student loan bankruptcies Archives - Page 9 of 12

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

The collapse of ITT Tech gives former students a chance to wipe out their student loan debt

Posted on September 1, 2016by Admin

Students who graduated or dropped out of ITT Technical Institute may be the biggest winners in the federal government’s aggressive actions against the for-profit school. The Education Department’s sanctions on the Carmel-based ITT Educational Services Inc. allow past students to take advantage of the “defense to repayment” rule that can wipe out their student loans.

Federal law gives the Education Department broad discretion to forgive student loans for borrowers who claim they were defrauded or that their college violated state laws. The government recently made the case that ITT has done just that and is inviting former students to request what could amount to hundreds of millions of dollars in loan forgiveness.

The “defense to repayment” rule applies to all former students with federal loans, but does not cover private loans.

Another piece of good news- The Education Department is simplifying the claim process for borrowers. The defense to repayment rule falls under the U.S. Higher Education Act. It has existed for years, but received little attention until recently.

The Education Department has already forgiven more than $4.2 million in loans from more than 2,000 Corinthian College students who claim they were defrauded by the for-profit chain. Students at other for-profit colleges, such as Brown Mackie College, which is closing most of its campuses, will likely have a strong case as well due to the precedent set by Corinthian.

ITT has been ordered to begin working with other colleges to facilitate transfers for students. Anyone already enrolled in ITT can continue to access federal loans if they want to finish their program. If ITT closes, the Education Department has said it will forgive current students’ loans.

Here are some ways you can submit a claim:

Go online: https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation/borrower-defense

Email your claim: FSAOperations@ed.gov

Mail your claim: U.S. Department of Education, PO Box 194407, San Francisco, CA 94119

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

Ads Promote Fake ‘Obama Student Loan Forgiveness’

Posted on August 23, 2016by Admin

If you have student loan debt, you have probably already seen the advertisements online promoting “Obama’s New Loan Forgiveness Program.” Companies are charging borrowers upfront fees for services they can receive for free from the Department of Education.

Nine percent of student loan borrowers have used debt-relief companies, according to a recent survey by borrower advocacy group Student Debt Crisis and personal finance website NerdWallet. These consumers paid an average of $613 for income-based repayment plans and loan consolidation that they could have received at no cost from the federal government, the survey found. Sixty-five percent said the services did not improve their financial situation.

The Consumer Finance Protection Bureau has shut down three companies and the Department of Education has sent cease-and-desist letters to five just this year.

The Obama administration did expand repayment options for federal student-loan borrowers. In 2012, the Department of Education offered the “Pay-as-you-Earn” plan that reduced monthly payments to 10 percent of a borrower’s discretionary income, which was lower than the 15 percent required under the original income-based repayment plan.

Last year, an update was made to the plan, giving more than 1.6 borrowers more affordable student loan repayment options entitled, “The Revised Pay-as-you-Earn” plan. The percentage of borrowers enrolled in income-based repayment plans has quadrupled over the past four years from 5 percent in 2012 to nearly 20 percent in 2016.

The Department of Education offers four income-based repayment options for federal student loans. To enroll in any one of these plans, borrowers must complete an application from their loan servicer or online at StudentLoans.gov to verify their income.

Click here to read more on this story.

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

How the Presidential Candidates will Address Student Loan Debt

Posted on August 17, 2016by Admin

Student loan debt has topped $1.3 trillion and impacts approximately 43 million Americans, prompting a variety of efforts to help struggling students pay for college. It is also a very hot topic politically, with both presidential candidates expressing concerns about the federal government profiting off these loans. While some attribute the decline of state funding to driving up education costs, the presidential campaign has emphasized what Democratic nominee Hillary Clinton has called “the crushing burden of debt.”

Hillary Clinton’s Plan

One of the provisions in Mrs. Clinton’s plan to provide tuition-free education at public colleges and universities for students whose families make under $125,000 a year has sparked the most debate. But when she originally rejected Democratic rival Bernie Sanders’ more expansive plan, it invoked a long-running argument about who should shoulder the costs.

