student loan bankruptcies Archives - Page 8 of 12

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

Student Loan Borrowers Increasingly Turning to Bankruptcy to Alleviate Debt

Posted on January 2, 2017by Admin

Those struggling with student loan debt often do not see a way out. The stress of monthly payments is causing more graduates to put off things like marriage and buying a home. However, a new trend is helping alleviate the pressure: filing for bankruptcy.

Since March there have been a number of bankruptcy courts that have allowed borrowers to discharge their private student debt thanks to the vague wording in the definition of a student loan.

Bankruptcy law states that a borrower cannot discharge a loan that was for an educational benefit without proving “extreme hardship.” An increasing amount of students are arguing that their loans fall outside of this debt category because they attended a college that was not accredited or used loans that were taken out for the purposes of studying for a test like the bar exam.

This is an argument borrowers would not be expected to win, but in recent cases some judges have agreed with the borrower.

An example of this is a 37-year-old woman who filed for bankruptcy in 2014 and was able to discharge the unpaid portion of a $15,000 Citibank loan she needed to study for the bar exam. U.S. Bankruptcy Court Judge Carla Craig ruled that loan debt for bar exams is comparable to consumer debt and does not fall into the category of student loans that remains with a borrower even after bankruptcy.

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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. It is important you contact an experienced Miami bankruptcy attorney who can advise you of all your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade & Garcia, P.A. has been helping people from all walks of life build a better tomorrow. Our attorneys help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade & Garcia website at www.miamibankruptcy.com.

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

Social Security Checks Being Garnished for Unpaid Student Loan Debt

Posted on December 29, 2016by Admin

In an effort to recoup millions of dollars in unpaid student loan debt, the government has resorted to taking money from borrowers’ social security checks. Since 2001, the government has collected about $1.1 billion from recipients of all ages. In 2015 alone they collected $171 million. This has left thousands of retired or disabled Americans with below-poverty incomes, according to a recent report from the Government Accountability Office.

As of September 2015, 114,000 Americans who were 50 and older had their Social Security benefits reduced to offset defaulted student loans, according to the report. Since 2002, the figure has increased by 440%.

The report identifies an increasing trend of baby boomers entering retirement with student loan debt. According to the report, approximately 43% of people whose Social Security checks were decreased have held their student loans 20 years or more.

Borrowers who are determined to be permanently and totally disabled are entitled to have their student loan debt forgiven, though many are unaware of the option, according to the Wall Street Journal. Currently, the government’s student-loan portfolio is $1.26 trillion, with an increasing number of people continuing to fall behind on their payments.

Related Resources:

http://www.wsj.com/articles/social-security-checks-are-being-reduced-for-unpaid-student-debt-1482253337

http://fortune.com/2016/12/20/social-security-checks-garnished/

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

Student Loan Debt Forgiveness Signed into Law in New Jersey

Posted on December 7, 2016by Admin

Governor Chris Christie signed a bill into law this week that will eliminate student loan debt in the event of death and total disability, and allow for deferment of payments and interest accumulation for those who are temporarily disabled.

The change comes after an investigation into the case of a mother who was forced to continue paying her son’s student loans after his senseless murder. It brought to light New Jersey’s punitive lending practices. The bill’s sponsors in the lower house called its success a victory for students and parental co-signers who could have been left with insurmountable debt after a tragedy.

The primary sponsor of the bill, State Assemblyman Vince Mazzeo, made the following statement:

“Imagine you’re a family who always pays their bills, has good credit and then you lose a child and in the midst of your grief, you’re saddled with tens, if not hundreds, of thousands of dollars in their remaining student loan debt,” Mazzeo wrote. “That’s just something we can’t allow to happen on our watch.”

Fellow sponsor Andrew Zwicker also praised the change.

“To expect a student’s family or other survivors to pay their college loan debt in the event of their death is cruel and unacceptable. We can do better than that,” Zwicker wrote.

New Jersey’s Higher Education Student Assistance Authority (HESAA) will now be obligated to forgive those debts. In cases of permanent or temporary disability, borrowers will have to provide a written statement from their physician attesting to their condition.

Unlike other states, New Jersey does not allow for payments to be adjusted by income and charges higher interest rates than similar federal programs. The state can also garnish a borrower’s wages for non-payment and revoke professional licenses without court approval.

