at an all-time high. Last quarter, consumers ran up nearly $30 billion in credit card debt, the highest seen since the 2008 financial crisis.

In this study, women cardholders reported that they were struggling with their card payments, on top of other monthly expenses. In fact, one in four female cardholders reported that they did not feel confident at all in their ability to pay their bills in full monthly. This figure is double the percentage of men reporting the same sentiments.

Approximately 31 percent of women surveyed reported that they were able to pay their credit card monthly statement balances completely in full once or less in the past six months.

What does this mean for female cardholders? According to these figures, if we had two groups of individuals, one group female and one group male, each carrying $5,700 of credit card debt, paying this balance off in full will end up eating up much more of the total annual income for the women than the men.

Federal reserve figures report that the average female salary is $41,554 annually while their male counterparts earn on average $51,640 annually. Paying just shy of $6,000 in credit card debt ends up taking a much larger percentage of their annual income, making it much harder to keep up with other monthly expenses.

Single mothers are a subgroup that is suffering particularly hard. Many of these women are already on tight budgets, and when a major expense hits, it can be hard for them to keep up with monthly bills, let alone pay a credit card off in full. Some even rely on credit cards to cover daily expenses.

Did you know that one of the leading causes of bankruptcy in America is divorce? Many people say issues regarding money cause divorce, but money problems after divorce can also be equally troubling. In many instances, single mothers become the sole financial providers for themselves and their children.

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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.

 

Bankruptcy Law, Debt Relief, Timothy Kingcade Posts

How Often Can A Person File for Bankruptcy?

Many clients want to know if a previous bankruptcy filing is going to prevent them from filing again in the future.  A number of factors go into when and whether it can be done, but the two biggest factors are what type of bankruptcy was filed previously and how long ago the case was filed.

A Ban Does Not Exist on Subsequent Filings

The good news for bankruptcy filers is there are no limits on the number of times a person can file for bankruptcy. However, the bankruptcy courts do not want to see individuals misuse the system with multiple filings made in bad faith. It is for this reason that the law does impose certain statutory requirements and prerequisites that filers must meet to be able to file again. If an individual has filed for bankruptcy previously, it is important that he or she contact an experienced bankruptcy attorney to discuss the options available, as well as the requirements for filing again.

Previous Chapter 7 Bankruptcy Filing

If the previous bankruptcy filing was a Chapter 7 case, the individual must wait at least eight years from the date of the previous bankruptcy filing before filing a second time, if that person wants to file another Chapter 7 case. However, if the person filed a Chapter 7 bankruptcy case for the first filing but now wants to go forward with a Chapter 13 reorganization case, the time is shorter, and that person must only wait four years from the date of the first bankruptcy filing date.

Previous Chapter 13 Bankruptcy Filing

If the previous bankruptcy filing was Chapter 13, certain time limits do apply. If the previous case resulted in a bankruptcy discharge, the filer must wait at least six years from the date the first Chapter 13 case was filed before he or she can file for and get another discharge in a later Chapter 7 case. However, exceptions do exist to this rule. If the filer paid back all of his or her unsecured debts or at least 70 percent of the unsecured debts were paid, and the plan was to pay them back in good faith, the six-year rule does not apply. If the later case is a Chapter 13 bankruptcy again, the filer cannot get a later Chapter 13 bankruptcy unless the case has been filed at least two years after the date the first case was filed.

Case Dismissed with Prejudice  

However, other exceptions exist to the rules listed above. The filer can be prohibited from filing a later bankruptcy case if the bankruptcy court dismissed the previous bankruptcy case with prejudice, meaning the person who had filed the case failed to comply with court orders, filed multiple cases with the purpose of deceiving creditors or the case was not filed in good faith.

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

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

The Truth About Credit Card Debt Forgiveness

The thought of having your credit card debt completely forgiven can seem too good to be true. However, like so many things in life, if it sounds too good to be true, it probably is. The truth is, debt settlement comes with its own set of unintended consequences.

If a consumer is not able to pay off a credit card balance and has missed a number of payments, that person may choose to either work directly with the credit card company- or if the debt is sold, a third-party debt collector to settle payment. Credit card companies want to receive payment at the end of the day, and they are willing to accept less than what is owed in lieu of not receiving payment at all if the debtor chooses to file for bankruptcy and have the debt discharged.

The problem with debt settlement involves the consequences that come along with settling your credit card debt. For one, even if the balance is settled, it can still have a negative impact on a consumer’s credit score. In addition, if the amount that originally was owed is a lot more than the amount that ended up being paid, the difference is still considered taxable income by the IRS and state government, which means the consumer will have to pay taxes on the forgiven debt.

If you are successful in negotiating the amount with the creditor, make sure these agreements are in writing and be wary of any plans that seem too good to be true.  If you are receiving collection calls, unable to make payments, facing wage garnishment or have a lawsuit pending with a creditor, it is important to at least sit down with an experienced bankruptcy attorney, who can advise you of all your options.

Consumers should avoid working with debt settlement companies.  The cons often outweigh the pros, as many of these companies engage in unfair practices, require their clients pay large upfront fees and result in a consumer’s credit being irreparably damaged, and still left with debt.

Click here to read more on this story.

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.

 

 

 

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

Student Loan Borrowers Seeing Some Relief from Bankruptcy Judges

Student loan borrowers are beginning to see some relief in bankruptcy court when it comes to discharging student loan debt. At the start of 2018, the Department released a statement that it was reviewing student loan bankruptcy laws with respect to how difficult it has been for borrowers to receive a discharge of their student loan debt in bankruptcy. Following this statement, some bankruptcy court judges have lessened the standards borrowers are held to when deciding on whether the loan obligation should be discharged.

Since the statement was made by the Department and subsequent request for comments on the current policy, no updates have been given as to whether the Department would be making official policy changes. In the meantime, bankruptcy court judges seemed to have taken a cue from the Department and are now making rulings to make loan repayment terms easier on borrowers for the meantime.

A recent Wall Street Journal report found that judges were more becoming more lenient when dealing with individuals saddled with student loans. Current college graduates are now entering the workforce with well over six figures in student loan debt. Unless these graduates land a job making an income that is comparable to this debt, these individuals soon find themselves unable to make student loan payments. Bankruptcy is meant to provide individuals drowning in debt with a way out, but the current policy with respect to student loan debt has dictated that this obligation stays with the debtor even after a bankruptcy discharge of all other debts.

The study looked at 50 current and former bankruptcy court judges, reviewing bankruptcy cases where the filer had student loan debt. The study showed that a number of the judges were very sympathetic to the cause of the individuals in front of them who were not able to pay their current student loan debt obligations. In fact, many of them understood the struggle all too well with student loan debt since they may also carry debt from law school, or they may be influenced by the struggles they see with their law clerks finishing or graduating from law school. It is estimated that the average lawyer holds just under $120,000 in student loan debt.

These judges are required to follow the legal standard that a borrower must pass the “undue hardship test,” which has traditionally been a strict standard. It has also been a standard that has never been clearly defined by bankruptcy law and has been applied inconsistently from court to court.

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.

Even though the judges’ hands may be tied by the legal standard, they may seek other, more creative solutions to help the borrowers ease their burdens. They may not be able to completely cancel the debt in all situations, but they have tried to help alleviate some of that burden. In some cases, however, some of the more sympathetic judges have completely cancelled the borrower’s past due debt obligation.

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.

Related Resources:

https://studentloans.net/bankruptcy-judges-taking-it-easy-on-some-student-loan-borrowers/

https://lendedu.com/news/some-judges-push-to-ease-bankruptcy-rules-for-student-loan-debt/