“I disagree with free college for everybody. I don’t think taxpayers should be paying to send Donald Trump’s kids to college,” she said at a Democratic debate in November 2015.

But some researchers have argued that certain provisions in Clinton’s plan will not have as much impact on how students pay for college as she claims. One example is her platform’s promise to “significantly cut interest rates so the government never profits from college student loans.”

Donald Trump’s Plan

Mr. Trump’s plan would give more oversight to colleges to decide whether to grant loans to a student based on their prospective major and future earnings.

“If you are going to study 16th-century French art, more power to you. I support the arts,” said Dr. Clovis, a professor at a professor at Morningside College in Iowa, who now serves as the campaign’s policy director. “But you are not going to get a job.”

Some researchers say these efforts defeat the purpose of providing government aid for students hoping to attend college in the first place, putting lenders in the positions of picking “winners and losers,” and determining destinies for young people who, like all of us, deserve a shot at the American dream. The campaign’s plan would also give private banks oversight over government-backed student loans, reversing a 2010 decision under President Obama to make the federal government the lender.

There is a substantial racial gap in who holds student loan debt. Some 54 percent of young African-American households (aged 25 to 40) have student debt, compared to 39 percent of young white households, according to a recent study.

Some advocacy groups have pushed for more transparency in how the Education Department collects debts from borrowers. In March, the American Civil Liberties Union and the National Consumer Law Center sued the department, in an attempt to learn more about how debt collection practices could impact borrowers of color.

Click here to read more on this story.

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

Parents Responsible for Nearly Every New Private Student Loan

Posted on July 11, 2016by Admin

Student loans are no longer just for students. New private student loans are requiring parents to sign on the dotted line as well. This change comes as lenders continue to strengthen the guidelines on underwriting requirements. Nearly every, or 94%, of private student loans distributed to undergraduates for the 2015-2016 academic year had more than one borrower responsible for the debt–not only the student but a co-signer, according to the report.

Five of the largest private student lenders distributed $6.46 billion in loans between July 2015 and March 2016, up 7% from the same period a year earlier–and the fifth consecutive year of increases, according to recent data from MeasureOne.

Cosigners are becoming more common with graduate school student loans as well. Nearly 61% of student loans dispersed for 2015-2016 had cosigners versus 57% the previous year. For lenders, cosigners increase the chance that the loan will be repaid, avoiding defaults. When the student borrower cannot make the payments, co-signers- usually the parents- have to pay up. Otherwise lenders can report both the student and co-signer of being late to the credit bureaus. That would lead to lower credit scores for both the student borrower and the cosigner, making it harder to obtain other types of financing.

Student loans are considered among the riskiest type of consumer loans, because it is difficult to determine whether borrowers will graduate or end up with a salary that is enough to repay the debt. In case you missed it, read our blog on the dangers of co-signing.

Click here to read more on this story.

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

Even Death does not Meet Threshold for Student Loan Debt Forgiveness

Posted on July 6, 2016by Admin

Grief stricken after her son’s unsolved murder, a New Jersey mother faced an endless list of tasks- helping the police track down his killer, cancelling his credit cards, bank accounts, cell phone and planning a funeral.

And then there were his college student loans she co-signed.

When she called about his federal loans, an administrator offered condolences and assured her the balance would be written off. However, she received a far different response from a New Jersey state agency that had also lent her son money.

“Please accept our condolences on your loss,” explained a letter from the Higher Education Student Assistance Authority of New Jersey. “After careful consideration of the information you provided, the authority has determined that your request does not meet the threshold for loan forgiveness. Monthly bill statements will continue to be sent to you.”

These loans also carry higher interest rates than similar federal programs. Most significant, New Jersey’s loans come with a hurdle that even the most predatory for-profit players cannot avoid: the power of the state.

