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Your Best Bankruptcy Option When You Have Unmanageable Student Loan Debt

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When Can You Get Relief in Bankruptcy from Student Loan Debt?

Unmanageable Student Loan DebtHave you racked up a substantial amount of student loan debt, only to find a really tough job market when you graduated? Even if you’ve been able to find some work, chances are good that your student loan obligations take a significant portion of your disposable income, making it difficult to meet your other needs. You may have considered filing bankruptcy, just so that you can get a fresh start, only to hear that student loans cannot be discharged in bankruptcy. Don’t dismay?you may still have options.

The Discharge of Student Loan Payments in Bankruptcy

As a general principle, student loan debt cannot be permanently discharged through a Chapter 7 bankruptcy filing. There is, however, no prohibition on seeking to restructure or reorganize your debt in Chapter 13. If you choose this option, your student loan arrearages will be treated as “non-priority, unsecured debt,” much like a credit card bill. When you create a reorganization plan in Chapter 13, your student loan creditors will be on equal footing with all other unsecured creditors. It’s important to understand, though, that Chapter 13 reorganization will not wipe out your student loan debt. If there’s any balance still due at the end of the bankruptcy period, you will still be responsible for it.

The Availability of the Hardship Exception

There is an exception to the general rule banning discharge of a student loan obligation. If you can demonstrate that making the payments will cause an undue hardship on you and your family, you may be able to extinguish some or all of the debt. Typically, that requires that you show:

  • You cannot maintain a minimum standard of living for you and your dependents if required to pay your student loans
  • Your current financial condition is expected to last through all or most of the repayment period, and
  • You have made a good faith effort to repay your loans

Contact Our Offices

At the Law Office of Andrew B. Finberg, LLC, we bring comprehensive bankruptcy counsel to individuals in Burlington, Camden and Gloucester counties in New Jersey. To schedule an appointment, call our office at 856-988-9055 (toll-free at 866-721-7269) or contact us online.

Discharging Credit Card Debt in Bankruptcy

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Avoiding Concerns about the Fraudulent Use of Credit before a Bankruptcy Filing

Debt in BankruptcyUnmanageable credit card debt commonly contributes to a decision to seek protection under the bankruptcy laws. Because credit card debt is an unsecured obligation, you can permanently discharge credit card bills under Chapter 7. You must be careful, though, that you don’t engage in activity prior to your bankruptcy filing that may be construed as fraud. If there’s evidence that you incurred credit card debt knowing that you planned to discharge the debt in bankruptcy, that can be considered fraud. At a minimum, your bankruptcy petition may be disallowed. There could, however, be more serious consequences.

As a practical matter, it’s extremely difficult for a credit card company to show that you engaged in fraud. There would need to be some evidence that you were planning or considering filing for bankruptcy when you charged items. There are, though, actions that the bankruptcy court will carefully examine when assessing whether you engaged in bankruptcy/credit card fraud:

  • Luxury purchases within 90 days of your bankruptcy petition ? So-called luxury purchases in excess of $600 within three months prior to your petition will be subject to greater scrutiny. This includes any item not “reasonably necessary” to support you and your dependents. Food, shelter and utilities, for example, would generally not be considered luxury items. Jewelry, electronics, vacations, vehicles and designer clothes generally would be luxury items.
  • Cash advances taken within 70 days of filing ? Such advances over $925 will be presumed not to be dischargeable. Accordingly, you must provide evidence that you intend to repay the cash advance.

Contact Our Offices

At the Law Office of Andrew B. Finberg, LLC, we bring comprehensive bankruptcy counsel to individuals in Burlington, Camden and Gloucester counties in New Jersey. To schedule an appointment, call our office at 856-988-9055 (toll-free at 866-721-7269) or contact us online.

NATIONAL COLLEGIATE STUDENT LOAN TRUST (NCT): NOT IN NEW JERSEY!

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Who is NCT?

