Archive for the ‘las vegas student loans and bankruptcy’ Category

5 Ways Federal and Private Student Loan Creditors’ Collection Powers Differ

Monday, February 6th, 2012

Many people considering filing a Las Vegas bankruptcy are student debtors who have defaulted, or are about to default, on their loans. Now, no one knows the actual default rate for student loans. Many of them are held by the Department of Education, which only publishes the two-year (soon three-year) “cohort default rate,” which refers to the number of defaults over that period.

The problem is that any loans that default outside the cohort range aren’t counted. The actual default rate could be significantly higher, up to 40 percent by some estimates. That’s a lot of defaults, but for those facing the consequences of a default, it’s important to know what powers student loan creditors do and do not have.

The primary issue is the differences between federally guaranteed student loan creditors’ collection powers and those of private student loan creditors.

(1)  Federal student loans have no statute of limitations, but private student loans’ will be based on the state law under which they operate and whatever the loan agreement says.

(2)  Both types of loans define defaults differently. For the federal government, defaults occur after 270 days of nonpayment. Private lenders can define default however they wish, which often means one missed payment, and possibly not providing a new address or even filing bankruptcy.

(3)  The federal government allows loan consolidation once for each loan. Private lenders are not required to allow debtors to consolidate or refinance their loans.

(4)  Concerning wage garnishment, for federal loans, the lender must send the debtor a notice that gives the debtor an opportunity to request a hearing. The lender does not have to file a lawsuit against the debtor. For private student loan creditors, garnishment works just like any other loan under state law. The creditor must file a lawsuit and win before obtaining a garnishment as a remedy.

(5)  Finally, the creditors who own federally guaranteed loans can deny debtors government benefits and tax refunds. Private student loan creditors cannot do these things.

Student loan defaults are a serious issue, and their near-nondischargeability in bankruptcy makes them especially dangerous to fall behind on. It’s important to know that filing bankruptcy can suspend collection proceedings and possibly help reduce your payments on other debts.

For more questions about bankruptcy in Las Vegas, please feel free to contact an experienced Haines & Krieger Las Vegas bankruptcy attorney for a free initial consultation. Call us at 702-880-5554 to set up your free consultation.

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Las Vegas: Can Bankruptcy Discharge Student Loans?

Monday, July 18th, 2011

Discharging student loans through the federal bankruptcy court is extremely difficulty. Since 1978 Congress has increased restrictions on bankruptcy debtors seeking to discharge student loan debt. Today, nearly all student loans are dischargeable only if the debtor can prove that repaying the debt would impose an “undue hardship” on the debtor and his dependents. This standard applies to both federal student loans and private student loans, although a bill was recently introduced in Congress aimed at making it easier to discharge private student loans.

While student loans nearly always impose a hardship on a bankrupt debtor, the bankruptcy courts have interpreted the “undue hardship” standard to be an exceptionally high bar.  First, the debtor must file an adversary action and have a hearing to determine whether repayment of the debt would constitute an undue hardship.  At that hearing the debtor must show that: 1) the debtor cannot maintain a minimal standard of living and also repay the loan; 2) the debtor’s financial inability to repay the loan is likely to continue for a significant portion of the loan’s repayment period; and 3) the debtor has made a good faith effort to repay the loan.  In one particularly harsh case out of Ohio, a bankruptcy judge told a blind debtor receiving $811 each month in social security disability that, “It remains to be seen . . . whether [the debtor] will find work or remain unemployed.”  Wallace v. Educational Credit Management Corp., 2010 WL 5764771 (Bky.S.D. Ohio Dec. 1, 2010).

While discharging a student loan debt may be extremely difficult, lenders often find it equally challenging to “prove” the student loan debt during a Chapter 13 bankruptcy case. First, the lender who claims to currently own the debt may not be the original creditor on the contract. The current creditor must then prove that it has standing to collect on the loan. Second, the creditor must also demonstrate the amount owed. Financial records may be hard to produce if the loan has changed hands several times.

