Student Loans in Bankruptcy And Non-Bankruptcy Solutions For Older Americans With Debt

Older Americans With Student Loan Debt

The front page of Yahoo is riddled with stories every day about the dramatic rise in older Americans holding college debt, either for themselves or their children. What should be getting more attention, but isn’t, are the practical student loans in bankruptcy and non-bankruptcy solutions this population can use to take control of their overwhelming student loan debt.

If you’re in, or approaching retirement, and the federal student loans you’re carrying were for your own education and you’re having a hard time making the payment on a fixed income, but the loans are still in good standing (i.e- not in default) — contact one of the Crossley Law Offices student loan lawyer specialists to learn about income-based repayment options.

Income-driven repayment plans are available to all borrowers, and there are also some new options available for older student loan holders. If you’re eligible, one of our student loan lawyer specialists will help you get your monthly student loan payment set at no more than 15 percent of your income.

Interested in seeing more, just use the U.S. Department of Education’s Repayment Estimator to explore eligibility for income-based repayment plans and possible payment amounts.

After 25 years of payments on this plan, any remaining balance is forgiven, and that is reduced to 10 years if you are currently employed in public service.  One of our student loan lawyer specialists will ensure that you are eligibility re-certified for your IBR plan each year.

There is a newer version of income-based repayment called Pay As You Earn that’s slightly more generous, but is only available for loans taken out in recent years . If you have older Federal Family Education Loans, you’re not eligible for these plans, but you can use a similar plan called income-sensitive repayment.

With income-sensitive repayment, you can choose a monthly payment amount between 4 percent and 25 percent of your monthly income but can only use the plan for five years. Another option is to consolidate your existing Federal Family Education Loans into a new federal direct consolidation loan so that you can take advantage of income-based repayment plans.

If you have Parent PLUS loans that you took out for your children, things get a little trickier but there are still options. These loans aren’t technically eligible for income-based repayment, but if they are consolidated into the Direct Loan program, they gain eligibility for income-contingent repayment. That makes three different payment plans determined by income — four if you count Pay As You Earn separately.

While most of the USA’s $1.2 trillion in student debt is held by the federal government, there’s still approximately $150 billion in non-federal private student loans. And often borrowers of private loans, regardless of age, struggle the most because private loans don’t come with all the repayment options described above.

Private loans also often require a co-signer, so many older Americans have cosigned these loans for their children and are on the hook if their child can’t repay because they haven’t been able to find employment. If you’re struggling with private student loan payments, contact one of our student loan lawyer specialists to discuss other consolidation, refinancing or modification options.

Discharging both federal and private education student loans in bankruptcy is another practical solution for many older Americans nearing retirement.

Student Loans in Bankruptcy

Student Loans in Bankruptcy Explained

If you are struggling with overwhelming student loan debt, one of our lawyers can explain your bankruptcy options.

The belief that student loans in bankruptcy are never dischargeable is just plain incorrect.

You actually can get your student loan discharged in bankruptcy in some limited cases. However, for most people chapter 13 bankruptcy will provide the most immediate relief of overwhelming student loan debt without needing to worry about the dischargeability issue at all.

In 2011 Jason Iuliano published a study reporting that at least 40 percent of borrowers who do include their student loans in their bankruptcy filing end up with some or all of their student debt discharged.  The biggest issue is that the Internet is rampant with rumors that have almost all borrowers thinking there’s no chance to have their student loans discharged, so they don’t try. Iuliano’s study reported that only about 0.1 percent of consumers with student loans attempt to include them in their bankruptcy proceedings.

If life has left you in a position where you simply have no hope of repaying your overwhelming student loan debt, you need to contact a bankruptcy lawyer specialist at the Crossley Law Offices to learn about student loans in bankruptcy.

One of our lawyers will review the following key points with you:

  • If you pass the Brunner test: Current bankruptcy law exempts education loans and obligations from eligibility for discharge unless doing so would cause the consumer undue hardship. The problem is that undue hardship is not defined within bankruptcy law, leaving the bankruptcy courts to decide what this means.

