Chapter 7 Bankruptcy

Published on: March 23, 2023

Debt Settlement Companies – Often Not a Good Option!

Something 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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Published on: March 22, 2023

Bouncing Back From Bankruptcy is Easier Than You Think

By Christie D. Arkovich, P.A.

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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Published on: February 12, 2023

What is the Difference Between an EIDL loan versus a EIDL grant?

By Christie D. Arkovich, P.A.

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.

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.
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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Published on: February 5, 2023

What is the Brunner Standard for Discharging Federal Student Loans?

By Christie D. Arkovich, P.A.

The 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:

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

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Published on: February 3, 2023

How do I Discharge Federal Student Loans?

By Christie D. Arkovich, P.A.

There are several ways to discharge federal student loans, including:

Total and Permanent Disability (TPD) discharge: If you are completely and permanently disabled, you may be eligible for TPD discharge.
Death discharge: If the borrower of a federal student loan dies, the loan may be discharged.

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Published on: February 2, 2023

Auto Loans – It’s Crazy Out There – Read Your Credit Union Contract Carefully

By Christie D. Arkovich, P.A.

The average auto loan interest rates reported by DealerTrack are getting crazy high – hitting a decade high now:

New cars: 8.41%
Used cars: 12.88%

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Published on: January 31, 2023

EIDL loan or grant — Payments Starting Soon — How to Discharge or Forgive?

By Christie D. Arkovich, P.A.

First, and I must stress, EIDL loans are not forgivable. They were intended to help small businesses recover from the economic impacts of the Covid-19 pandemic.

However, EIDL Advance funds are like grants and do not have to be repaid.

More information is available on the SBA website: https://www.sba.gov/funding-programs/loans/covid-19-relief-options/eidl

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Published on: January 19, 2023

Is it a Good Idea to Consolidate Student Loans Before Filing Bankruptcy, or Should You Wait?

By Christie D. Arkovich, P.A.

Under the new provisions allowing a Debtor to attest to an undue hardship, a consolidation pre-filing would be viewed as evidence of good faith – this is the box that may be checked:

engaging meaningfully with a third party they believed would assist them in managing their student loan debt.

Also, there could be problems if a consolidation is later done after filing as this would create a new post-petition debt that the Court may not be able to discharge effectively. As always, please consult with a bankruptcy and student loan attorney as this can get complicated and you are usually talking about a very large debt and don’t want to make any mistakes. Here’s the case law for the above assertions:

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Published on: December 8, 2022

Bankruptcy is Finally an Option for Federal Student Loans

By Christie D. Arkovich, P.A.

Here’s a news clip on this topic that ran yesterday: https://www.youtube.com/watch?v=77xsEU7rFM0

It’s a good short 2 minute summary of what this means and well worth a listen! I haven’t seen this in the news much and we really need to get the word out because in my 30 years of practice, I see this as finally working to discharge significant federal student loan debt.

So how are we starting on this to get our student loan and bankruptcy clients discharges in 2023?

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Published on: July 12, 2022

What to do with Medical Debt in Bankruptcy?

By Christie D. Arkovich, P.A.

Credit reporting is changing for medical debt. Starting July 1, 2022, previously defaulted, but subsequently repaid, medical debt will no longer be reported on someone’s credit. Next year, medical debt of less than $500 will not be reported on credit reports any longer. This doesn’t mean that the medical provider doesn’t have a claim however. It’s important to keep copies of these small medical bills and give them to your bankruptcy attorney so they can be officially discharged in your bankruptcy.

The timing can also be important. Remember, that you can only file a Chapter 7 every eight years. So if you have a medical procedure coming up that may have unexpected and you incur out-of-pocket costs, you may want to consider getting ready to file bankruptcy, but wait to actually file once you are medically cleared.

It’s often better to file a bankruptcy when you are unemployed. You don’t have to be without a job, but we’d rather you look into filing bankruptcy right after a medical procedure (so all out-of-pocket costs are discharged), but before you begin a new job.

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