Tag: student loan bankruptcies

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

Disabled no longer face big tax hit when student loans are forgiven

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Borrowers who have had their federal student loans forgiven due to “total and permanent” disability determinations will no longer have to pay federal income taxes on the amount forgiven. This change is great news for borrowers who anticipate having loans forgiven in the future. However, if the disabled borrowers were granted loan forgiveness prior to the rule change in December, the benefit does not extend to them as the Tax Cuts and Jobs Act is not retroactive.

According to a report issued by the U.S. Government Accountability Office (GAO) in December 2016, the United States Department of Education forgives an estimated $2 billion in loans owed by disabled borrowers annually.

Disabled borrowers include veterans who are no longer able to work due to service-related injuries but also anyone who is determined to be “totally and permanently disabled” by a physician and is now receiving disability benefits from the Social Security Administration. According to the GAO, over 213,000 people were approved for discharges due to total and permanent disability (TPD) in 2014 and 2015. The typical amount forgiven in 2015 was around $17,500, an amount which would be then considered taxable income by the IRS.

In 2016, the Department of Education, utilizing a computer matching software, identified an additional 387,000 borrowers who appeared to be eligible for loan forgiveness. Notifications were then sent to these individuals regarding their eligibility, also warning them of the tax consequences. An additional 19,000 in new approvals for loan forgiveness were then made.

However, the fact that only 19,000 followed through showed that borrowers may have been either intimidated by the paperwork or scared of the tax consequences of the student loan forgiveness.

Now that no federal tax implications are tied to loan forgiveness for disabled borrowers, lawmakers want to see the Department automatically clear out the debt of those who do meet the eligibility requirements by using the same or similar computer matching program that was previously used. In fact, on Feb. 15, eight lawmakers sent a letter to Secretary of Education Betsy DeVos and VA Secretary David Shulkin, asking that the process begin in discharging these debts.

“Veterans who have served our country with honor and sustained a debilitating service-connected disability are still facing the burden of payments on debt that is eligible to be forgiven,” the letter said. “Delaying benefits owed to our veterans due to a lack of coordination among federal agencies is unacceptable.”

Certain issues may delay borrowers from filing for a TPD discharge, especially if the filer is not a veteran. Delays have been known to happen at the Social Security Administration level.

“Borrowers with disabilities who are eligible for loan discharge may still struggle to get relief from the burden of their student loans,” the Consumer Financial Protection Bureau’s student loan ombudsman, Seth Frotman, reports. “Borrowers complain to the Bureau about problems related to every stage of the TPD discharge process.”

Once approval has been given for the disability and the borrower has been approved for loan forgiveness, it is also still possible that the approval can be taken away if the borrower fails to submit to annual income verification that is required for the three years following the approval, also known as the three-year monitoring period. The IRS is not notified that the loan has been forgiven until after the three-year period has been completed.

However, if the borrower was given TPD discharge through a VA application, he or she will not need to do the three-year monitoring period.

The Consumer Financial Protection Bureau (CFPB) suggests borrowers do the following when seeking TPD loan discharges:

  • Provide proof of disability from a physician, the Social Security Administration or Veterans Administration;
  • If the borrower’s loans are in default, it is recommended that he or she apply for discharge as soon as possible. Any payments being taken out of social security benefits will then stop while the application is being reviewed;
  • Remain in touch with the loan servicer during the three-year review period;
  • Discuss other options if the borrower has been turned down for a TPD discharge. Other income-based repayment plans do exist to help ease the burden if the borrower cannot get a total discharge.

There are ways to file for bankruptcy with student loan debt.  For borrowers who are struggling with student loan debt, relief options are available. Many student loan borrowers are unaware that they have rights and repayment options available to them, such as postponement of loan payments, reduction of payments or even a complete discharge of the debt. It is important you contact an experienced Miami bankruptcy attorney who can advise you of all your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade Garcia McMaken has been helping people from all walks of life build a better tomorrow. Our attorneys help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade Garcia McMaken website at www.miamibankruptcy.com.

