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Yesterday I was back for a full day after being sick with the flu for a few days.  The day was surprisingly productive.  Many people have asked me what we can do for people with student loans.  This question is often combined with a statement that they thought nothing could be done.

To the contrary, here are the results for our Tampa Bay clients just yesterday.  First I received an email from a client who thanked our law firm for greatly improving the quality of his life.  You see when this client initially contacted us six months ago he owed over six figures in private student loans and could see no end in sight – he was in his late 50s.  The student loan companies were always asking him to make payments for more than he could afford.  He was single, healthy and able to work making 40k a year.  Despite this, we put him in a bankruptcy and filed an adversary proceeding asserting that he was due a partial discharge due to the non-affordability of the private student loans among other things.  Within a few months, we had negotiated settlements with both servicers of his student loans which included substantial principal  (50% or greater) and interest rate reductions (to 0-2%) and an affordable monthly payment plan.

Another client returned a signed rehab agreement to us today where she accepted the $10 a month payment plan we had negotiated for her to bring her federal loans current and remove the default on her credit report.  She had narrowly avoided garnishment by hiring us just in time.  When her rehab is done, we’ll put her into a specific income based debt forgiveness plan that takes into account her loan types,  marital status and type of employment for the best result.

 Unfortunately, student loan borrowers in default on federal loans are experiencing tax intercepts around this time of year, sometimes for the first time ever.  Some tips:  1) if we can cure the default before your taxes are filed and the intercept occurs, we can stop it from ever happening; 2) if you can’t cure the default, there is a 20 day period to request a hearing, but ultimately unless you are completely destitute they will be able to keep your tax refund.  We recommend that if you know this is coming, delay filing your tax return and request an extension until you can cure the default.

Curing a default in federal student loans does not mean you have to bring it current and pay all missed payments.  Instead what we do for clients is negotiate a rehabilitation plan or sometimes a consolidation of certain loans to cure the default.  Often the payments to rehab a loan are as little as $5 and it does take into account your income and expenses.  We have a very thorough budget we like to use in negotiations so the debt collector can see what your true disposable income is.

You can also stop a tax intercept by filing bankruptcy.  If you have have enough personal property exemptions, you would be able to keep a portion or the entire tax refund.  Filing a bankruptcy petition before the offset activates causes the automatic stay to stop all collections even those initiated by the federal government.

While not a Florida case, the Fourth Circuit ruled today that the arbitration provision of Western Sky Payday Loans is unenforceable.  This may be a sign of expanding consumer protections in the future, although it is very early to tell.  Mandatory arbitration clauses force a consumer to give up their right to go to court, participate in a class action, pay expensive filing fees of sometimes thousands of dollars, pay an arbitrator $300-$400 a hour (a Judge is free!) as well as other drawbacks.

Quick summary of the highlights:

• No one appears to seriously dispute that Western Sky’s payday loans violated a host of state and federal lending laws. Indeed, a quick glance at Western Sky’s loan agreement suggests that Western Sky was keenly aware of the dubious nature of its trade.

Bankruptcy is supposed to provide a fresh start.  A reprieve from debt collector letters, calls, statements, threatening legal correspondence etc.  A do over.

Many mortgage servicers have believed they were exempt from this – after all they are merely servicing and protecting a mortgage lien they argue.  They’ve argued that federal laws require they send you all this stuff.  And call you multiple times in one day, every day.  This is not true.  Due to recent federal and state court rulings in Florida, mortgage servicers must stop mailing and calling you when you’ve told them not to, or filed bankruptcy and given up the home.  One local federal case brought in the Tampa Division, Florida, Elissa Diane LaPointe v. Bank of America, N.A., Case No.: 8:15-cv-1402-T-26EAJ (August 26, 2015) even ruled that the disclaimers often found in the small print in footnotes would not be enough to insulate mortgage servicers from liability.  The Court particularly noted the inconspicuous tiny print disclaimers are contradicted by the much more obvious demands for payment or statements of a past due amount.  The Court ruled that the consumer stated a claim under the FCCPA in three respects:  1) the bank’s communications could reasonably be expected to harass the consumer; 2) that they were an attempt to collect a debt that was no longer owed due to the bankruptcy; and 3) the consumers were contacted when they were represented by an attorney.

We’d like to pursue these contacts for what they are:  debt collection violations.  If you’ve ever told a mortgage company to stop calling you, we’d like to know about it.  If you are continuing to receive all kinds of correspondence or statements from mortgage companies after you’ve given up a home in bankruptcy, we’d like to know about it (particularly when those notices contain requests or demands for payment).  Most likely, their continued calls and the sending of statements are unlawful and you are entitled to statutory damages.  We have no fees or costs unless there is a recovery.   Contact Arkovich Law for further information.