Category: Bankruptcy

When Bankruptcy is the Best Option

I had the pleasure the other day of reading an article on a website called nerdwallet.com called "When Bankruptcy is the Best Option". It raised a number of issues that I would like to take the opportunity to expound upon. It also cited two of my favorite Federal Reserve articles, one published by the Federal Reserve Bank of New York and the other by researchers at the Philadelphia Federal Reserve Bank. One concern that people commonly have when filing bankruptcy is what impact it will have upon their credit score. This article cites some findings from the researchers at the Federal Reserve Bank in Philadelphia. The article quotes the following...

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Question About Renting Out Surrendered Property When The Bank Does Not Foreclose

This question came in my email today, and I am going to answer it here: Question Detail: Can I rent my house to someone in need if I filed bankruptcy and the case has been discharged for 3 years but bank has done nothing yet with the house? Answer:  Yes, but you should have a plan for if the bank does come for the house. The fact is that even though you have filed bankruptcy, discharged the mortgage and advised the court and Trustee of your intention to surrender the property, it is still yours until the bank comes to take it away.  It is not uncommon for the bank to take three years to come for a house.  Unless and until it does, you still own it and may treat it as your property.  If you live in it, you may continue to live in it until the bank forecloses upon it and evicts you (or pays you to move out).  If it is a rental property, you may continue to collect rent until the bank forecloses. I will admit that I am a...

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New Repaye Program For Direct Student Loans

The Department of Education announced the Revised Pay As You Earn (REPAYE) rules for Student loan borrowers who cannot afford their regular payments. The two most important changes in the program are 1. the REPAYE rules apply to all government direct student loans, no matter how long ago they were issued, and not just to “new” borrowers and 2. the payment will be based upon 10% of “disposable income” (the difference between the borrowers adjusted gross income and the poverty line). People in the REPAYE program will be eligible for full debt forgiveness after 20 years. If they have graduate debt then the forgiveness period is extended to 25 years. If the borrower works in the public (government) or non-profit sector, they can receive a full debt forgiveness after only ten years. The one big problem with...

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Bankruptcy And Student Financial Aid

I thank the National Association of Consumer Bankruptcy Attorneys for sharing this article on bankruptcy and financial aid.  People often ask me about the impact of bankruptcy on financial aid and I refer them to their school’s financial aid officer. However, it is generally the case that need based financial aid is unaffected by a bankruptcy filing. If the school or the government is handing out money based upon financial need, then that cannot have a credit based component. Private and other credit based loans could be affected.  However, if you are contemplating bankruptcy then your credit is probably already bad and thus you would be ineligible for a credit based product anyway.  This article provides a good...

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“Do It Yourself” Income Based Repayment Plans For Private Student Loans In Chapter 13

I recently read an article that was posted in a consumer bankruptcy attorneys forum titled “Student Loan Debtors Using Chapter 13 Bankruptcy to Buy Time On Payments“.  This article was about “Do it Yourself Income Based Repayment Plans” for student loan Debtors by using Chapter 13 of the Bankruptcy Code. I was happy to see this article, because it addresses a subject I have been thinking about a lot, although it does not resolve the issue in my mind. Then I read a second article on the same subject, and decided I should blog about...

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Bankruptcy And Security Clearances

I recently watched an interesting webinar on security clearances and bankruptcy. I have had a number of clients over the years that have security clearances. Generally speaking, these clients are civilians who work for defense contractors such as Raytheon. Naturally, they are concerned about of the impact of filing bankruptcy upon their security clearance. My stock answer is that I do not know, but I have filed a number of petitions, and none of my clients have ever reported having a problem keeping or renewing their clearance simply because they filed bankruptcy. To the contrary, I tell them that I believe that filing bankruptcy is probably superior to being deep in debt and unable to pay your bills. After all, the whole point of doing a background check associated with a security clearance is to see if a person is vulnerable to outside control. If someone is deep in debt and cannot afford to pay their bills, that person is vulnerable. If a person has filed bankruptcy and has wiped...

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The Importance Of Sharing Your Bankruptcy Experience

I originally wrote this blog last December, but something happened today that made me want to add this story and re-post it.  A client hired me to do a chapter 7 today.  She first came to see me a year or two ago, but was so appalled by the concept of bankruptcy that she decided not to file.  Instead she has spent the last year or two being harassed by creditors and visiting Lowell District Court for supplementary process hearings.  What inspired me to re-post this blog is the way she found me.  She had made a purchase at a department store.  As the clerks usually do, the clerk asked her if she would like a store credit card.  She declined, saying that she is already in default on several credit cards, and would not qualify.  The department store clerk recommended that my new client see her bankruptcy lawyer.  Fortunately for me, I was her bankruptcy lawyer.  I think that it is important that people share their bankruptcy experience with other people.  A lot of people are...

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Bankruptcy, Even Nfl Players Do It

One of the interesting changes in bankruptcy practice since the “Great Recession” is that bankruptcy clients now seem to find lawyers mostly by word of mouth. After the Dot-Com bubble burst, bankruptcy really began to lose its stigma. Even then, a large number of people who had been very successful found themselves filing for bankruptcy protection. However, when the housing bubble burst, and the whole economy collapsed, the attitude towards bankruptcy changed dramatically.  A number of otherwise very successful people have sought bankruptcy protection. These very successful people include a number of people you have actually heard of. I read with interest this article about NFL players filing for bankruptcy protection. It indicates...

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How Many Cars And How Many Car Loans Can I Have In Chapter 7 Bankruptcy?

One issue which seems to cause a fair amount of confusion, and which also causes people to do inappropriate things before going to see a lawyer, is the subject of the number of cars, and the number of car loans (if any), a person can take into bankruptcy. Frankly, the question by itself misses the point. At least on the surface, the issue is not how many cars do you have, but what are they worth? In other words, if a married couple owns one completely paid off late modeled Mercedes SL, that is a problem in bankruptcy. On the other hand, if an individual owns a five year old Toyota Camry which still has a car loan on it, a twenty year old pickup truck that he uses to haul things around, and a used car worth about $1,000.00 that he keeps for his daughter, that is probably no problem at all. The issue is not the number of cars, but how much equity is in the cars. By equity, I am referring to what you would receive if you were to sell the car after the bank holding the car loan received...

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The Department Of Education Has Finally Given Some Guidance On Student Loan Discharge In Bankruptcy

The Bankruptcy Code prohibits the discharge of student debt unless that debt causes an “undue hardship” for the Debtor.  “Undue hardship” is an amorphous term, which is itself problematic when people of limited means are being asked to pay money to seek to discharge debts that they cannot afford.  The Congress put the additional hurdle in front of them of making it hard to know if their efforts are likely to be successful.  The Department of Education has promised for some time to put out guidelines on when it would oppose the discharge of federal student loans (these guidelines have no impact upon private student loans).  If the federal government chooses not to challenge the discharge of a federal student loan, then it will be discharged.  Unfortunately, these guidelines are more in the nature of factors to consider, instead of being hard and fast rules.  Still, guidance is guidance, and there will be cases in which this guidance helps to clarify when it would be...

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