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

More Older Americans Filing for Bankruptcy

Posted on August 6, 2018by Admin

A greater number of Americans who are 65 years of age and older are filing for bankruptcy. The reasons for this increase in bankruptcy filings are numerous, including the loss of pensions, high medical expenses, and lack of savings. Regardless of the reasons, research is consistently showing that individuals at retirement age of 65 years old or older are three times more likely to file for bankruptcy than this age group in previous years.

One reason for this trend is the instability behind the government safety net that was once there for retirees as they left the work force. Social security was always considered a given, something that would support the retiree throughout their remaining years. Retirees are now having to wait longer to receive their full social security benefits, causing them to struggle to make ends meet until that time.

The pension plans they always considered were a given are now replaced with 401(k) plans, which require self-contribution for them to be successful. Many of these individuals are paying out-of-pocket for medical expenses, and many are being forced into early retirement before they are financially ready to live without a reliable, steady income.

According to Consumer Reports, from February 2013 to November 2016, bankruptcy statistics showed that there were 3.6 bankruptcy filings for every 1,000 individuals between the ages of 65 to 74 years old. This number shows a significant increase from the 1.2 bankruptcy filings for every 1,000 individuals in the same age category in 1991.

Looking at all bankruptcy filings made currently, 12.2 percent of those who filed are older than 65 years old. In 1991, only 2.1 percent of all filings were from individuals older than 65. The problem is the generation following this age group is also filing for bankruptcy in greater numbers. The best explanation for why this is occurring are structural shifts for these generations.

Of the reasons given for why they are filing for personal bankruptcy, these filers are reporting medical debt as a leading cause. The recession of 2008 has also been a leading cause for why these aging filers are facing such difficult financial circumstances. The recession wiped out a great deal of their investments, leaving everyone, including this demographic, leaving them with little money to retire with and a small amount of liquid assets with which to pay medical bills. Lastly, many wives in this generation are outliving their husbands, those in the family who were the main breadwinners and the individuals handling the family finances. Once the husband dies, the surviving spouses may not know how to handle the finances, resulting in decisions that could later lead to bankruptcy court. The notion may seem dated, but in this generation, it is an all-too-common occurrence.

For many, bankruptcy offers a fresh start providing the relief needed from collection proceedings and harassment from debt collectors. But what are the signs that it’s time to file for bankruptcy? Debt collectors can be anything but subtle in their efforts to receive payment on a debt, and this added stress can be too much for an older individual. Filing for bankruptcy puts these efforts to a halt and at the very least gives the individual a chance to breathe and to receive relief from this type of communication. If you are filing for Chapter 7 bankruptcy in Florida, you can use Florida bankruptcy exemptions to protect your property, social security and retirement savings. In addition, residents are provided unlimited exemptions for homestead, annuities, and the cash surrender value of a life insurance policy.

Click here to read more on this topic.

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

Tax Debt will Affect Passport Renewals and Applications for Thousands of Americans

Posted on August 3, 2018by Admin

Americans who have overdue tax debts will soon find it difficult to receive a new or renewed passport, according to the Internal Revenue Service (IRS). It is estimated that approximately 362,000 Americans have overdue tax debts, and soon, Congress will be increasing efforts to enforce a law passed back in 2015.

The 2015 law requires that the IRS and State Department deny applications for new or renewed passports for taxpayers who have overdue tax debt in the amount of $51,000 or more.

Increased efforts to enforce this law began in February 2018, according to a recent Wall Street Journal report. Currently, the IRS is in the process of sending the names of these 362,000 individuals to the State Department.

According to the IRS Division Commissioner, Mary Beth Murphy, authorities are currently only denying passports rather than revoking them for people who hold excessive IRS debts. In fact, the State Department has stated that the agency has already denied passports for individuals who hold tax debts. For the time being, Americans with over $51,000 in tax debt will be able to continue traveling abroad if they hold current passports.

The IRS has accounted for inflation and other assessed penalties, taxes and interest when calculating the amounts owed. These amounts do not include debts that were collected by the IRS, such as FBAR penalties due to the person’s failure to report foreign financial accounts or child support owed. If the taxpayer has entered into an agreement for installment payments, is in the middle of a bankruptcy proceeding, is a victim of identity theft or is in a federally declared disaster area is not subject to revocation of their passports.

The State Department is within its rights to issue a passport for emergencies or other humanitarian reasons should a U.S. citizen who is subject to this law need to return to the U.S. from overseas. Individuals affected by the law will be notified in writing by the IRS.

