Student loans

Published on: March 12, 2018

Student Loan Debtors Getting Kicked Out of Income Driven Plans in Bankruptcy

Reports have been surfacing that the Department of Education is kicking borrowers out of Income Driven Plans when they file bankruptcy. It makes no difference if they are in a Chapter 7 or 13. It also doesn’t matter if the debtor is current in their payments. The National Association of Consumer Bankruptcy Attorneys (NACBA) views this as a direct violation of 11 U.S.C. 525 (Protection against Discriminatory Treatment).

There are ways to counter this and remain in an Income Driven Plan to continue progress toward debt forgiveness including Public Service Forgiveness. A new development is spreading across the country to file what is called the Buchannan provisions in a Chapter 13 Plan. We have recently adopted this in Tampa, Florida.

On January 5, 2018, Trustee John Waage and Judge Catherine McEwen agreed to the following Non-Conforming language in In re Hyland, 8-17-bk-01564-CPM that now allows for Income Driven Repayment Plans concurrently with a Chapter 13.

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Published on: March 1, 2018

Trying to Rehab a Federal Student Loan? Be careful!

By Christie D. Arkovich, P.A.

If you are in default on a federal student loan, one option to cure the default is to enter into a 9 or 10 month rehab plan to cure the default. This can be a paperwork nightmare, with the result ending in wage garnishment if you are not careful. Once a garnishment starts, it cannot be stopped for five months. That means that you have to pay a negotiated rehab payment for nine months during which you’ll have 10 paychecks garnished. Most people’s finances cannot suffer that.

So it’s important to do this right. Sometimes that doesn’t mean doing it yourself if this is a process you are unfamiliar with. See what a rep for ACSI (Automated Collections Services, Inc.) said about working with our firm recently. John advised: “he really appreciated how detailed the firm was with advising them of our client’s situation and how he appreciated that we submitted the supporting documentation straight away. He noted that if other firms implemented a system like ours, it would make his job that much easier. He’s been dealing with student loans and collections for 30 years now and has never come across a firm that has been as thorough with addressing a situation and helping to swiftly rectify it.”

Since this conversation, John has drafted and sent over the garnishment release notice to our client’s employer and had one of his associates follow up with us to get our client on an affordable repayment agreement. This client approved for a $5.00 rehabilitation plan.

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Published on: February 28, 2018

New Procedure Allowed In Tampa Now To Reduce Student Loan Debt When Filing Chapter 13

By Christie D. Arkovich, P.A.

Ignoring your debtor’s federal student loans in their Chapter 13 bankruptcy can have catastrophic circumstances. While fixing vehicle, credit card and mortgage debt, you may have inadvertently allowed a debtor’s $100,000 federal student loan to balloon into nearly $150,000 by doing nothing. This is because the standard procedure of the Department of Education is to place these loans into forbearance during a bankruptcy. However, now in Tampa, we are permitted to use the following Non-Conforming Provision in Chapter 13 Plans to permit our clients to enroll in Income Driven Plans and even Public Service Loan Forgiveness whenever eligible.

On January 5, 2018, Trustee John Waage and Judge Catherine McEwen agreed to the following Non-Conforming language in our client’s case, In re Hyland, 8-17-bk-01564-CPM that now allows for Income Driven Repayment Plans concurrently with a Chapter 13.

The permitted language:

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Published on: February 20, 2018

Tax on Death and Disability Discharges is Gone . . . For Now.

By Christie D. Arkovich, P.A.

One lesser discussed provision of the new tax bill passed at the end of 2017 provides great news for student loan borrowers. Borrowers who have their loans canceled due to death or disability are no longer taxed for the forgiveness. This also applies to those parents who have taken out Parent Plus loans for their children and their child dies (there is no forgiveness of a Parent Plus loan if the child becomes disabled, it is the parent who must be disabled). The new law takes effect January 1, 2018. Those with loans discharged prior to 2018 are still potentially taxable. However, those with disability discharges should be able to argue that the loan is not actually discharged for tax purposes until the three-year monitoring period has ended – this is also when the 1099-C is sent.

This tax relief for student loan borrowers is set to expire at the end of 2025.

Published on: February 19, 2018

What to Do When You Believe(d) Your Student Loans Were Discharged in a Prior Bankruptcy

By Christie D. Arkovich, P.A.

There are a ton of people who believed their student loans were discharged when they loans were simply listed in their bankruptcy. It may have been years before the private student loan companies started to communicate with the borrowers to collect this debt which added to that impression.

