White House Unveils New Student Loan Initiative

White House Unveils New Student Loan InitiativePresident Barak Obama announced the signing of the “Student Aid Bill of Rights” before an enthusiastic crowd of over 9,000 supporters at Georgia Tech University. In a similar move, President Obama directed the Treasury Department, Education Department and Consumer Financial Protection Bureau to opine whether or not bankruptcy laws should be changed, or at least relaxed, in this area. President Obama gave the agencies an October 1 deadline for their report.

This Bill of Rights is designed to streamline the loan repayment process and keep delinquent borrowers out of default. The new law also requires lenders to provide clear disclosures to borrowers about repayment terms.

In terms of bankruptcy reform, the administration’s review will most likely focus on private student loans which do not have the same obligations and conditions as federally-guaranteed loans. The President promised that “we’re going to take a hard look at whether we need new laws to strengthen protections for all borrowers, wherever you get your loans from.”

According to the White House, about 40 million people owe an average of $28,400 apiece in student loan debt.

Bankruptcy Laws and Student Debt

The President’s initiative comes about six weeks after Maryland Democrat John Delaney introduced House Resolution 449, which would change Section 523 of the Bankruptcy Code to make all student loans dischargeable in bankruptcy.

Democratic lawmakers are not the only people who have recently questioned the Brunner Rule. Both the Eighth Circuit Court of Appeals in Minnesota and the Tenth Circuit Court of Appeals in Colorado expressed some preference for a totality of the circumstances analysis, which basically states that “if the debtor’s reasonable future financial resources will sufficiently cover payment of the student loan debt – while still allowing for a minimal standard of living – then the debt should not be discharged.” The First Circuit in Maine joined this chorus when it described the Brunner rule as “overkill” that was contrary to standard of a fresh start for bankruptcy debtors.

Republicans have yet to speak out on any of these measures, but by and large, this same group of GOP lawmakers pushed the cleverly-titled Bankruptcy Abuse Prevention and Consumer Protection Act through Congress in 2005. Predictably, lenders also oppose any move to make student debt dischargeable.

Contact John Hargrave and Associates

We have provided comprehensive counsel to individuals in and around Barrington, New Jersey, since 1977. To schedule a free initial consultation, contact our office by e-mail or call us at 856-547-6500.

What Debts Can Be Discharged Through a Chapter 7 Bankruptcy Filing?

If you are struggling to pay your bills, you may be considering bankruptcy as a way to get a fresh financial start.. There are limits, however, on what debts may be discharged in a Chapter 7 or Chapter 13 filing. You want to know what debts you can and cannot rid yourself of in Chapter 7 or Chapter 13, so that you get the outcome you need and want. This blog provides an overview of the types of debts that can and cannot be discharged in a Chapter 7 or Chapter 13 bankruptcy filing.

As a general rule, you cannot discharge secured debt and still keep the property. Secured debt means home mortgages, car loans and other debts secured by collateral.

The other kinds of debt that are generally excluded from discharge are:

  • Child support and alimony obligations—These obligations can never be discharged.
  • Tax obligations—There are limited instances where a tax debt can be eliminated in a Chapter 7 bankruptcy. The tax debt must be at least three years old, the tax return must have been filed at least two years ago, any assessments by the tax authority must have been made more than 240 days ago, and you must not have committed tax evasion or tax fraud.
  • Student loan payments—In rare situations, where a debtor has shown extreme hardship, the bankruptcy court has allowed the discharge of student loan payments. As a general rule, though, they cannot be extinguished in bankruptcy.
  • Equitable Distribution from a Divorce – If you owe money to a former spouse as equitable distribution (as opposed to child support or alimony) arising from a divorce, you cannot discharge this debt in a Chapter 7. However, this kind of debt can be discharged in a Chapter 13!

Even though you may not be able to discharge all of your debts by filing for bankruptcy, filing for bankruptcy can often by a smart financial decision. By wiping out your credit card, medical bills, and personal loan debts you will free up

Contact John Hargrave and Associates

We have provided comprehensive counsel to individuals in and around Barrington, New Jersey, since 1977. To schedule a free initial consultation, contact our office by e-mail or call us at 856-547-6500.

Understanding the Different Bankruptcy Filings

Whether you face personal financial challenges or your business has fallen upon difficult times, there are options available to you under the federal bankruptcy laws. This blog post provides an overview of the most common types of bankruptcy filings.

Chapter 7 Liquidation Proceedings

The protections afforded by Chapter 7 are available to individuals or businesses. In a Chapter 7 petition, you are allowed to permanently discharge most types of debts. In a Chapter 7 bankruptcy you are allowed to “exempt”, or protect your assets up to a certain dollar amount. In more than 95% of all bankruptcy cases, the person who files for bankruptcy keeps everything they own. In a Chapter 7 certain debts, such as child support arrearages, student loans (except under very limited circumstances) and some tax obligations cannot be wiped out. Each state has its own state based exemptions, and some states allow their residents to use the federal property exemptions. You may choose the state or the federal exemption, but not both. Once your Chapter 7 bankruptcy if finalized, you are permanently freed from any obligation to repay any debts discharged.

In 2005 Congress added a “means test” to the bankruptcy code. The means test determines if an individual or couple makes “too much money” to file a Chapter 7 and instead must file a Chapter 13 to repay their creditors a portion of what is owed. For the vast majority of people looking to file bankruptcy, the means test has no impact on their ability to file Chapter 7. It is simply false to say that you “can’t file a Chapter 7” or that is it “much harder to file a Chapter 7”.

Chapter 13 Reorganization

In a Chapter 13 filing, you pay what you can afford to pay on a monthly basis. Your creditors will receive a percentage of what they are owed, and at the end of your three to five year plan, the balance of what is owed is wiped out.. As with a Chapter 7 petition, you are immediately protected by the automatic stay, which prohibits your creditors from calling, writing or taking legal action against you to recover a debt.. As long as you honor the terms of the reorganization plan, your creditors may not make any other attempts to collect any debts you owe.

Chapter 11 Business Reorganization

A Chapter 11 bankruptcy filing allows a business to obtain the protection of the automatic stay, and to negotiate new payment arrangements with creditors, in a fashion similar to the Chapter 13 petition for individuals. Chapter 13 has debt limits and if an individual owes more money than what is allowed, they will be required to file a Chapter 11 case in order to reorganize.

Contact John Hargrave and Associates

We have provided comprehensive counsel to individuals in and around Barrington, New Jersey, since 1977. To schedule a free initial consultation, contact our office by e-mail or call us at 856-547-6500.