Even when bankruptcy cannot discharge or otherwise eliminate your student loans, it can provide some temporary relief. The automatic stay stops all collection action during the bankruptcy case and a Chapter 13 bankruptcy case provides an opportunity to make payments under court supervision.  After the bankruptcy case is concluded, non-bankruptcy options are available including deferment, forbearance, loan forgiveness, and income contingent repayment plans.  If you are experiencing financial difficulty and have student loans, consult with an experienced Las Vegas bankruptcy attorney at Haines & Krieger by calling 702-880-5554 and discover your options.

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Las Vegas Student Loan Debt: 7 Things That Can Happen if You Default

Thursday, September 23rd, 2010

Student loan debt has now surpassed credit card debt – read more.  Congress is making noise again about permitting student loans to be discharged in bankruptcy – read more. (FYI, at present student loan debt has special status that makes it particularly hard to get rid of.)

Student loan debt is a serious problem for many Las Vegas residents and for our economy.  And it’s important to understand what can happen if you do default on your student loans.   So what can happen?

1.  You lose the ability to negotiate a deferment or forbearance from your lender.  Once you default, your student loans are considered due immediately.  And once this happens, the door is closed on deferments or forbearances.

2.  Any tax refunds you might otherwise receive are subject to seizure by the government.

3.  Garnishment of wages.  The government can take up to 15% of your wages.

4.  Ineligibility for FHA or VA mortgages in the future.  In other words, it may be harder to buy a home down the road.

5.  Loss of Social Security.  When you get older and start collecting Social Security, the government can still come after you and take a portion of those payments.

6.  Possible lawsuit by the federal government against you to collect.

7.  Significant damage to your credit score.

What to do to avoid this?  Be proactive.  There are effective strategies for addressing student loan debt problems.

Contact your lender to discuss options ahead of time.  Or contact Haines & Krieger at 702-880-5554 for a free initial consultation to help figure out effective strategies for dealing with your student loan debt together with your other debts.

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Bankruptcy and Student Loans in Las Vegas

Tuesday, May 4th, 2010

The federal bankruptcy code states that a debtor may obtain a discharge of a government-sponsored student loan only if repaying the loan would impose an “undue hardship” on the debtor and his dependents. Most bankruptcy courts interpret “undue hardship” as meaning that the debtor cannot repay the loan and maintain a minimal standard of living. As a result of this very high bar, it is rare that a student loan is discharged during bankruptcy.

Consequently, many bankruptcy debtors are caught in a student loan trap of being unable to pay on the student loan and the interest continues to accrue. While discharging the student loan may not be possible, there are options for dealing with a student loan during and after bankruptcy.

First, the student loan lender or collection agency is strictly forbidden from engaging in any collection action during the bankruptcy. This protection (known as the “automatic stay”) may last from a few months during a Chapter 7 to several years during a Chapter 13 repayment plan. Interest may continue to accrue and will be tacked-on at the end of the bankruptcy case.

Second, if the student loan was not defaulted prior to the bankruptcy filing (meaning no payment for more than 270 days), the account will usually be re-aged and is considered current upon the conclusion of the bankruptcy case. This is a good time to negotiate with the lender for a payment plan you can afford. If the student loan was defaulted prior to the bankruptcy, the lender may offer a loan rehabilitation program.

Finally, your student loan lender has many repayment options after your bankruptcy case ends, including the Income Based Repayment Plan which limits your loan repayment to 15% of your income and offers loan forgiveness after 25 years of repayment (or 10 years for public service employees).

If you are struggling with student loan debt, speak to the experienced bankruptcy attorneys at Haines and Krieger and discuss your options. Your attorney can explain the many ways for dealing with student loan debt and can help you decide on a course of action that is best for you and your family.  Contact us for a free consultation.

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Discharging Student Loans in Las Vegas Bankruptcy

Wednesday, March 24th, 2010

Student loans are extremely difficult to discharge in bankruptcy. The bankruptcy code states that a debtor may obtain a discharge of a government-sponsored student loan only if repaying the debt would impose an “undue hardship” on the debtor and his dependents.

Proving undue hardship is more difficult than it sounds. The bankruptcy code requires the debtor to file an adversary action and have a hearing to determine whether repayment of the debt would constitute an undue hardship. At that hearing the bankruptcy court may require proof that: 1) the debtor cannot maintain a minimal standard of living and also repay the loan; 2) the debtor’s financial inability to repay the loan is likely to continue for a significant portion of the loan’s repayment period; and 3) the debtor has made a good faith effort to repay the loan. If the debtor is successful in proving undue hardship, the student loan debt will be discharged by the bankruptcy court.