That?s complicated. Your student loan probably originated with a private bank. Over time, the bank transferred the promissory note to the National Collegiate Funding, LLC. National Collegiate Funding, LLC then creates and packages the loans into series of trusts pursuant to Delaware statutory law. They then sell the loans to investors as asset backed securities.

NCT claims to own my loan, but I never did business with them.

You may have never heard of NCT before. That?s typical. However, in order to show ownership of your loan, NCT has to produce the paper trail of assignments. If you?re not in litigation, ask them for copies of the supporting documentation proving ownership of the debt, including the promissory note and assignments.

Now I?m being sued by NCT? HELP!

If you live in New Jersey and you?re being sued by NCT, there is a good chance you won?t have to pay them a cent! But how is that possible? Well? You?ll have to call to find out!

Contact the Law Office of Andrew B. Finberg

Contact a lawyer at the Law Offices of Andrew B. Finberg, LLC today online or at (856) 988-9055. Consultations are free.

How to Surrender Your Home under Chapter 7 Bankruptcy

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Including the Debts on Your Real Estate in Your Bankruptcy Case

How to Surrender Your Home under Chapter 7 BankruptcyFirst, be aware that both Chapter 7 ?straight bankruptcy? and Chapter 13 ?adjustment of debts? can help you keep your house. Talk to an attorney so that you are well informed about your options, including what it would take for you to keep your home. Believe it or not, under some circumstances you can significantly reduce your monthly payments, and even reduce the debt against your house by tens or even hundreds of thousands of dollars.

But, if you have been fully informed about your options and have decided to surrender your home, Chapter 7 can give you many advantages while you do so.

The Timing Advantages of Surrendering Your Home in a Chapter 7 Case

A Chapter 7 case can give you a precious few extra weeks or months of staying in your home, usually at no cost because you are not paying your mortgage(s). This gives you time to gather more money for your transition to other housing. Or it can give you the necessary time to complete a pending sale of your home that was coming up against a foreclosure. Or in some situations Chapter 7 even buys you the leverage for ?cash for keys??the lender paying you money to move out on a set date.

The filing of a Chapter 7 case imposes the ?automatic stay,? the immediate stopping of virtually all creditors? actions against you, including foreclosure of your home. So if you have a foreclosure sale pending, with the right timing that foreclosure would be stopped and delayed. That ?automatic stay? lasts the length of your case, usually 3 to 4 months. But the delay may be shorter than that if the creditor asks the bankruptcy court for ?relief from stay??permission to re-start the foreclosure. At that point it might be possible to negotiate the above ?cash for keys? option or some other arrangement that would be advantageous to you.

The Debt-Discharge Advantages

Depending on what debts you have against your house, a Chapter 7 case may be able to discharge (legally write off) obligations that you would be saddled with if you surrendered the house without filing bankruptcy.

For example, if you have a second mortgage, a foreclosure by the first mortgage lender would usually leave the second mortgage debt unpaid and still owed by you in full. The same thing would likely happen if you simply surrendered the house, without a bankruptcy filing. This could leave you owing tens of thousands of dollars, which your Chapter 7 case would almost certainly discharge.

There are various other debts potentially secured by the home?such as a judgment lien, income tax lien, homeowners? association dues and assessments?which would also likely be left owing after a foreclosure by your mortgage holder. Also, some of those creditors would likely be spurred into going after you personally once they were foreclosed off the real estate. Dealing with all of this through a Chapter 7 case, and getting it taken care of all at once instead of letting it drag on for years, is often the most sensible solution.

The Home Sale Advantages

If you are trying to close a sale, including a short sale, a Chapter 7 filing may well help. Besides potentially giving you more time if your sale is threatened by a foreclosure, it can give you two other important advantages.

First, if you have a judgment against you which has turned into a judgment lien attached to the house, a Chapter 7 ?judgment lien avoidance? may well get rid of that lien so that it does not need to be paid. That may enable the sale to proceed when there was not enough money to pay the secured creditors beforehand, or could even leave you with money from the sale proceeds that would have otherwise gone to that judgment creditor.