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Bankruptcy Law, Credit, Credit Card Debt, Debt Relief

The Dangers of Subprime Credit Cards

Posted on August 1, 2018by Admin

When someone has less than perfect credit and is looking to improve his or her credit score, it can be tempting to look to a subprime credit card. In fact, many consumers looking to start from scratch in rebuilding a low FICO score choose subprime credit cards as their preferred method of rebuilding credit. These credit cards, while they work for some, come with their own set of hidden dangers that should be understood before signing on the dotted line.

A subprime credit card is a credit card issued to individuals who carry a lower, substandard credit score or who have a very limited credit history. Normally, these cards have a higher interest rate than other types of credit cards granted to prime borrowers. In addition to the higher rates, these cards also come with extra fees, as well as lower credit limits.

It is estimated that approximately 40 percent of millennials have what is known as subprime credit, according to credit reporting agency, TransUnion. Of the over 16 million Americans who have credit scores lower than 600 have at least one credit card. Many of them have more than one card, each card holding a significant balance.

Many people are under the misconception that to rebuild credit, an individual needs to get a card and maintain a balance, while paying the minimum payments. When the advertisements pop up on these individual’s computer screens, promising a way to build credit through a subprime credit card, it can be very tempting to click on the ad and sign up right then. However, many of these individuals do not understand what the cons are to sign up for a subprime credit card, and they do not do their homework in researching the negative aspects before signing up for the card.

Hidden credit card fees are oftentimes where people get hit the hardest. Fees can even get as high as being 25 percent of what the available credit balance is on the very first day the card is used. At that rate, it can be nearly impossible for the consumer to catch up.

Subprime credit cards also tend to carry nonrefundable yearly costs. Of the unsecured subprime credit cards surveyed, all nine of them had some type of nonrefundable annual cost. On average, this cost is just a little over $150 on the first year the card is used. The annual percentage rate (APR) for these cards can range as high as 30 percent, which keeps the balance high, no matter how hard the cardholder tries at paying down the balance.

TransUnion reported that the average American who has a low credit score carries 2.5 credit cards. Of these individuals who were surveyed, approximately $300 of their income annually goes towards paying the high credit card fees that went along with those cards, not including the monthly interest that they pay on the balance held on each card.

Occasionally, a subprime credit card will have an annual fee that must be paid from the start. These credit card annual fees will appear on the card statements and can take up 25 percent of the cardholder’s credit line. Ideally, the credit utilization ration will be 10 percent, but for individuals with subprime credit, this number is impracticable.

It is for this reason that many credit advisors recommend that a secured credit card be used by someone just coming out of a bankruptcy or in a bad financial situation to rebuild credit. Unlike a subprime card, a secured card holds lower fees and less risk. Many secured cards offer a graduation program, meaning if the cardholder can establish a good payment history, eventually that person will move up to an unsecured credit card with a good rate. Examples of secured credit card programs include the Capital One Secured Mastercard and the Discover it Secured Card. Secured cards often require the cardholder pay an initial deposit through a connected bank account, or, if someone does not have a bank account, programs exist that allow for a secured card to be issued through an approval process and low annual fee.

It is important that the credit card not carry too high of a balance, and that the cardholder pay the minimum balance every month on time. Only use the card for small, manageable purchases, and keep an eye on the cardholder’s FICO score to monitor any changes in a positive or negative direction.

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Bankruptcy Law, Debt Relief, Timothy Kingcade Posts

Attorney Timothy S. Kingcade Obtains Successful Win for Bankruptcy Client

Posted on July 30, 2018by Admin

Second Motion to Dismiss Granted & Hearing Cancelled due to lack of evidence to support the claims

Bankruptcy Attorney Timothy S. Kingcade, founding partner of Miami-based Kingcade Garcia McMaken successfully obtained an Order for his client in a Chapter 7 case, granting a Second Motion to Dismiss and cancelling a hearing scheduled for July 25, 2018.

“We are extremely pleased with the victory obtained for our client today. The allegations stated in the Complaint lacked sufficient evidence to support the claims. It was simply assumed that actions taken by Torres and PSI petroleum, LLC assigned liability to our client, without providing sufficient and specific allegations. The law was on our side in this case,” Kingcade said.

On March 5, 2018, the Plaintiffs in the case: Milan Gohil and GMC Law Firm, PLLC filed an adversary proceeding seeking a judgement against the Defendant. The complaint alleged three counts: (1.) False Pretenses, Fraud & Nondischargeability; (2.) False Financial Statements & Non-Dischargeability, and (3.) GMC Law Firm Claim for Attorney’s Fees. The Order Granting the First Motion to Dismiss included a provision that allowed the Plaintiffs to file an amended complaint, and on May 6, 2018 the Plaintiffs filed an Amended Complaint to Determine Dischargeability of Debt. On May 18, 2018, Defendants filed the Second Motion to Dismiss stating the plaintiffs did not plead their claims for relief as required by law.