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

For-Profit College Debt Strikers Plead with Obama to Discharge their Loans before Trump’s Inauguration

Posted on December 5, 2016by Admin

More than 1,000 students (calling themselves the Debt Collective) from for-profit schools are protesting, claiming their colleges used manipulative financial tactics while providing them with a subpar education.

They released a statement and video on Monday, pleading with President Obama to discharge their student loans before President-elect Trump’s inauguration. The Debt Collective claims that the Obama Administration has yet to provide the relief it promised. One former Corinthian student said she had $32,000 of student loan debt and was unemployed, despite having applied to about 300 jobs in the criminal justice field. She said she had either received no response or had been told she did not qualify.

The Department of Education refunds federal loans to students enrolled in the last 120 days before a college closes in what is called a closed school discharge. ITT Tech closed its doors in September. But students who left the school before that 120-day time frame or who graduated but still feel they were defrauded by their college must instead file a “borrower’s defense to repayment” claim.

The Obama Administration had planned to resolve back-logged relief claims from Corinthian and ITT Tech students by the spring of 2017, but will likely now be under additional pressure to speed resolution of the claims.

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

Bankrupt Student Can Discharge Debt because it “Technically” Was Not a Loan

Posted on December 1, 2016by Admin

A financial agreement between a student and an educational institution is not considered a student loan and as a result in the bankruptcy case ( D’Youville Coll. v. Tucker (In re Tucker), the borrower was able to discharge her debt.

Judge Michael J. Kaplan of the U.S. Bankruptcy Court for the Western District of New York concluded that because the debt was not “an education benefit overpayment or a loan,” the exception to discharge under Bankruptcy Code Section 523(a)(8)(A)(ii) does not apply.

The financial agreement entered into between both parties was “no more than an agreement to pay for tuition, fees and other registration costs (whatever they turn out to be), at some unspecified future time, and not for an ‘educational benefit overpayment or loan’ as contemplated in §523(a)(8)(A)(i), the court said.

This case is similar to two other recent cases in the Western District of New York, with the exception that in this one, there was no promissory note signed by the debtor.

Exceptions to discharge under the Bankruptcy Code are construed narrowly and a creditor must prove by a preponderance of the evidence that its claim falls within one of those exceptions.

The court sided with the borrower in this case because it did not find a specific amount due in the financial agreement. The agreement contained a monthly interest provision and indicated that an adjustment would be made for financial aid received at a later time.

The financial agreement between the parties was “nothing more than a running account,” the court said.

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

Xerox Ordered to Pay $2.4 Million to Settle Illegal Debt Collection Charges

Posted on November 30, 2016by Admin

Many of us know Xerox as the company that handles office supplies, printers and similar products. However, back in 2009 the company acquired ACS and has been operating as a lender of student loans through Xerox Education Services (XES).

The division has come under much scrutiny in the past year for allegedly violating debt collection laws and overcharging borrowers. Now the company has decided to settle the charges by paying a $2.4 million settlement.

The initial investigation began in December of 2015. After analyzing the company’s loan servicing practices, officials found that XES had failed to properly process applications for federal loan relief associated with the Income-Based Repayment Plan under the Higher Education Act. This forced student loan borrowers to pay more than they needed on their debt. They were also hit with more late fees when they could not afford to make their payments.

The company was charged with violating debt collection regulations by making frequent and repeated phone calls to borrowers and not investigating credit reporting disputes. This led to false information being reported to credit agencies.

Under the settlement, XES will pay $2.4 million, which will be be used as restitution for borrowers who tried to apply for relief but were not able to enroll. The company has also agreed to credit late fee overcharges, reform service members’ accounts, stop its illegal debt collection practices, and establish a “Borrower Advocacy Group” that will help loan recipients apply for income-based repayment plans.

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

Banks Revise Student Loan Contracts to Help Borrowers Avoid Automatic Default

Posted on November 2, 2016by Admin

Private lenders are revising student loan contracts to ensure borrowers are not placed in default when the co-signer of their loan dies or declares bankruptcy. In a letter obtained by The Washington Post, Consumer Bankers Association President Richard Hunt informed Consumer Financial Protection Bureau (CFPB) director Richard Cordray that the 10 member banks who offer student loans, including Wells Fargo, PNC Bank, Discover and Sallie Mae, have changed their policy on these type auto defaults.