Second, the pending bankruptcy?s anticipated discharge of a second mortgage may provide leverage on that creditor to stop holding up a short sale, or convince it to accept less than it would have otherwise.

The Income Tax Advantage

When a creditor reduces or eliminates the debt you owe to it?such as debt owed to your second mortgage lender through a short sale?the amount that you no longer owe can under some circumstances be considered income for income tax purposes. This is called ?cancellation of debt income.? Details of this are beyond the scope of this blog and should be discussed with your tax professional. But generally, if this occurs while in a bankruptcy case, such cancellation of debt is not treated as income, thereby avoiding a potentially serious future tax hit.

Contact the law Office of Andrew B. Finberg

As you can see, Chapter 7 brings a surprising array of potential advantages to you when you are letting go of your house. To learn which of these?and possibly others?apply to your unique circumstances, come in to see us for a free, no-obligation consultation if you are in New Jersey. Let us help you understand your options.

The Law Office of Andrew B. Finberg works with individual consumers and business owners facing financial challenges. Please call (856) 988-9055 or use this form to contact your New Jersey bankruptcy attorneys at The Law Office of Andrew B. Finberg, LLC. We look forward to the opportunity to bring you peace of mind.

How to Save Your Home under Chapter 7 Bankruptcy

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If You Are Current on Mortgage and Other Home-Related Debts

How to Save Your Home under Chapter 7 BankruptcyA Chapter 7 ?straight bankruptcy? is generally designed for more straightforward debt situations, including those on your home. If you are current on all obligations legally tied to your home, and you intend to keep your home and keep up on your mortgage payments, your home and your mortgage will very likely sail smoothly through a Chapter 7 case.

This means being current not only on your mortgage (and any second or third mortgages), but also on the real property taxes, any homeowner association dues. And it also helps if you don?t have any income tax liens or other obligations encumbering the title to your home. If you have problems with any of these, a Chapter 13 ?adjustment of debts? may be a better solution.

If You Are Not Current on Your Mortgage But Aren?t Far Behind

If these other issues don?t apply to you but you ARE a few months behind on your mortgage, Chapter 7 may still work for you. Generally your mortgage lender will require you to catch up on your arrearage. This usually means that you have to make your regular monthly payments PLUS enough extra each month to pay off the arrearage within a certain length of time, often no more than about a year. You and your attorney need to look closely at your budget to see how much you could afford to pay monthly towards that arrearage after you no longer need to make payments on the debts that you are discharging (legally writing off) in your Chapter 7 case.

How much time you would have to catch depends on your lender and on your history of payments. You may qualify for a loan modification, wrapping the arrearage into the new mortgage loan with new payment terms, usually avoiding having to catch up on the back payments. Your attorney, who negotiates with mortgage lenders every day, will inform you about your options.

If you are not able to catch up on the mortgage within the time required by your lender, a Chapter 13 case can usually buy you much more time to do so, up to 5 years.

If You Have a Judgment Lien Against Your Home

Chapter 7 is quite limited in how it can help deal with debts that are liens against your home?s title. So if you are behind on property taxes or homeowner association dues, have an income tax or child support lien, or a lien arising from a dispute with building contractor, and you want to keep your home, there?s a good chance that Chapter 13 would be a better way to address these.

However, if there is a simple judgment against you which has turned into a lien against your home by the creditor filing that judgment in the county in which your home is located, that judgment lien may well be able to be ?avoided??erased?within your Chapter 7 case. Certain conditions must be met regarding the amount of equity in your home and the amount of the judgment lien. Be sure to tell your attorney about the judgment right when you meet him or her, to determine whether the conditions for ?avoiding? the judgment lien can be been met.

Contact the law Office of Andrew B. Finberg

To see if a Chapter 7 is the right tool for you and your home, if you are in New Jersey let us help you understand your options. The Law Office of Andrew B. Finberg works with individual consumers and business owners facing financial challenges. Please call (856) 988-9055 or use this form to contact your New Jersey bankruptcy attorneys at the Law Office of Andrew B. Finberg, LLC. Thank you.