Many Courts use what’s called the Brunner test to determine if requiring a consumer to continue to be responsible for an education debt would cause him or her undue hardship. There are essentially three criteria a consumer has to meet under the Brunner test.

First, continuing to pay the loan must cause the borrower to be unable to sustain a minimum standard of living. Second, the borrower’s financial situation must be unlikely to change in the future. Finally, the borrower must have made a good-faith effort to pay his or her loans.

If you meet these criteria, one of our bankruptcy attorneys can file an adversary proceeding for you (which is essentially a lawsuit within the bankruptcy case itself) seeking to have your student loans discharged.

However, for most borrowers with student loans in bankruptcy the far simpler route is to use chapter 13 bankruptcy to create a 5 year (60 month) payment plan, which the borrower can reasonably afford without needing to worry about whether or not the student loan service company will approve the monthly payment.  For more information on how to use chapter 13 bankruptcy to effectively deal with overwhelming student loan debt contact one of our Massachusetts bankruptcy lawyer specialists now.

How Much Do Bankruptcy Lawyers Charge

Massachusetts Bankruptcy Lawyers Fees Explained

When you are ready to file your Chapter 7 or Chapter 13 Bankruptcy it is a good idea to contact several qualified bankruptcy lawyers and have them quote you their fees.  Fees charged by lawyers can range in price and just because you are quoted a high fee it doesn’t mean that the lawyer is actually an experienced bankruptcy lawyer.  Similarly, just because you are quoted a lower fee it doesn’t mean that your lawyer is inexperienced.

In order to evaluate a bankruptcy lawyers’ experience with filing bankruptcy cases, you should read as many on-line reviews of the lawyer as you can.  The more and better the reviews the more comfortable you should feel that your lawyer has the bankruptcy experience that you need him/her to have, and the more smoothly your case will run.  For example, you can read numerous reviews for our law firm’s bankruptcy lawyers at Google+ or at Yelp.

Once you have evaluated the level of experience for all of your potential bankruptcy lawyers, you can then return to evaluating their fee structure.  Some lawyers charge an hourly rate and others charge a flat-fee.  Our firm charges a flat-fee because we believe that our clients’ like to know exactly how much the entire bankruptcy proceeding is going to cost them before they agree to sign a fee agreement.  If you were to agree to an hourly rate, there is always the possibility that your lawyer will have to spend many extra hours on your case, and it could wind up costing you 3 to 5 times as much as you originally expected; with a flat-fee you can completely avoid this risk.

Always make sure to ask your potential bankruptcy lawyers to explain all of their fees to you up-front.  This is very important because many bankruptcy lawyers simply want to sign you as a client, so they will quote you only a portion of the fees so that you think you are getting a deal.  Once you have signed as a client however they will suddenly contact you and “remind” you of Court filing fees, credit report fees and debt counseling course fees that they previously “forgot” to tell you about.  Below is a list of the fees you will want to ask about:

1.  Lawyers’ fee: cost for your bankruptcy lawyer to handle your case for you.

2.  Bankruptcy Court filing fee: cost to file your case with the Court (standard fee set by Court).

3.  Credit report fee: cost for your lawyer to obtain a copy of your credit report.

4.  Debt counseling course fee: cost for you to take the two (2) Federally required courses.

Remember, it’s up to you to ask your potential bankruptcy lawyer all the important questions about fees.  Check these links for information about our law firm’s Chapter 7 bankruptcy fees, Chapter 13 bankruptcy fees and Chapter 11 bankruptcy fees.

Chapter 13 Bankruptcy Case Information

National Data Center

Have you filed for Chapter 13 bankruptcy? Are you currently repaying your debts through an administered plan? The National Data Center website lets you view the details of your Chapter 13 Bankruptcy Case any time.

