Articles Posted in Chapter 13 Bankruptcy

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arkovich_law-narrow“It is now time”, states Judge Klein who is charting a path for discharging student loans without being reversed.  For years, bankruptcy judges were wary of ruling in favor of debtors who asked for a discharge of federal student loan debt.  In part, because those Judges knew their rulings would be appealed by either the Department of Education, or ECMC (guarantor litigator for the older FFEL loans).  Now it’s different.

In an opinion just out on April 5 (Love v U.S. Dep’t of Education, Fedloan Servicing, Nelnet; Adv. 21-02045-C), Judge Klein decried the “widespread belief that student loans are virtually impossible to discharge in bankruptcy.”  Now there is an attestation process, whereby a debtor can use factors like:

  • School closure
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One of the little known facts in a Chapter 13 bankruptcy, is that someone can repay a vehicle loan using the Till rate of interest rather than contract rate, as well as value the vehicle at it’s current market value.  That can be important if the vehicle is “underwater” and more is owed than what it is actually worth.

But what exactly is a Till Rate?  And why has it been going up over the past couple years?  Do we expect it to drop back down?  After all, it was incredibly low for so many years.

The Till Rate, or Trustee rate, is a presumptive interest rate used in chapter 13 cases paying off secured debts over the life of the Chapter 13 Plan. The rate takes its name from the  Supreme Court case Till v. SCS Credit Corp., which affirmed the notion that interest in chapter 13 was the combination of a risk factor and the prime rate.  The Till rate is calculated from the Wall Street Journal “Prime” rate, plus 1.5.

EFFECTIVE DATE RANGE TILL RATE
03/23/2023 9.50%
02/02/2023 9.25%
12/15/22 9.00%
11/3/2022 8.50%
9/22/22 7.75%
7/28/22 7.00%
6/16/22 6.25%
5/5/22 5.50%
3/17/22 5.00%
3/17/20 4.75%

There are so many things that can be done in a bankruptcy, whether Chapter 7 or 13.  For instance, did you know that we can even reduce or eliminate federal student loans now with the new DOJ guidance?  We helped teach an all day class on that to our fellow attorneys last week.

Come talk with us if you’d like to know more about how a bankruptcy filing can help dig you out of a hole.

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By now everyone (our attorney friends) has probably watched a CLE on the new DOJ Guidance to discharge federal student loans, but do you really understand how to do the process?
We are on a panel set up by the Bransons in Orlando doing an all-day workshop via Zoom on 4/3/23 for the step-by-step process. Including how to draft complaints, serve summons properly, how to fill out the attestation form, what/when to give the DOJ information, and how to get paid. Most likely this will be a $2,500.00 no look per creditor for student loan adversary or you can file a fee application.
I’ll also have a section on other options that are only good for a short period of time when folks have non-Direct federal student loans and an adversary won’t work. This will include the new one time account adjustment under the IDR Waiver, PSLF, the new Repaye calculations which should make an IDR payment roughly 1/3 of what it used to be, BDTR claims are now processing for full forgiveness, the 10k forgiveness appeal and an update on TPD and the payment pause.
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arkovich_law-narrowHome sellers and home buyers are likely both waiting for some kind of change in the financing markets right now.

Those homeowners locked in with low rates do not wish to sell, but cannot maintain a standard of living with their current income and increased expenses.  They may not qualify for an equity loan due to tighter credit conditions in the marketplace.  So they believe they are stuck and face mounting credit card debt.

Same with home buyers essentially, although for different reasons.  Mortgage rates above 6%, limited home inventory on the market, and now a limit to the marketability of mortgage bonds will place even more pressure on mortgage rates even if the Fed pauses the interest rates per the Wall Street Journal in its article today “How the Bank Mess Can Hit Home Buyers“.  This will limit home sales for those who are not cash buyers.

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arkovich_law-narrowStuck in a timeshare (or nowadays they are called vacation clubs or vacation ownership plans) you can’t get out of?  You can get rid of a timeshare in a bankruptcy.  If the timeshare is a contract agreement for points etc., then the contract can be rejected as an executory contract.  If the timeshare is a secured interest (and many are), then you can provide in a Chapter 13 Plan to revest the title to the timeshare company/lender and they get it back.

For example, the Order Confirming Plan would provide for recording purposes:

Pursuant to 11 U.S.C. Sections 1322(b) (8) & (9), title to said property shall vest in Wyndham Vacation Resorts, Inc.  Wyndham Vacation Resorts may file an unsecured claim for any resulting deficiency that may exist.  Confirmation of this plan shall constitute a deed of reconveyance to this property upon recording with the XX County Recorder.

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arkovich_law-narrowSomething going around one of the listserves I monitor daily is how debt settlement or debt consolidation companies are a sham.

The facts for this one:  (by the way, the client provided a copy of the written agreement to the attorney so the fees and proposed settlement amounts were verified)

The Debtor placed $54,000 with the debt settlement company.  The estimated settlement amount was $27,500 and the debt settlement company charged a fee of $12,500.  The settlement would cost them $40,000 on a $54,000 debt.  Plus this would be a taxable forgiveness, so the Debtor would receive a 1099-C for $27,500.  Why would anyone agree to this nonsense??

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You can bounce back from bankruptcy way more quickly than you think.  For instance, debtors who file bankruptcy can qualify for an FHA loan in as few as two years, or a conventional loan four years after filing.

What about credit scores?  They can and frequently do go up right after filing.

Bankruptcy can help repair credit faster than trying to chip away at debt with predatory interest rates or judgments that last for 20 years.  Most people that we talk with, if they decide to file, they usually wished they’d pulled the trigger and gotten that “fresh start” years before.

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The Economic Injury Disaster Loan (EIDL) program is a loan and grant program offered by the U.S. Small Business Administration (SBA) to help small businesses and non-profit organizations recover from economic injury caused by a declared disaster. The EIDL program provides two types of financial assistance: EIDL loans and EIDL grants.

  1. EIDL Loan: The EIDL loan is a long-term, low-interest loan designed to help small businesses and non-profit organizations recover from economic injury caused by a declared disaster. The loan amount is based on the economic injury suffered, and can be up to $2 million. The loan must be repaid, with interest and fees, over a maximum of 30 years.
  2. EIDL Grant: The EIDL grant is a grant that does not have to be repaid, and is designed to provide immediate relief to small businesses and non-profit organizations suffering economic injury from a declared disaster. The grant amount is up to $10,000 and is meant to help cover basic needs such as rent, mortgage, and utilities, while the business is waiting for the loan application to be processed.
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Christie_1The Brunner standard is a legal test used in certain circumstances to determine whether a borrower’s federal student loans can be discharged in bankruptcy. The test was established by the U.S. Supreme Court in the case of Brunner v. New York State Higher Education Services Corp. (1987).

The Brunner test has three prongs:

  1. Hardship: The borrower must prove that repaying the loans would impose an undue hardship on the borrower and their dependents.
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