Even though the bar for discharging student loans is set extremely high, it is often equally challenging for a creditor to “prove” its debt during a Chapter 13 bankruptcy case. The Chapter 13 claims process may be used by the debtor to obtain a judicial determination of what is owed. A student loan is a contract and the debtor may ask the creditor to produce the contract, to prove that the current creditor has standing to collect on the loan, and prove the current amount owed. During the claims process the burden is on the creditor to prove both that you owe the debt as well as the amount. This may be difficult for a creditor if the loan has changed hands multiple times.

While discharging your student loans may be difficult, the bankruptcy laws offer several benefits including temporary relief from the bankruptcy automatic stay and a chance to make payments through a court supervised Chapter 13 plan. Additionally, non-bankruptcy options are available including deferment, forbearance, loan forgiveness, and income contingent repayment plans. If you are experiencing financial difficulty and have student loans, consult with an experienced bankruptcy attorney and discover your options.

Contact Haines and Krieger today for a free consultation at 702-880-5554.

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Las Vegas Student loans and the ripple effect

Friday, February 19th, 2010

Student loans have a unique place in the world of debt:  Unlike credit card or gambling debt that can be reduced, or a mortgage where the homeowner as a last resort can walk away, there is no mechanism for simply getting rid of student loan debt.  (Though there are bankruptcy law strategies for dealing with it.)

And according to a post on The Wall Street Journal’s blog The Juggle, this indisposable aspect of student loan debt is taking its toll on our society and our economy.  Especially in the current recession where many people with college and gradute degrees are unable to find jobs after incurring significant amounts of student debt.

What is the ripple effect of student loan debt?  People are working jobs they might not otherwise take, calling to mind the concept of indentured servitude.  People are putting off major life decisions like marriage and having children.  Related debt problems may harm credit scores, preventing people from buying homes or cars.  And calls from credit collection agencies who take over the payment collection for student loan debt add even more stress.

The post notes that in the current economic climate, there’s been a fairly passionate reaction to student loans.  There’s even now a Facebook group called Forgive Student Loan Debt with over 27,000 members and its own website.

If you’re struggling with student loan debt, clearly you’re not alone.

And if you’re tired of “juggling” your debts–whether student loan, credit card, mortgage, medical or other–and ready to work with good bankruptcy attorneys in Las Vegas who can really help, we encourage you contact us for a free initial consultation.  You can discuss your situation over the phone or meet with a Haines & Krieger attorney in person in our Las Vegas bankruptcy law office.

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Discharging Student Loans in Las Vegas Bankruptcy

Sunday, December 20th, 2009

Recently the House of Representatives Judiciary Subcommittee on Commercial and Administrative Law held a hearing to initiate legislation to change provisions of the federal bankruptcy law that give student loan lenders an advantage over other consumer loans. Current bankruptcy law provides that student loans are generally not dischargeable under any chapter of the bankruptcy code unless the debtor can show that repayment of the loan creates an “undue hardship.” Unfortunately, Congress did not define “undue hardship” in the bankruptcy code, so this interpretation has been left to the individual bankruptcy court judges.

During the Committee hearing Rafael I. Pardo, an associate professor at the Seattle University School of Law who has studied the discharge of student loans in bankruptcy, challenged Congress “to clarify the undue hardship standard.” Many courts view “undue hardship” as a high bar that is only met by a showing of exceptional circumstances (like physical or mental disabilities, or poor or no future earning potential) that result in an inability to both repay the student loans and provide a minimum standard of living for the debtor and the debtor’s family. This is a very difficult burden for most debtors to meet, and consequently bars the discharge of student loans in most cases – even while other consumer debts like auto loans, credit cards, medical debts, mortgages, and even taxes are discharged in the debtor’s bankruptcy.

Consumer bankruptcy attorney Brett Weiss, who testified on behalf of the National Association of Consumer Bankruptcy Attorneys and the National Consumer Law Center, called the situation “unfair” when other consumer loans are forgiven in bankruptcy proceedings while student loans are not. As a result of these hearings, Rep. Steve Cohen (D-Tenn.) announced his plans to file legislation to “give private student loan borrowers more equitable treatment during the bankruptcy process.”