Simply go to the National Data Center’s website, click on the “Get Started Now” button located on the left side of the screen and input the following information on the Step 1 screen:

1.  First Name

2.  Last Name

3.  Case Number: (Example: 13 – 40960)

4.  Last 4 digits of your Social Security Number

Click the “Submit” button.  You will then be directed to the Step 2 screen where you will be asked to choose the correct answers from 3 drop down menus for the following 3 questions:

1.  Your Mailing Address

2.  Your Chapter 13 Bankruptcy Trustee’s Name

3.  The correct name for one of your Creditors

Click the “Submit” button.  You will then be directed to the Step 3 screen where you will be asked to create a User Account by entering such basic information as:

1.  Your Name

2.  Your Email address

3.  Choosing a User Name

4.  Choosing a Password

Click the “Submit” button.  You will then be directed to the Step 4 screen where you will be permitted to log-in to your User Account and view the details of your case by entering your User name and Password.

Once you have successfully logged-in to your User Account you will be able to view most of the payment-related details of your case such as:

1.  The total amount of payments that you have made towards your Chapter 13 Bankruptcy Plan

2.  The Names of all your Creditors that have filed Proofs of Claim in your Case

Please note that the above 2 pieces of information may not be fully available until the U.S. Bankruptcy Court Judge who is overseeing your case has “Confirmed” your Chapter 13 Payment Plan.  Confirmation of your Plan often takes as long as 6 months from the date of your Section 341 Hearing.



Bankruptcy Lawyers Explain Key Chapter 13 Points

Chapter 13 Explained By Massachusetts Bankruptcy Lawyers

Mortgage Foreclosures

One of the most important points about filing a Chapter 13 bankruptcy in Massachusetts, is that by filing under this chapter, individuals can stop foreclosure proceedings and may cure delinquent mortgage payments over time.  Nevertheless, they must still make all normal mortgage payments on time that come due during the chapter 13 plan.

Rescheduling Secured Debts

Good Massachusetts bankruptcy lawyers will explain that another advantage of Chapter 13 over Chapter 7 is that it allows you to reschedule secured debts (other than normal mortgage payments on a primary residence) and extend them over the life of the chapter 13 plan.  Doing this will almost always lower the monthly payments that the debtor needs to make.  For example, if an individual owes the IRS past-due taxes, and has reached an agreement to pay those past-due taxes at the rate of $500 per month, they could reschedule those monthly payments under a chapter 13 plan, and (depending on what their monthly disposable income is) they could wind up paying the IRS only $250 per month during the plan period.

Co-signer Protection

It’s also important to note that another advantage of Chapter 13 bankruptcy over Chapter 7 is that it has a special provision that protects 3rd parties who are liable with the primary debtor on consumer debts.  This provision basically protects co-signers or co-debtors.  Unless the bankruptcy court allows otherwise, a creditor may not seek to collect a consumer debt from any individual who is liable along with the debtor.  Consumer debts are those debts incurred by an individual primarily for a personal, family, or household purpose.

Check Back Soon For More Important Bankruptcy Law Updates Explained By Massachusetts Bankruptcy Lawyers.

Chapter 11 Bankruptcy Eligibility

Is Your Massachusetts Small Business Eligible For Chapter 11 Bankruptcy? Find Out Now.

Chapter 11 Eligibility

On the other hand, almost anyone can file bankruptcy under Chapter 11. Individuals, corporations, partnerships, joint ventures, and limited liability companies are all eligible to be Chapter 11 debtors. There are no debt or income requirements or limitations for filing bankruptcy under Chapter 11.

Appointment of a Trustee

Whether a bankruptcy trustee will be appointed in your case differs in Chapter 11 and Chapter 13 bankruptcy. In Chapter 11, appointment of a trustee is the exception rather than the rule. The bankruptcy court may appoint a Chapter 11 trustee, but only if there is cause, such as gross mismanagement, or fraud.

In Chapter 13, a trustee is always appointed. In most cases, the role of the Chapter 13 trustee is relatively limited. Chapter 13 trustees review the proposed plan and other documents and make recommendations to the bankruptcy court on how to proceed. Chapter 13 trustees are also responsible for collecting plan payments and distributing the proceeds to creditors. If you fail to make required plan payments, the Chapter 13 trustee (or creditors) can ask the court to dismiss the case or convert it to a Chapter 7 liquidation.