As it turns out, there may be a way to argue this after all – in instances involving private loans. Private student loan lenders have to prove their loans are in fact “qualified education loans” and meet other criteria in order to be exempt from a general discharge. We are now filing cases where we do not believe the private lenders can meet this burden and the loans are and should have been considered discharged all along. This opens the lender and servicer to a potential FDCPA and FCCPA case if it has tried to collect on previously discharged debt. Moreover, it also opens up the lender to potential claims to refund monies paid toward these loans since discharge.

An easy way around this would have been for the private student loan lenders to have filed their own adversary actions in the debtor’s bankruptcy to obtain a declaratory judgment that its loans were excepted from the general discharge. However, this was never done.

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Published on: February 10, 2018

Six Things You Should Know About Student Loan Forbearances

By Christie D. Arkovich, P.A.

If you run into trouble paying your student loan, chances are you’ve been told to “just go on forbearance.” Here are five reasons that is a terrible idea in many cases:

The client I just finished speaking with has had a few hardships in her life (health, divorces, low pay, disabled daughter etc.). When she called her servicer for help, she was told she could go on a forbearance. She’s been on many forbearances over the years. Her servicer never adequately explained her options. She could have taken advantage of an income based plan with ten year debt forgiveness because she was a teacher. She’s been a teacher for practically forever. She would owe zero right now if she’d known what to do. But instead her loan has ballooned from 23k to, wait for it, $126,000. It’s gone up 10x! And she has only three years until she retires, divorced with a disabled daughter. Do.Not.Trust.Your.Servicer.to.do.the.Right.Thing.
You might ask, how does a loan go up 10 times from 23k to 126k? Easy, although this is one of the worst I’ve seen. The interest capitalizes every time the forbearance is renewed. This means the unpaid interest is added to the principal balance and now you owe interest on interest.

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Published on: February 7, 2018

Do Not File Your Tax Return If You Are In Default on Your Federal Student Loans: File an Extension and Cure the Default First

By Christie D. Arkovich, P.A.

Are you expecting a large tax refund this year?

If so, and you have had some financial difficulties this year, do NOT file your tax return if you are in default on your federal student loans OR about to file bankruptcy.

Instead, some pre-planning is in order. For federal students loans, cure the default before you file your taxes. File an extension if you must to gain some additional time.

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Published on: February 6, 2018

Parent Plus Loans: Don’t Believe Your Loan Servicer if They are Telling You Nothing Can be Done to Reduce Payments

By Christie D. Arkovich, P.A.

Parent Plus Loans are federal loans that a parent or grandparent takes out for their child or grandchild to go to college. Learn more about these loans, their high default rates and avenues to reduce this type of student loan debt by listening to our interview on the Crushing Debt Podcast with Shawn Yesner.

Published on: February 6, 2018

Paralegal Association of Florida, Inc. Luncheon “Master Your Student Loans”

By Christie D. Arkovich, P.A.

I’d like to thank the PAF’s Hillsborough Chapter for the invitation to speak at their luncheon today with the assistance of our long term legal assistant, Angie Glaser, now paralegal!! — about Taking Control of Your Student Loans.

There were lots of good questions by people starved for information and surprised about what they learned today. Hopefully, they will go back to their offices and share this with their attorneys and clients – and help us to share the word that there are many ways to reduce student loan debt that are not discussed by student loan servicers.

If you know of any group who would be interested in learning more about dealing with their student loans, please contact us to arrange a speaking engagement!

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Published on: February 5, 2018

Borrowers Not Getting Automatic Forbearances Timely Approved After Filing Borrower Defense to Repayment Applications

By Christie D. Arkovich, P.A.

We’ve noticed over the past few months that some of our clients and many other borrowers have been reporting that they are having no luck getting their federal loans in forbearance after they’ve filed a Borrower Defense to Repayment (“BDTR”) application. These forbearances are simple to request and are supposed to be automatic. Basically, you check a box requesting the forbearance in the application. The DOE is supposed to automatically grant the forbearance while the review is under way – a process that may take a year or even longer.

However, under Secretary DeVos’ watch, the BDTR department has basically been gutted, with only a handful of people working to process what appears to be approximately 1200 claims received per week. So the work isn’t getting done.

So who’s responsibility is this to make sure the borrower is being placed on forbearance as they should – DOE, the servicer (such as Navient, AES, Great Lakes, FedLoan, Nelnet), or both? That is the question we are now looking into.

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