A court “weighing a motion to dismiss asks ‘not weather a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims.’” (quoting Scheurer v. Rhodes). Federal Rule of Bankruptcy Procedure 7012, adopting Federal Rule of Civil Procedure 12, authorizes the court to dismiss a complaint that fails to state a claim upon which relief may be granted.

The Order directs the Second Motion to Dismiss be granted, all pending motions are denied as moot and the hearing on July 25, 2018 be cancelled.

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Miami-based Kingcade Garcia McMaken 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 McMaken 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.

For more information visit, https://www.miamibankruptcy.com/.

Bankruptcy Law, Student Loans, Timothy Kingcade Posts

Trump Administration Making It More Difficult for Defrauded Students to Erase Debt

Posted on July 26, 2018by Admin

The Trump Administration has taken steps to make it harder for student loan borrowers who were defrauded by for-profit colleges or universities to erase their debt. United States Department of Education Secretary, Betsy DeVos, moved to make the process more difficult for students and roll back regulations set by the Obama administration.

The Obama administration took a particularly tough stance on for-profit colleges, creating rules that allowed similar claims against for-profit universities to be processed as a group. The Obama administration also created rules that prevented colleges from requiring students to sign an agreement that required them to arbitrate disputes with the colleges.

DeVos’s statement this week made it clear that student loan borrowers will now have to prove their claims on an individual basis and will be held personally accountable for their student loan debt – even if their decision to take out the loans was based on fraudulent information.

The U.S. Department of Education is seeking comments regarding what standard should be set for students to prove their case. The previous administration had used the “preponderance of the evidence standard” to win a case regarding their obligations. However, the Trump administration is considering going to the higher burden of proof of “clear and convincing evidence.”

The Department is hoping to publish a final rule by November 1, 2018. Any loans originating after July 1, 2019, will be affected by the new rule.

Consumer advocates have argued for a more aggressive stance against for-profit colleges. These advocates worry that this proposed rule will have a chilling effect on borrowers who seek relief from student loan debt. Borrowers would need to show that the college intended to mislead or defraud them. Proving intent on the part of the for-profit college can be nearly impossible. On top of this, a higher burden of proof would make winning their cases that much harder.

The proposed rules may also give borrowers less time to apply for relief. Students have six years from the date they discover a breach of contract to file a claim. The new rule limits that length of time to three years from when the borrower leaves school. Oddly enough, this time period coincides with the time period schools have to report how many students are not making payments on their federal student loans.

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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.

Bankruptcy Law, Debt Relief, Timothy Kingcade Posts

Miami bankruptcy attorney Timothy S. Kingcade Obtains Successful Order for Chapter 7 Bankruptcy Client

Posted on July 26, 2018by Admin

Court Finds in Favor of Kingcade Garcia McMaken Client- Plaintiff’s Objections to Defendant’s Bankruptcy Discharge Denied

Bankruptcy Attorney Timothy S. Kingcade, founding partner of Miami-based Kingcade Garcia McMaken successfully obtained an Order for his client in a Chapter 7 case (In re: Mirta M. Ramos Case No. 16-27127-BKC-RBR) determining Objection to Discharge. Florida Bankruptcy Judge, Raymond B. Ray signed an order in our client’s favor on July 24, 2018.

“We are extremely pleased with this win for our client. The Court found that the amount of litigation demonstrated the plaintiff’s personal animosity towards our client, especially after he went as far as to request our client’s bankruptcy discharge be revoked,” Kingcade said.

The matter came before the court for trial on April 20, 2018, upon the Plaintiff’s (Anderson Triggs) Complaint seeking revocation of the Defendant’s bankruptcy discharge. The Plaintiff and Defendant are the parents of a minor child with autism and have multiple other pending family law cases with the Court. In addition, the Plaintiff filed a lawsuit against our client in the State Court alleging civil conspiracy, defamation (libel and slander), tortious interference with a business relationship, intentional infliction of emotional distress and invasion of privacy.

The Defendant was the sole witness at trial and a first-time bankruptcy filer. The Court found that she provided credible testimony with honest answers and displayed no intention to deceive the Court. In the end, the Court found in favor of our client and the Plaintiff’s attempts to have her bankruptcy discharge revoked were denied.

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For more information visit, https://www.miamibankruptcy.com/.