New Jersey can garnish wages, rescind state income tax refunds, revoke professional licenses, and even confiscate lottery winnings— all without having to get court approval.

Some consumer attorneys compare it to “state-sanctioned loan-sharking, a program that is set up so that you fail.”

Like many states, New Jersey administers a student loan program designed to help students further their education in order to be competitive in today’s workforce. Where New Jersey differs with other states is the degree of difficulty in getting out from under burdensome loan payments despite extreme poverty, illness and even death.

Click here to read more on this story.

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

Common Sense and Compassion enter the Student Loan Bankruptcy Arena

Posted on June 30, 2016by Admin

In the case, Nightingale v. North Carolina State Educational Assistance Authority, the debtor, Alice Nightingale, 67 years old, suffered from “intractable foot pain,” hypothyroidism, obstructive sleep apnea, and chronic fatigue, all of which had worsened over the course of her chapter 13 bankruptcy. The condition prevented her from engaging in employment and from taking part in many day-to-day activities.

She was granted full disability from her teaching job by the County School Board. In a hearing in October, 2015, the court found Ms. Nightingale had established the first and third prongs of the Brunner test with evidence that she had attempted to repay the student loan, that she was “elderly” and unlikely to find future employment and that she suffered from significant medical problems. Although Ms. Nightingale’s testimony concerning her medical disabilities was credible, the second prong of the Brunner test still needed to be satisfied.

Over the lender’s objection, the court held a second hearing in which Ms. Nightingale presented medical documents to corroborate her testimony, including letters to Ms. Nightingale’s attorney from two of her doctors, a medical report for disability eligibility, and a physician-provided list of Ms. Nightingale’s current medications.

The subsequent hearing specifically addressed the second prong of the Brunner test: whether there existed “additional, exceptional circumstances, strongly suggestive of continuing inability to repay [the debt] over an extended period of time.”

While the court agreed with the lender that Ms. Nightingale could have presented evidence of recent tests and evaluations, it found that it was not necessary that she “provide every possibly available piece of evidence that could further corroborate the unrebutted evidence in this case.”

The court concluded: “Taking into consideration the Plaintiff’s age, current living situation, inability to walk or stand for long periods of time, chronic fatigue, lack of stamina, lack of strength, diminished cognitive ability, and the likelihood that these conditions will all last for a significant period of her possible repayment period given her age and the duration of her illnesses, the Plaintiff has demonstrated that exceptional circumstances exist in this case and has met the second prong of the Brunner test.”

Click here to read more on this story.

Related Resources:

http://www.ncbrc.org/wp-content/uploads/Nightingale-Bankr-MD-NC-opinion-April-2016.pdf

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

Shady College Practices could Erase Student Loan Debt

Posted on June 22, 2016by Admin

Proposed federal legislation will now make it easier for student borrowers, who have been cheated or misled by their college or university, to have their student loan debt forgiven.

The proposed rule changes announced last week by the U.S. Department of Education are part of an ongoing crackdown on the alleged abuses by for-profit colleges and universities.

Major provisions of the proposed debt-relief rule include:

An easier way to seek relief from federal student loans when a college has committed wrongdoing. The current “defense to repayment” process is complicated and subject to different rules depending on the state. It went largely unused until the collapse of Corinthian Colleges in 2015. As of today, more than 23,000 claims for student loan debt forgiveness have been filed, and the government has wiped out more than $42 million in debt for more than 2,000 borrowers so far.
Allowing group applications for debt relief in cases where there is school-wide wrongdoing. Currently, each student is required to file individually.
Requiring schools to warn current and prospective students if former students have poor loan repayment rates.
Doing more, sooner, to inform students whose schools have closed that they may qualify to have their loans forgiven.
Completely banning school agreements under which students sign away their right to sue schools and agree to participate in an arbitration process instead of notifying regulators about problems.
Requiring schools at financial risk to set aside funds, via irrevocable letters of credit, to cover the cost in case students eventually are due debt relief because the school fails to keep its promises to students. Conditions are set that would trigger the requirement (i.e. – a government entity filing a major suit against the school or the school relying too heavily on federal student loans.) Schools that activate these so called, “triggers” would be required to warn current and prospective students that they are at financial risk. Currently, when schools declare bankruptcy, taxpayers are responsible for the forgiven loans.