Keeping a Vehicle by ?Reaffirming? the Vehicle Loan

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Chapter 7 Bankruptcy and Your Secured Debts

Keeping a Vehicle by ?Reaffirming? the Vehicle LoanA secured debt is one in which in which you essentially made two agreements with your creditor, the first involving the debt, the second involving the collateral. 1) You agreed to pay the amount you owe under certain terms, and 2) you agreed to surrender the collateral if you don?t pay the debt under those terms.

A Chapter 7 ?discharge? (legal write-off) of a debt erases the debt?the first of those two agreements?but does not affect your obligation to surrender the collateral if you don?t pay the debt. So if there is some collateral you want to keep?such as your vehicle?you need to keep paying for it, in spite of your ability to discharge the debt in bankruptcy.

Does Your Vehicle Definitely Secure Your Debt?

Most of the time there is no doubt that your car or truck is legally tied to your debt as its collateral. It?s clear that the creditor has a right to repossess your vehicle if you do not pay. But sometimes, such when you already own a vehicle that you give as security for a personal loan, or when paperwork is not processed correctly, a vehicle which you thought was collateral on a loan is actually not. This is something you and your attorney need to determine early in your case.

If You?re Current or Almost Current on Your Vehicle Loan

To keep your vehicle under Chapter 7, most of the time you must either be current on your vehicle loan or be able to get current within a month or two of filing the case. Otherwise you will not be able to keep your vehicle. Rarely, you may be given more time than that to catch up, or the unpaid payments may even be put at the end of the loan contract. Ask your attorney about your particular lender?s likely requirements.

If you can?t bring your loan current as fast as your lender requires, your better option may be Chapter 13, which usually allows many months to catch up on a vehicle loan, and may give you other significant advantages.

Reaffirming Your Vehicle Loan

So assuming that you are current or can get current quickly on your loan, under Chapter 7 you must usually sign a ?reaffirmation agreement? to keep your vehicle. You ?reaffirm? your debt in spite of your bankruptcy, saying that you want to exclude your vehicle loan from the discharge of your other debts. You agree to remain liable on this one particular debt in order to keep your car. Reaffirming can also help you get a jump on rebuilding your credit. So reaffirming can often be a very sensible move.

Risk of Future ?Deficiency Balance?

The potential disadvantage of reaffirming your vehicle loan is that if you are later unable to keep up the payments you could be liable for a ?deficiency balance.? That?s the amount that would still be owed on the loan after the lender would repossess and sell your vehicle, and then apply the sale proceeds to the loan balance.

Whether this problem would ever arise depends on the likelihood that you would not be able to maintain the payments as reaffirmed, and also on how much you owe on the vehicle compared to its value. You should think very carefully about reaffirming a vehicle loan if you do not anticipate having a stable source of income throughout the remaining length of the loan, and/or if the vehicle is worth much less than you owe on it.

In some limited situations you may be permitted to keep your vehicle by just keeping current on your payments without reaffirming the debt. This way, if you miss or are late on a payment the creditor could immediately repossess your vehicle. But you?d not risk owing a future ?deficiency balance.? That?s because without a reaffirmation the creditor?s rights are limited to repossession. This option is not likely available with most creditors, so ask your attorney.

Contact the law Office of Andrew B. Finberg

If you live or have a business in New Jersey, we can help you keep your vehicle in bankruptcy. The Law Office of Andrew B. Finberg works with individual consumers and business owners facing all kinds of financial challenges. Please call (856) 988-9055 or use the online contact form to contact your New Jersey bankruptcy attorneys at the Law Office of Andrew B. Finberg, LLC.

What a Straightforward Chapter 7 Bankruptcy Case Looks Like

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A straightforward Chapter 7 case does the following:

  1. immediately protects you and your possessions and property from your creditors;
  2. enables you to hold onto everything you own;
  3. lets you keep or surrender any collateral based on your choice; and
  4. discharges (legally writes off) all your debts that you want to discharge.