For the time being it remains extremely difficult to discharge student loans. However, there are other non-bankruptcy programs for debtors unable to repay their loans. In some cases debtors may qualify for reduced payments, deferment, forgiveness or cancellation. Chapter 13 bankruptcy can also provide a way to cure defaulted student loans, or pay them off during the bankruptcy. If you have student loan debt, discuss your situation with the attorneys at Haines and Krieger during a Free Consultation.

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Las Vegas Student Loans: Will they soon be dischargeable?

Thursday, September 24th, 2009

At present, student loans are nearly impossible to discharge under the bankruptcy code, even if you get yourself the best Las Vegas bankruptcy lawyer you can find.

The only way to meet the standard of “undue hardship” is to prove that you are physically unable to work, or your chances of obtaining any type of gainful employment in the future are non-existent.  (That said, there are still ways of using the bankruptcy process to help you deal with student loans, as described in one of our previous posts.)

Fortunately for many American, all of that may soon change.

According to an article in Inside Higher Ed, Congress has been making noises about putting lenders of private student loans on the same footing as all other lenders.  That means that in the near future, you may finally have the option of discharging your student loans in a bankruptcy filing.

Recently, the House Judiciary Subcommittee on Commercial and Administrative Law held a hearing on the subject of student loans.  In it, Rep. Steve Cohen (D-Tenn.), the committee chair, said the current law gave private student loan lenders a “favorable, unusual” advantage over other consumer lenders.  As a result, Cohen is initiating legilsation to undo a 2005 change in the federal bankruptcy law, saying, “Hopefully it’ll be bipartisan and if not, you know, we’ll just have to forge ahead and do what’s right.”

This is potentially great news for everyone facing financial hardship who also has to worry about student loans.  According to House testimony by attorney Brett Weiss, a consumer bankruptcy lawyer, it’s unfair that mortgages and other large loans can be dealt with in bankruptcy while student loans cannot.

If you’re considering bankruptcy and student loans is one of your concerns, please get in touch with us for all the bankruptcy information in Las Vegas that you’ll need to start dealing with your problems.  Get in touch with us for a free initial consultation and you can talk with an experienced bankruptcy attorney in Las Vegas and get a clear picture of all of your options.

For more information on student loans and bankruptcy, here’s one of our previous posts on the topic.

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Benefits of Bankruptcy When You Owe Student Loans

Friday, May 22nd, 2009

A number of recent graduates have asked us about discharging their student loans in bankruptcy.

Student loans are generally non-dischargeable in a bankruptcy.  This means that you cannot totally eliminate them, unless you can show the bankruptcy judge that your loan payments impose an “undue hardship” on you.   It is almost impossible to show this type of “undue hardship” unless, for example, you are physically unable to work, or your chances of obtaining any type of gainful employment in the future are non-existent.

Nonetheless, there are still benefits to filing bankruptcy if you are burdened with student loans:

  • You’ll be able to consolidate your student loan payments in a Chapter 13 bankruptcy.  You’ll submit a repayment plan of all your debts to the bankruptcy court, in which you’ll propose how much to repay your creditors, and over what period of time.  If the judge accepts your plan, your creditors will be also be forced to accept it.  It’s very possible that you’ll be able to lower your repayments, and repay the loan over a longer period of time.
  • In a Chapter 13 bankruptcy, you likely won’t need to pay interest, late fees or other penalties.  All your repayments will go towards the principal amount you owe on your loan.   If you and your lender disagree over what portion of the student loan constitutes principal and what constitutes other charges, you’ll be able to make an argument to the bankruptcy judge, who will then render a decision.
  • Once you file for bankruptcy, your creditors, including your student loan officers, are prohibited from beginning or continuing collection actions against you.  This includes harassing you with phone calls and letters.
  • If you file a Chapter 7, you won’t be able to adjust the terms of your student loans, but you will be able to free up your money to repay your student loans because you’ll be able to discharge other debts.

For more information on this topic, or any other bankruptcy topic, call our offices at 702-880-5554.  If you are calling from within Nevada, you can also reach us at 702-880-5554.  Our lawyers are bankruptcy experts, and can offer you the bankruptcy services you need to get your financial life back on track.

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