Chapter 11 Proceedings: Pros and Cons

A big disadvantage to Chapter 11 is that the proceedings can be complex and expensive. However, there are special provisions which streamline and expedite Chapter 11 cases involving “small business debtors.” (For a list of these streamlined procedures, see Chapter 11 Bankruptcy for Small Business Owners.

For these purposes a “small business debtor” is a person or entity who:

  • is engaged in business or other commercial activities, and
  • owes no more than $2,490,925 in total debt (excluding obligations owed to insiders such as family members of the business owner).

An advantage of Chapter 11, if you can meet all of the statutory requirements, is that there is no set limit on a plan’s duration. Chapter 11 plans typically provide for debtors to make payments to creditors over a period of three to five years. The bankruptcy court can confirm a Chapter 11 plan with a longer term, however, if you need more time to make required payments. Small business debtors with real property mortgages or equipment loans, for example, often need extended payment terms.

Chapter 13 Bankruptcy vs. Chapter 11 Bankruptcy For Massachusetts Businesses

Differences Between Chapter 13 Bankruptcy and Chapter 11 For

Massachusetts Small Businesses

For a small business in financial distress, bankruptcy may be the only viable option. There are two restructuring options under bankruptcy law for debtors who want to try to stay in business: Chapter 11 and Chapter 13. For a “straight” or “liquidation” bankruptcy, see Chapter 7 Bankruptcy for Small Business Owners.

General Overview

To some extent, Chapters 11 and 13 are similar. Both types of bankruptcy allow debtors to continue in business and propose plans to restructure their finances. Subject to legal requirements and limitations, a Chapter 11 or 13 plan can:

  • allow you to retain property needed to operate your business
  • give you time to sell assets you no longer need or cannot afford to keep
  • modify payment terms on secured debts (like real property mortgages or equipment loans), and
  • discharge (or in other words, eliminate) obligations that you cannot pay over the plan term.

Most small business owners, when possible, choose Chapter 13 over Chapter 11. Chapter 11 can provide more flexibility, but it usually costs too much money and takes too much time to be a realistic option for small business owners. (To learn about these types of bankruptcy, see Chapter 13 Bankruptcy for Small Businesses, and Chapter 11 Bankruptcy: An Overview.)

Eligibility for Chapter 11 or Chapter 13 Bankruptcy

Virtually anyone can file for Chapter 11 bankruptcy, whereas many small businesses are ineligible to file for Chapter 13.

Chapter 13 Eligibility

Chapter 13 is available only to individuals with regular income. If you operate your business as a sole proprietorship, you can take advantage of Chapter 13 by filing a petition on your own behalf. Otherwise, Chapter 13 is not an option you can choose. Small businesses operated through corporations, partnerships, or other entities are not eligible to seek Chapter 13 relief.

Chapter 13 is also subject to debt limitations, which change periodically. Currently, eligibility for Chapter 13 is limited to individuals who owe no more than $383,175 in unsecured debt and $1,149,525 in secured debt. Unsecured debts are obligations that are not backed by collateral, such as medical bills and credit card claims. Examples of secured debts are home mortgages and car loans. Individuals cannot file for relief under Chapter 13 if they owe more than the specified debt limits.

(Learn more about eligibility for Chapter 13 bankruptcy.)

Chapter 13 Bankruptcy Steps cont.

9. You file a modified plan, if you wish.

– this occurs anytime before the Chapter 13 Bankruptcy confirmation hearing. You must send a copy of the modified plan to all creditors, who are entitled to 20 days’ notice before the confirmation hearing. If you don’t give 20 days’ notice, you will have to schedule a new hearing date.

10. You or your attorney attends the confirmation hearing, where the court addresses any objections raised by creditors or the trustee and approves your repayment plan.

– this occurs between 20 and 45 days after the creditors’ meeting, unless the court wants to hold it earlier and there is no objection to the earlier date.

11. Creditors file their Proofs of Claim, specifying how much they are owed. You may also have to file Proofs of Claim for creditors who don’t file their own Proofs.

– this occurs within 90 days after the Chapter 13 Bankruptcy creditor’s meeting (180 days for creditors that are government agencies). If you have to file Proofs of Claim on behalf of creditors, you must do so within 30 days after the 90-day or 180-day limit.