1) Protects You Right Away

What a Straightforward Chapter 7 Bankruptcy Case Looks LikeThe moment your Chapter 7 case is filed, virtually all collection efforts by creditors against you are legally stopped. This includes virtually any and all ways to collect a debt?garnishments, lawsuits, judgments, phone calls, mailed or emailed bills and collection letters, home and other real estate foreclosures, repossessions of vehicles and furniture, income tax liens. In addition, if a creditor does continue trying to collect illegally, the bankruptcy court could punish that creditor. As a result, creditors almost always do immediately stop once they are informed that you filed a Chapter 7 case.

There are some exceptions to this protection, but they are narrow exceptions. There are some very specific kinds of obligations and legal proceedings not affected by a Chapter 7 filing, like criminal fines and criminal proceedings, as well as child support arrearages and many domestic relations matters. Plus, very rarely, if you filed and had dismissed one or more bankruptcy cases in the prior year, the protection against creditors may either not come into effect at all or may expire after 30 days.

So in the simplest Chapter 7 case, the protection kicks in when your case is filed, it applies to all your creditors, and they all immediately honor it by stopping all their collection actions against you.

2) Keep All That You Own

In most Chapter 7 cases, everything you own is ?exempt??protected from your creditors, and also protected from the Chapter 7 trustee who acts on behalf of the creditors.

Both federal bankruptcy law and each state?s laws provide lists of types of properties and the maximum dollar amounts of each type that are exempt. New Jersey lets you choose between using either its state exemptions or the federal ones. (Some states only allow the use of their state exemptions.) This gives you and your attorney the flexibility to determine whether the New Jersey exemptions or the federal ones cover your unique set of assets better.

In the simplest Chapter 7 case (and indeed in most of them), everything you own is exempt, and you can keep it all.

3) Keep or Surrender Any Collateral

Under Chapter 7 you generally have the choice to either surrender collateral?your home, car, truck, or whatever you purchased and the creditor holds a lien on or to keep that collateral. If you keep it you usually have to catch up any late payments and keep current on it going forward.

The immediate advantage of surrendering collateral under Chapter 7 is that you can stop making payments on that debt, and also stop paying related expenses, like insurance on a vehicle loan (once you?ve surrendered it). But just as importantly you also almost never have to pay any of the remaining ?deficiency balance,? the amount you would often still owe after your creditor sells the surrendered collateral and credits the sale proceeds to your account.

Under Chapter 7 you can usually keep the collateral, especially if you are current, or can get current within a few weeks. In most situations, you would enter into a ?reaffirmation agreement? whereby you ?reaffirm? your debt, excluding it from the discharge of your other debts.

So in the simplest Chapter 7 case, you can surrender the collateral and usually owe nothing, or you can keep it if you are current or close to current on your secured debt and are willing to reaffirm that debt.

4) Discharge All Debts

In most Chapter 7 cases, all debts are discharged? legally written off?with certain exceptions.

There are two kinds of exceptions. The first involves your right to discharge ANY of your debts, and another that involves your ability to discharge certain specific debts.

In the unusual event that a debtor hides assets or lies to the bankruptcy court or trustee in some other significant way, that debtor could potentially lose the ability to get a discharge altogether. Also, filing a new bankruptcy case too soon after an earlier one could result in no discharge of debts in the new case.

Certain specific kinds of debts are NEVER discharged?child and spousal support, for example. Some kinds of debts which are ONLY discharged under very specific or limited circumstances?income taxes and student loans, for example. Finally there are debts which are discharged UNLESS a creditor raises and proves the existence of specific conditions?for example, a loan that was procured through the debtor?s misrepresentations.

So in the simplest Chapter 7 case, you qualify for a discharge, and all your debts are in fact discharged.

Contact the law Office of Andrew B. Finberg

If you are in New Jersey, we can help you decide whether Chapter 7 is right for you. The Law Office of Andrew B. Finberg works with individual consumers and business owners facing financial challenges. Please call (856) 988-9055 or use the online contact form to contact your New Jersey bankruptcy attorneys at the Law Office of Andrew B. Finberg, LLC.

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