Related Resources: https://www.credible.com/news/student-loans/disabled-no-longer-face-big-tax-hit-student-loans-forgiven/

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

Disabled Veterans Could See Their Student Loan Debt Cancelled

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The Department of Education announced this week that it will work together with the Department of Veteran Affairs to identify disabled student loan borrowers who are eligible for debt forgiveness. Borrowers will be notified of their potential eligibility in the mail and will also receive a Total and Permanent Disability Discharge application.

Many veterans are unaware that they may be eligible for student loan debt forgiveness.  There have also been recent changes in tax law that benefit those whose loans are discharged. A provision in the new tax code waives federal income taxes on forgiven education debt for permanently disabled people.

Previously, the IRS considered the cancelled debt as taxable income.  For example, in a 2017 case a veteran who had his $223,000 in student loan debt forgiven, received a tax bill of $62,000.

Click here to read more on this story.

There are ways to file for bankruptcy with student loan debt.  For borrowers who are struggling with student loan debt, relief options are available. Many student loan borrowers are unaware that they have rights and repayment options available to them, such as postponement of loan payments, reduction of payments or even a complete discharge of the debt. It is important you contact an experienced Miami bankruptcy attorney who can advise you of all your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade Garcia McMaken has been helping people from all walks of life build a better tomorrow. Our attorneys help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade Garcia McMaken website at www.miamibankruptcy.com.

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

Class Action Lawsuit Brings Hope to Student Loan Borrowers in Bankruptcy

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A Texas bankruptcy judge has denied a request by student loan giant, Navient, to dismiss a class-action lawsuit accusing the firm of illegally collecting on loans that were discharged in bankruptcy. The decision means the case can move forward and allow the opportunity for an appellate court to consider whether loans historically viewed as exempt from bankruptcy can be discharged.

The ruling is an important one, as the Department of Education is currently reviewing the high standard student loan borrowers must meet to have their student loan debt discharged in bankruptcy.  The case in question focuses on a specific type of private loan debt (i.e. – money loaned to borrowers to pay for unaccredited programs, such as bar exam study courses and K-12 educational expenses).  However, if the appellate court rules in favor of the plaintiffs, it could mean that borrowers with similar student loans from other companies could qualify for the same relief.

Before this ruling, bankruptcy courts have determined that the types of loans in question in this case cannot be discharged because they were received as an “educational benefit.”  Recently however, lawyers and judges have started to challenge whether loans to help borrowers study for the bar exam and other similar debts truly fit into the category.

Click here to read more on this story.

For borrowers who are struggling with student loan debt, relief options are available. Many student loan borrowers are unaware that they have rights and repayment options available to them, such as postponement of loan payments, reduction of payments or even a complete discharge of the debt. It is important you contact an experienced Miami bankruptcy attorney who can advise you of all your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade Garcia McMaken has been helping people from all walks of life build a better tomorrow. Our attorneys help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade Garcia McMaken website at www.miamibankruptcy.com.

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

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

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

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

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

Click here to read more on this story.

For borrowers who are struggling with student loan debt, relief options are available. Many student loan borrowers are unaware that they have rights and repayment options available to them, such as postponement of loan payments, reduction of payments or even a complete discharge of the debt. It is important you contact an experienced Miami bankruptcy attorney who can advise you of all your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade Garcia McMaken has been helping people from all walks of life build a better tomorrow. Our attorneys help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade Garcia McMaken website at www.miamibankruptcy.com.

Bankruptcy Law, Student Loans, Timothy Kingcade Posts

Will Student Loans Be Discharged In Bankruptcy Under Trump Administration?

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

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

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

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

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

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

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

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

Click here to read more on this story.