U.S. Education Secretary John King said, “These rules should make schools think twice,” about misleading students or engaging in risky enrollments.

U.S. Sen. Sherrod Brown, D-Ohio, praised the proposed rule, which is subject to a 45-day comment period, as “a victory for students.” These protections will stop for-profit colleges from using fine print to deny students their right to a day in court.

Click here to read more on this story.

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

Survey Reveals Student Loan Debt Hurting the Housing Market

Posted on June 15, 2016by Admin

Approximately three-quarters of people who have student loan debt say it is hindering them from purchasing a home, according to a recent survey. Although a college degree increases a person’s chances of obtaining a good job and a secure future, the survey found that many would-be homeowners are increasingly burdened by student loan debt.

Seventy-one percent of those surveyed said their student loan debt is delaying them from buying a home. More than half said they expect that delay to last longer than five years.

With 43 million Americans carrying nearly $1.3 trillion in student debt, the burden is affecting all parts of the economy. The home ownership rate among those 35-and-younger has declined from 44 percent at the height of the housing boom to 34 percent today.

Forty-three percent of those surveyed carried between $10,001 and $40,000 in student loan debt, while 38 percent owed $50,000 or more. The most common debt range was between $20,000 and $30,000.

As a result of their student loan debt, 69 percent of borrowers said they did not feel financially secure enough to buy a home, while 80 percent said they cannot save up enough for a down payment. This is not only affecting first-time home buyers, but also “move-up” buyers. A third of those surveyed who are current homeowners said they cannot afford to sell their home and purchase another because of their student loan debt.

Among the reasons cited were the expense of moving and upgrading to a new home, credit problems caused by student loan debt and owing more than their home is worth because student loan debt has limited their ability to pay more than the minimum on their mortgage payment.

The 33-question survey was sent to 75,000 student borrowers, of which 3,230 responded. Among the respondents, 67 percent attended a four-year college and 27 percent attended a graduate/post-graduate school. Two-thirds went to a public institution. Seventy-one percent are employed full time while 14 percent are part-time but seeking full-time employment, according to the National Association of Realtors and American Student Assistance, who conducted the survey.

Click here to read more on this story.

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

The Battle for Student Loan Debt Discharge

Posted on June 8, 2016by Admin

Section 523(a)(8) of the Bankruptcy Code outlines a debtor’s ability to discharge student loan obligations. Under this section, student loans are presumably nondischargeable. However, there is a narrow exception if a debtor is able to show that repayment of their student loans will cause an “undue hardship.”

Two courts recently entered decisions on this issue within the same week, using the same standard for “undue hardship.” The District Court for the Middle District of Alabama and the Bankruptcy Court for the District of Idaho issued largely opposite decisions based on similar facts.

In ECMC v. Alexandra Elizabeth Acosta-Coniff, the bankruptcy court initially held that the debtor was able to meet the undue hardship threshold and discharge her $112,000 of student loans. However, on appeal, the district court reversed the decision.

The case involved a 44-year-old single mother of two who took out more than $100,000 in student loans pursuing four degrees, including two master’s degrees and a PhD in special education. As a full-time public school teacher, the debtor argued that the student loans were an undue hardship, as she was underpaid with no prospects to increase her earnings in the near future.

The court used the test for undue hardship, where the debtor must establish:

(1) That he or she cannot maintain, based on current income and expenses, a “minimal standard of living for herself and her dependents if forced to repay the loans;

(2) that additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period of the student loans; and

(3) that the debtor has made good faith efforts to repay the loans.”