The banks will no longer trigger a default when a co-signer dies, while most will do the same in the event of a bankruptcy. The same policy will apply with existing loans.

Earlier this year, the CFPB warned bankers that they were at risk of breaking the law by automatically placing people who were current on their loans in default. The practice occurs in the private student loan market, where banks and other financial firms provide education financing with loan contracts that give them the right to trigger a default, even if the loan is being paid on time. Auto defaults leave borrowers with no choice but to repay the entire balance of the loan or ruin their credit, making it difficult to purchase a home or car.

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

Student Loan Debt Hits another Record High

Posted on November 1, 2016by Admin

Student loan debt has reached another record high, according to the annual report of The Institute for College Access and Success (TICAS). In fact, 68% of graduating seniors had student loans, and their average debt increased 4% from the previous year’s record to $30,100.

This means college graduates will face student loan payments exceeding $300 a month over the next 10 years. What is more disturbing is that 19% of those loans are private student loans, which are loans issued by banks instead of the federal government.

Private student loans tend to come with higher interest rates, non-flexible repayment plans and oftentimes do not offer loan forgiveness. Compared to federal loans, private student loans can be much harder to repay, especially if the borrower falls on hard times.

The high level of private debt is concerning because much of this debt is avoidable. Nearly half of students who take out private loans have not maximized all of the federal student loans they are eligible for. The U.S. Department of Education will lend almost any undergraduate anywhere from $5,500 to $12,500 a year, depending on their age and year in school.

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

Government Likely to Forgive Billions in Student Loan Debt – but only if you qualify

Posted on October 12, 2016by Admin

Student borrowers who have been working since 2007 in public service are looking forward to next year. This will be the first time the government will forgive debt under the Public Service Loan Forgiveness (PSLF) program. The program states that individuals who work for ten years in specific careers are eligible to have the remaining balance of their loans forgiven.

These areas include working for:

Non-profit organizations;
Libraries;
Schools;
Certain government jobs.

To qualify, borrowers must make on-time payments on their student loans during the ten years they work in public service. The payments can be made under an income-based repayment plan if the borrower qualifies.

With as many as 25% of working individuals qualifying, the government may have to forgive more than anticipated. More borrowers took advantage of the program than the government had expected. The average amount of loans carried by those in the program is $60,000. About 30% have debt over $100,000. This means the government will have to forgive more than $12 billion in student loans between 2017 and 2027.

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

More than half of all student loan borrowers have seen scams

Posted on September 15, 2016by Admin

Approximately 60% of more than 6,300 student loan borrowers surveyed said they have seen scams for advertisements promising relief from their student loan payments. Nearly 45% of the respondents said at least one of these companies reached out to them directly, according to the survey conducted by the personal finance site NerdWallet, and student loan advocacy group, Student Debt Crisis.

These predatory companies offer to help borrowers with their student loan payments for a fee, but typically provide services borrowers can access from the government for free- or sometimes they provide nothing at all. The more than 40 million student loan borrowers with $1.3 trillion in student loan debt has become a vulnerable part of the population.

In response to borrowers’ struggles, the Obama administration has gone to great lengths to expand the assistance programs borrowers can use to manage their debt. But scammers have used these programs as an opportunity to lure borrowers, advertising their services with government logos and phrases like “Obama student loan help.”

About 9% of the survey respondents said they paid for student debt relief services, spending an average of $613. The Consumer Financial Protection Bureau has taken legal action, accusing various student loan debt relief companies of deceiving borrowers into paying for services they can get for free from the government and keeping borrowers on the hook for a repeating charge illegally.

Consumer advocates say the prevalence of these student loan debt relief scams is reminiscent of the mortgage crisis, where servicers failed to provide homeowners with necessary information and scammers targeted a vulnerable portion of the population.

The Department of Education is taking action and working on revamping the student loan servicing system, giving servicers more of an incentive to work with borrowers, and repay their loans through one government-branded portal. By fixing the current system, borrowers will not be as tempted to turn to these predatory companies.

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