For borrowers who are struggling with student loan debt, relief options are available. Many student loan borrowers are unaware that they have rights and repayment options available to them, such as postponement of loan payments, reduction of payments or even a complete discharge of the debt. It is important you contact an experienced Miami bankruptcy attorney who can advise you of all your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade Garcia McMaken has been helping people from all walks of life build a better tomorrow. Our attorneys help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade Garcia McMaken website at www.miamibankruptcy.com.

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

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

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

The three-pronged test to determine undue hardship:

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

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

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

Click here to read more on this story.

For borrowers who are struggling with student loan debt, relief options are available. Many student loan borrowers are unaware that they have rights and repayment options available to them, such as postponement of loan payments, reduction of payments or even a complete discharge of the debt. It is important you contact an experienced Miami bankruptcy attorney who can advise you of all your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade Garcia McMaken has been helping people from all walks of life build a better tomorrow. Our attorneys help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade Garcia McMaken website at www.miamibankruptcy.com.

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

Top 10 Reasons People File for Bankruptcy

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While it is commonly assumed that people who file for bankruptcy cannot resist the temptation of using credit cards or are self-proclaimed shopaholics, most people go bankrupt for other reasons.  Here are the most common reasons people file for bankruptcy.

  1. Medical debt. Medical expenses account for approximately 62 percent of personal bankruptcy filings in the U.S., according to a recent Harvard University study.  And interestingly enough, the study revealed that 72 percent of those who filed for bankruptcy due to their medical bills had some form of health insurance.
  2. Reduced income. Companies are cutting back on expenses and for many employees that means pay cuts. Less income, combined with an unexpected expense can end in bankruptcy.
  3. Job loss. The sudden loss of a job can quickly deplete ones savings.  Approximately 62% of Americans have less than $1,000 in savings and 21% live month-to-month.
  4. Credit card debt. This is not always the result of irresponsible spending, but can accumulate due to an unexpected medical expense, illness or job loss.
  5. Divorce. This can mean a significant loss of income and assets for both partners. It can also mean taking on a portion of your partner’s debt if you co-signed on a loan during the marriage.
  6. Unexpected expenses. Emergencies can happen to any one of us, whether your vehicle breaks down, you suffer a debilitating illness or a catastrophic storm damages your home—these events can deplete savings quickly.
  7. Student loans. Even though these are difficult to discharge in bankruptcy, statistics show that student loans account for at least one percent of all U.S. bankruptcy filings, which translates to approximately 15,000 bankruptcies a year.
  8. Utility payments. For many homeowners, the rising costs of utilities- such as heating, air conditioning and electricity- can quickly add up and pave the way to bankruptcy.
  9. Foreclosure. A number of people file for bankruptcy in an effort to save their homes from foreclosure.
  10. Money mismanagement. Money management has become more difficult, thanks in part to inflation.  A combination of poor spending habits and incorrect budgeting can quickly spiral into debt.

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.

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

More Seniors Struggling with Student Loan Debt

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More than 5 million people began paying off federal student loan debt between October 1, 2013 and September 30, 2016, according to the U.S. Department of Education.  And not all of them were young people.

The number of borrowers over the age of 60 with student loan debt has quadrupled over the past decade in the United States.  Of the more than 5 million people, 580,671 of them — or 11.5 percent — defaulted on their loans. This is a slight increase from the previous year’s 11.3 percent and the first time the percentage has increased in the last five years.

Many have accumulated the debt helping their children or grandchildren, either by borrowing directly or co-signing on student loans.  As these borrowers age, it becomes more difficult to afford the monthly payments while also paying for necessary food, housing, prescriptions, and medical expenses.

Seniors living month-to-month on fixed incomes are most likely to default.  When this happens to borrowers 65 and older, a portion of their social security benefits can be seized by the government.  Many seniors who are carrying federal student loan debt are eligible for income-based repayment plans, but student loan servicing companies have not made it easy for borrowers to enroll in these programs or even let them know it is an option.