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

How Debt Can Sabotage Your Retirement Plans

Posted on July 25, 2018by Admin

Getting out of debt can be tough at any age, but for those nearing retirement age the challenge can be particularly daunting.

According to an Experian study published in 2017, Baby Boomers hold on average approximately $188,828 in mortgage debt and over $27,000 in other debt. Consumers who are considered Generation X who are now entering their 50s hold even more debt, with $231,774 in mortgage debt and $30,334 in other debt.

While it is normally agreed that younger individuals are more likely to carry debt because they are just starting their lives and have a longer period to pay off the debt, the survey showed that only 18 percent of households with workers 50 years or older did not have any debt. The most common types of debt include: credit cards, mortgages and car loans.

People who carry debt tend to have less discretionary income to save for the future, especially when it comes to retirement. However, with pensions being eliminated and the uncertainty of Social Security benefits, the need to save for retirement is more important now than ever. It is a given that workers need to contribute towards their 401(k) accounts, which many do. However, more workers are also borrowing from their 401(k) accounts- and paying the price for it.

In fact, approximately one in six workers over the age of 50 have taken a loan from their 401(k) to pay off some other type of debt, an unplanned major expense, medical bills or other financial issue. In the past, emergency savings accounts were meant to help people through these types of financial issues, but currently, for workers who are over 50 years old have only an average of $10,000 in their savings accounts.

The problem with borrowing from a 401(k) is it can be risky for the borrower. Many times, if the person cannot repay the loan from the 401(k) within a set period for any reason, he or she will end up owing the IRS a great deal of money, which can include a 10 percent early withdrawal tax penalty.

Prior to the 2017 tax law, a person who borrowed from his or her 401(k) had 60 days after leaving a job to repay the loan, or a penalty would be assessed. However, for loans taken from a 401(k) after the start of 2018, and the person leaves a job, the borrower can put the money back into the plan, into an IRA or a new 401(k) plan up until October of the following tax year to avoid the penalty.

How are retirement accounts treated in bankruptcy? Individual retirement accounts like 401(k)’s and IRA’s are protected in bankruptcy, along with social security and pensions worth up to $1.245 million are all exempt from creditors during bankruptcy. This means that retirement income and savings are out of reach and protected under federal law. That is why you should never pull from retirement accounts to pay off debt like credit cards or medical bills you cannot afford to pay.

Some people think that filing for bankruptcy means they will lose everything. That is one of the biggest bankruptcy myths out there. To the contrary, you will likely get to keep a lot of your possessions including homes, cars and other assets. A vast majority of Chapter 7 cases are “no-asset” cases, which means the debtor is not required to give up any of their possessions.

Click here to read more on this story.

If you have any 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, Student Loans, Timothy Kingcade Posts

More Millennials Carry Credit Card Debt than Student Loan Debt

Posted on July 23, 2018by Admin

Student loan debt has said to have been the biggest financial burden the Millennial generation will face, but more and more individuals in this generation say they are in fact, struggling with credit card debt. In fact, credit card debt – as opposed to student loan debt – is the most prevalent type of debt among the group. According to a recent NBC News/GenForward survey, 46 percent of U.S. adults between the ages of 18 and 34 carry credit card debt. Approximately 36 percent of them carry student loan debt. The survey reported that around three out of four Millennials carried some type of debt. More than 75 percent of those surveyed said they carried at least one type of debt, including credit cards, student loans and car loans. Only one in five Millennials reported having a mortgage debt.

One-fourth of these Millennials who carry credit card debt have balances of more than $30,000. One-fourth say that their balances are below $10,000. Around 11 percent of those in this age group surveyed have over $100,000 in debt with 22 percent of them being debt free.

The survey found that Millennials with college degrees were more likely to have credit card debt with 56 percent reported graduating with credit card debt. Forty percent who held credit card debt did not have a college degree.

When it comes to having a personal savings, 62 percent of Millennials owed more in debt than they had in a savings account. Only less than one-fourth had more in their savings account than owed in debt. Approximately one in three Millennials have less than $1,000 in savings. One-fourth of Millennials have no savings at all.

Entering the workforce with such a large amount of debt pushes young individuals to hold off on saving for the future, which leaves many of them unprepared in the event of an emergency. It also puts them at a slower start in preparing for retirement.

When asked if they would have trouble paying on an unexpected financial expense of $1,000 or more, two-thirds of them stated they would have a hard time meeting that obligation. Out of the group surveyed, those who were African-American or Latino would have the hardest time paying these obligations, although the difficulty was not exclusive to just these two groups.