The district court denied the debtor’s discharge of the loans based on the second factor, holding that the debtor did not satisfy the burden to show that there are additional circumstances preventing her from fulfilling her payment obligations. The court reasoned that the debtor chose to earn four degrees with a general understanding of the cost versus benefit analysis and her multiple degrees enabled her to seek employment on a larger pay scale.

It reasoned that the debtor’s future ability to earn extra income was a realistic possibility, negating the need to discharge her student loans.

In Elizabeth M. McDowell v. Education Credit Management Corporation, and U.S. Department of Education, the court reached the opposite decision under the Brunner analysis.

There are essentially three criteria a debtor must meet under the Brunner analysis.

Continuing to pay the loan must cause the borrower to be unable to sustain a minimum standard of living;
The borrower’s financial situation must be unlikely to change in the future;
The borrower must have made a good-faith effort to pay his or her loans.

The debtor, a 43-year-old single mother of two, owed $93,000 in student loan debt for both her undergraduate and graduate degrees. The debtor was steadily employed as a social worker, but had recently taken a $6,000 trip to South America to attend training for a career switch to photography. The debtor also financed the purchase of a motorcycle for her ex-husband.

At trial on the issue of undue hardship, her doctor testified that her health was deteriorating, and it was likely that she would be unable to work in the near future. Due to this fact, the court found her health condition to be an additional circumstance that would persist, or worsen, in the near future, satisfying the second requirement of the Brunner test.

The court recognized that the debtor made certain financial errors in the past, such as her trip to South America and the purchase of a motorcycle. However, the court held that she otherwise lived modestly while working full time. Ultimately, the court held that the debtor could discharge most of her loans, except for $10,000 which the court determined to be frivolous spending.

Click here to read more on this story.

Related Resources:

http://www.lexology.com/library/detail.aspx?g=8b4f44fe-0baa-4e50-b4f8-d77adda86096

http://www.usnews.com/education/blogs/student-loan-ranger/2014/08/13/debunking-the-student-loan-bankruptcy-myth

Bankruptcy Law, Credit, Debt Relief, Student Loans

Local Doral Company Sued for Running a Massive Student Loan Debt Scam

Posted on June 2, 2016by Admin

The Federal Trade Commission (FTC) and Florida Attorney General Pam Bondi are suing the Doral-based, Student Aid Center, for illegal business practices in the hopes of recouping some of consumers’ lost money.

The Student Aid Center, which claimed to help graduates relieve themselves of student loan debt, is now facing serious legal trouble of its own. The two owners filed for bankruptcy in February, stating the company had liabilities between $1 million and $10 million.

In addition to the FTC and the State of Florida complaint, Minnesota and the District of Columbia have filed lawsuits accusing Student Aid Center of “deceptive practices.” The Minnesota lawsuit alleges one of the owner’s Instagram account frequently referenced Jordan Belfort, the money-grubbing stockbroker depicted in the Leonardo DiCaprio film The Wolf of Wall Street.) The account has since been taken down.

The owners were savvy marketers, running advertisements on social media, radio spots, Google ads promoting the tagline, “Obama Loan Forgiveness,” and even in one case, an aerial banner flying over South Beach.

The complaint brought by the FTC and the State of Florida says Student Aid Center “preyed on consumers’ anxiety about student loan debt” by falsely promising to reduce or even eliminate it.

The company demanded upfront fees in five monthly installments of $199 or more, according to the complaint- even though graduates can apply for government loan forgiveness programs free of charge. Student Aid Center went as far to tell its customers to stop paying their lenders and instead pay the company directly, the lawsuit alleges.

But although the company lured in customers by promising a 100 percent money-back guarantee, Student Aid Center later deflected those who demanded refunds by either not returning the money or returning an amount much less than what had been paid, according to the FTC.

Click here read more on this story.