For Florida seniors who are struggling with student loan debt, relief options are available. Many student loan borrowers are unaware that they have rights and repayment options available to them, such as postponement of loan payments, reduction of payments or even a complete discharge of the debt. It is important you contact an experienced Miami bankruptcy attorney who can advise you of all your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade Garcia McMaken has been helping people from all walks of life build a better tomorrow. Our attorneys help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade Garcia McMaken website at www.miamibankruptcy.com.

Related Resources:

https://www.dcourier.com/news/2018/jan/12/more-seniors-citizens-have-student-loan-debt/

 

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

New House Bill Calls for Federal Student Loan Caps, End of Public Service Loan Forgiveness

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A new bill from House Republicans could end Public Service Loan Forgiveness for student loans.  The U.S. House of Representatives will consider proposed changes to the Higher Education Act, including limits on the amount of money students and parents can borrow in government student loan programs, and ending loan forgiveness programs for public interest employees.  Approximately a quarter of jobs in the U.S. economy are considered public interest positions.

The earliest someone could receive loan forgiveness under the Public Service Loan Forgiveness (PSLF) program was October 2017, and not a single person has reported receiving loan forgiveness through the program.

The proposal also suggests changes to student loans’ income-driven repayment plans. Currently, if borrowers make payments of between 10 and 15 percent of their discretionary incomes the remainder of their school loans will be forgiven after 20 or 25 years.

Rep. Virginia Foxx (R-N.C.) and Rep. Brett Guthrie (R-KY) of the House Committee on Education and the Workforce introduced the 542-page legislation known as the Promoting Real Opportunity, Success and Prosperity through Education Reform (PROSPER) Act. The PROSPER Act, if implemented, would have borrowers in income-driven repayment plans “pay 15 percent of discretionary incomes for as long as it took to cover the amount they would have paid under a 10-year standard repayment plan,” according to the Wall Street Journal.

Click here to read more on this story.

For borrowers who are struggling with student loan debt, relief options are available. Many student loan borrowers are unaware that they have rights and repayment options available to them, such as postponement of loan payments, reduction of payments or even a complete discharge of the debt. It is important you contact an experienced Miami bankruptcy attorney who can advise you of all your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade Garcia McMaken, P.A. has been helping people from all walks of life build a better tomorrow. Our attorneys help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade Garcia McMaken website at www.miamibankruptcy.com.

Related Resources:

https://www.forbes.com/sites/zackfriedman/2017/12/06/house-bill-student-loan-forgiveness/#1f25540b7990

 

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

Student Loan Borrowers Awarded $3.75 Million from Citibank

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The Consumer Financial Protection Bureau said in a consent order that Citibank improperly misled borrowers into believing they were ineligible for a tax deduction on interest they paid on certain student loans.  Student loan borrowers who were effected, will share $3.75 million in payments from Citibank for financial practices that forced them to make overpayments, a federal watchdog said this week.

In addition, the bank incorrectly charged late fees and extra interest to borrowers who were still in school and eligible to defer repayments on their student loans.  Citibank also misled borrowers about their monthly bills and failed to disclose required information after the bank denied borrower requests to release loan co-signers.

“Citibank’s servicing failures made it more costly and confusing for borrowers trying to pay back their student loans,” Richard Cordray, the consumer bureau’s director, said in a statement issued with the announcement.

Federal law allows student loan borrowers to deduct as much as $2,500 in annual interest they pay on student loan debt. However, Citibank made statements that suggested the borrowers had not paid qualified interest or were ineligible for the deductions.

Click here to read more on this story.

For borrowers who are struggling with student loan debt, relief options are available. Many student loan borrowers are unaware that they have rights and repayment options available to them, such as postponement of loan payments, reduction of payments or even a complete discharge of the debt. It is important you contact an experienced Miami bankruptcy attorney who can advise you of all your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade Garcia McMaken has been helping people from all walks of life build a better tomorrow. Our attorneys help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade Garcia McMaken website at www.miamibankruptcy.com.