If the Millennials were parents, around 48 percent of them reported that they would have a great deal of trouble in the event a financial crisis; for example, a job loss or medical emergency. Of the Millennials who did not have children, 39 percent of them reported this fact.

Credit card debt and student loan debt have caused a number of Millennials to postpone major life events like starting a family, purchasing a home and saving for retirement.

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Bankruptcy Law, Debt Relief, Timothy Kingcade Posts

How Former Billionaire Known As ‘Catwoman’ Went Bankrupt

Posted on July 20, 2018by Admin

New York City socialite Jocelyn Wildenstein once worth billions of dollars has filed for Chapter 11 bankruptcy protection. She listed her Citibank account balance as $0 in the filing. The 77-year-old says she is unemployed and now relies on only social security and the kindness of friends and family to pay for ongoing expenses.

One thing working in her favor is the amount of property she has, which is in the millions. She listed assets of $16.39 million against $6.38 million in liabilities, and her holdings include an apartment valued at $11.75 million in the Trump World Tower in Manhattan, plus a 2006 Bentley now worth $35,000, according to the bankruptcy filing.

However, her debts are also in the millions and include more than $300,000 owed to various lawyers. And she owes $4.6 million on her apartment, which is currently in foreclosure, according to court papers.

The $2.5 billion divorce settlement she received in 1999 from the late billionaire art dealer Alec Wildenstein has virtually disappeared. But she alleges that her money woes are not a result of overspending, but rather problems with the trust she got in her divorce.

Click here to read more on this story.

If you 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, Student Loans, Timothy Kingcade Posts

New Bankruptcy Rules Proposed for Student Loan Debtors

Posted on July 19, 2018by Admin

According to a recent report from the Consumer Financial Protection Bureau, it is estimated that there are around 44 million individuals with student loan debt. The report showed that around $1.4 trillion is owed by total student loan borrowers. Of this amount, around 11 percent of that debt is past 90 days overdue. These figures show one common theme: student loan debt affects many Americans and not in the good way.

Student loan debt becomes an even bigger problem for those borrowers who are not able to keep up on their payments. It has traditionally been impossible for a borrower to have his or her student loans discharged in bankruptcy, which meant that these individuals were continued to be burdened by immense debt even after bankruptcy was over. It seems counter-intuitive since the purpose of bankruptcy is to get a financial fresh start, which has led to recent proposals to change the way student loans are handled in bankruptcy.

A recent bill, the HIGHER ED Act, H.R. 5549, introduced in April 2018 by Oregon Democratic Congressman Peter DeFazio has proposed significant changes to how student loans are handled in bankruptcy. The legislation would broaden the legal definition of “undue hardship,” which is the standard used by bankruptcy courts to determine if a borrower is eligible for discharge of his or her student loan debt.

The “undue hardship” determination has never been truly defined, and bankruptcy courts have had to decide on what it means on a case-by-case basis, and this inconsistent application has led to inconsistent rulings across the board. Earlier in 2018, the U.S. Department of Education had issued a statement requesting public comments on whether the undue hardship definition needed to be modified. The Department had previously expressed concerns that the undue hardship test has kept borrowers from trying to see relief from their debts through bankruptcy.

In a recent study written by Jason Juliano at the University of Pennsylvania Law School, it was found that around 40 percent of borrowers who included their student loan debts in their initial bankruptcy filings ended up with some or all of their debt obligation discharged. That number does not seem too bad until it is compared with the 0.1 percent of filers who actually attempted to discharge their student loan debts. This number shows that people simply do not even feel it is worth trying to discharge their student loan debts.

When it comes to bankruptcy and student loan debt, there are some common misconceptions. One being, that student loans are never dischargeable in bankruptcy. In fact, there are ways to file for bankruptcy with student loan debt.

All of the federal courts of appeals, with the exception of the Boston 1^st U.S. Circuit Court of Appeals and St. Louis 8^th U.S. Circuit Court of Appeals have adopted what is commonly referred to as the Brunner test in defining undue hardship. The test goes through three factors when making this determination:

If the borrower had to continue to pay back the loan, would he or she be able to maintain a minimal standard of living?
Are the borrower’s financial difficulties expected to continue for the next several years, or are they temporary?
Has the borrower made efforts to keep up with student loan payments before deciding to file for bankruptcy?

Under the Brunner Test, the borrower must be able to show that the debt has made it impossible for him or her to support themselves and their families and that the financial situation is not expected to change without the debt being discharged or lifted.

The Department of Education is taking the comments and data received this year and hopes to re-evaluate this criterion. The Department also hopes to change the weights given to each of the three factors and make the discharges more accessible to student loan borrowers who desperately need relief.

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