Can I get rid of this student loan debt?

I am in default on my student loans. Can bankruptcy help me get rid of this debt?

Student loans are non dischargeable, generally. To discharge a student loan obligation through bankruptcy you must file a complaint requesting that your government-owned student loans be discharged pursuant to section Bankruptcy Code Section 523(a)(8). The standard for the Court to determine your student loan obligation discharged was set in the case Brunner v. New York State Higher Education Services Corp. in 1987. This means you need to satisfy the so-called “Brunner Test” and the court is to consider: (1) you current level of income and expenses, and determine whether you can maintain a minimal standard of living for you and your dependents if you are required to repay the loans; (2) whether there are additional circumstances suggesting that your current financial condition is likely to continue for a significant portion of the repayment period; and (3) whether you have made a good faith attempt to repay the loans.

The “Bruner Test” is a very high standard and basically, unless you care for or are suffering from a disability that will continue for your lifetime, that prevents you for earning sufficient income to support you and your family and you have made a good faith effort to repay your loans, you will be unable to discharge your student loan debts through a bankruptcy.

Testimony in the Con­gress hearings in 1998 intended undue hardship claims to be considered in light of “the availability of various options to increase the affordability of student loan debt, including deferment, for­bearance, cancellation and extended, graduated, income-contingent and income-sensitive repayment options.” H.Rep. No. 750, 105th Cong. 2d Sess. 408 (1998).

There are other options to consider on your student loans. One such option is through the United States Department of Education, William D. Ford Federal Direct Loan Program (“Direct Loan”), of­fers various repayment options for student loan debtors. One of these is the Income Contingent Repayment Plan (the “ICR” plan). Essentially, once a student loan debtor is on an ICR plan, monthly payments are calculated on the basis of adjusted gross income, family size, and total amount of Direct Loan debt. This can give student loan debtors the flexibility and breathing room they need during difficult times. The maximum repayment period under an ICR plan is twenty-five years. Direct Loan provides a handy calculator for ap­proximating ICR plan pay­ments. The calculator is located http://www.ed.gov/ offices/OSFAP/DirectLoan/ calc.html.

If you make payments under an ICR plan for twenty-five years, and there are still amounts left owing, those unpaid amounts are forgiven. Of course, there may be tax consequences as a result of this forgive­ness.

Call the attorneys at Stone Haven Law Group at (909) 457 – 8200 to discuss more about your particular loan and your circumstances.

Which Chapter is Right for Me?

I used to make great money but now the company I work for cut bonuses, overtime and my regular hours. I am unable to pay my credit cards, some which I have had for years and never missed a payment and the creditors are calling me. I know I owe the money but just cannot pay right now. Which Chapter is right for me?

Meet the new face of bankruptcy. This nation’s worst downturn in 70 years pushed more formerly affluent people into bankruptcy than in previous recessions. Overall, personal bankruptcy filings were up 36.5 percent in the first half of 2009 from the same time a year ago, and experts predict the number of filings will keep rising even as the economy recovers. We are finding more and more of our clients had annual income of $60,000 or more, were careful with their money and through no fault of their own are simply unable to make their payments. Leslie Linfield, executive director of the Institute for financial Literacy, calls it “a middle-class recession”

Our blogger needs to find out what remedies are available through bankruptcy. The remedies of Chapter 7 and Chapter 13 are different. First, what type of Bankruptcy does our blogger qualify for? If our blogger qualifies for a Chapter 7, but needs the remedies of a Chapter 13, then our bloggers’ Chapter 13 can be for as few as three (3) years or as long as (5) years, depending on the debts our blogger must pay (in a Chapter 13, priority and secured debts must be paid, the unsecured creditors receive a percentage payment on the amount they are owed) and how much “disposable income” our blogger has. We know our blogger has tax debt. This must be paid in full through a Chapter 13 plan and is a determining factor in the minimum amount the Chapter 13 monthly plan payment will be.

The changes in the Bankruptcy Code added a three (3) part test to determine if our blogger qualifies for a Chapter 7 (liquidating) Bankruptcy or Chapter 13 (repayment plan) Bankruptcy. The first and second parts of the test are based on our bloggers last six months of income from all sources, multiplied by two, to determine our bloggers “annual income”. The third part of the test is based on our bloggers current income and expenses.

Part One compares our bloggers “annual income” and household size with the local standards of “median income level” for the same size household. If our bloggers annual income exceeds the “median level income”, then our blogger qualifies for a Chapter 13.

Part Two subtracts our bloggers secured monthly payments (i.e. monthly mortgage or auto payment), allowable necessary expenses (IRS standards based on household size), and mandatory tax and insurance deductions from our bloggers monthly income (“annual income” divided by the number of months in a year). If there is no “disposable income” remaining after these expenses are deducted, then our blogger qualifies for a Chapter 7 and can also elect a three (3) year Chapter 13.

The third and last part of the test looks to our bloggers current monthly income and expenses. After subtracting expenses from income, if there is “disposable income” which when multiplied by 60 would pay 25% of our bloggers total unsecured debt, our blogger qualifies for a Chapter 13.

Sounds complicated? The changes in the Bankruptcy Code made it more difficult for the honest debtor to seek relief, but not impossible.

Call the attorneys at the Stone Haven Law Group today to learn more about whether bankruptcy is right for you and which Chapter may apply.

10 Thinks Bankruptcy Court Won’t Tell You, Smart money Magazine by Elizabeth O’Brien, Published September 30, 2009.

Can bankruptcy stop the Credit Card Harassment?

My hours at work were cut about 6 months ago. I am happy to have a job but now I have fallen behind on my credit card payments. They are calling me at all hours. I am worried they will start calling my work. What can bankruptcy do to help me?

Once you retain the services of any attorney you have the right to tell your creditors that all further communications are to go through your attorney. If you also write a letter to your creditors advising them all further communications are to go through your attorney and send it certified, return receipt through the United States Post Office or other mailing service in which you have proof an agent of the creditor received the letter, then, if the creditors continue to call, you have a cause of action against the creditor and its agent. This is one of the benefits of hiring an attorney to prepare and represent you in a bankruptcy.

You are not alone in the financial stress you are experiencing. Research by the Federal Reserve indicates that household debt is at a record high relative to disposable income. Many households have experienced a reduction in work hours, thus a reduction in income. In fact, the American Bankruptcy Institution statistics show that in second quarter of 2008, 32,387 bankruptcies were filed in the State of California. In the second quarter of 2009, 53,505 bankruptcies were filed in the State of California. That is more than 60% increase in filings.

Your credit card debts are discharged through a bankruptcy, as long as there is no fraud involved. You may be forgiven of all the debt through a Chapter 7 or for a percentage of the debt through a Chapter 13. See previous blogs to understand which Chapter you qualify for.

Call the attorneys at Stone Haven Law Group at (909) 457 – 8200 to take the first step towards ending creditor harassment!