12. You or the trustee files written objections to creditors’ claims, if you have a reason to object.

– this occurs as soon as possible after the creditors file their claims. You must notify your creditors at least 30 days in advance of the hearing on your objections.

13. The trustee sends you periodic statements showing:

* who has filed claims and for how much

* how much money has been paid to each creditor, and the balance due each creditor.

– this occurs usually twice a year

14. You give the trustee annual income and expense statements.

– this occurs every year while your Chapter 13 plan is in effect, if requested by the court, trustee, U.S. Trustee, or a creditor

15. You file a Certificate (Form 23) showing that you completed a course in personal financial management.

– this occurs before you make your last plan payment

16. The court grants your discharge. The court may schedule a brief final court appearance called a “discharge hearing.” If there’s no discharge hearing, you’ll be mailed formal notice of your discharge.

– this occurs 36 to 60 months after you file if you complete your plan payments; sooner if you seek and obtain a hardship discharge.


Chapter 13 Bankruptcy Case Steps

1. You file for Chapter 13 bankruptcy.

– this occurs once you have paid your chapter thirteen bankruptcy filing fee.

2. The automatic stay takes effect. It bars your creditors, once they learn of your filing, from taking any actions to collect what you owe.

– this occurs once your bankruptcy lawyer files the bankruptcy petition.

3. The court appoints a trustee to oversee your case. You will receive a Notice of Appointment of Trustee from the court.

– this occurs within a few days after your bankruptcy lawyer has filed the bankruptcy petition.

4. The court sends you and your creditors a Notice of bankruptcy case, which usually contains:

* general information about Chapter 13 bankruptcy

* a summary of your Chapter 13 plan

* the date of the meeting of creditors

* the date of the confirmation hearing, and

* the deadline by which creditors must file their claims.

– this occurs within a few days after your bankruptcy lawyer has filed your proposed Chapter 13 plan.

5. Creditors file written objections to your plan, if they wish.

– this occurs at least 25 days before the confirmation hearing.

6. You provide your most recent tax return to the trustee. You may black out certain personal information, such as your Social Security number.

– this occurs at least seven days before the scheduled date of the first meeting of creditors.

7. You begin making payments under your repayment plan. (If your plan is never approved, the trustee will return your money, less administrative costs.)

– this occurs within 30 days after your bankruptcy lawyer files the bankruptcy petition.

8. You attend the meeting of the creditors, where the trustee and any creditors who show up can ask you about the information in your bankruptcy papers. A creditor may raise objections to your plan with the hope of getting you to modify it before the confirmation hearing. You must bring any documents the trustee requests and proof that you‘ve filed tax returns for the last four years.

– this occurs within 40 days after your bankruptcy lawyer files the bankruptcy petition.

Next Week – Chapter 13 Bankruptcy Steps 9 through 16

Chapter 7 Bankruptcy Steps cont.

6. File the forms.

Filing your petition (the main bankruptcy form) officially starts your case. Most people file all the forms at once, but if you’re in an emergency, you can file just a two-page form, and then file the complete set of the forms within 15 days.

To learn more, see Filing for Bankruptcy.

7. Go to a meeting.

In most cases, you’ll need to go to court only once, for a short meeting with the trustee (and perhaps a creditor or two) to review your case and answer any questions about the information in your forms.

To learn more see, The Meeting of Creditors in Chapter 7 Bankruptcy.

8. File objections or motions if needed.

If you dispute a creditor’s claim against you or you want to eliminate certain liens, you’ll need to address these matters before your bankruptcy case is closed.

9. Wind up your secured debts.

When you filed your bankruptcy forms, you completed a form in which you stated how you intended to handle your secured debts. Before your case is closed, you’ll need to act on these matters.

10. Get your discharge.

Congratulations! This is what it’s all about. At the end of a successful bankruptcy, the court will issue an order saying that your dischargeable debts are officially discharged. Once a debt is discharged, you no longer have a legal obligation to pay it and the creditor has no legal right to demand it.