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The Senate passed a bill a few weeks ago, the Joint Consolidation Loan Separation Act, to unravel the Joint Spousal Consolidation Loan program which has trapped many older borrowers who were encouraged to consolidate their loans with their spouses upon graduation. While that may have sounded like a good idea back in the 1990s to an uninformed borrower, folks were trapped in the program when it was discontinued in 2006, and therefore were not eligible for the lowest income driven plans, nor even public service because they did not have the correct loan types and could not change them through a consolidation.

Twenty years later, borrowers are still shackled with these spousal consolidation loans even in cases of divorce, or the death of one spouse. If passed, the Act would allow the loans to be severed, and would enable borrowers to access loan relief programs that they were previously ineligible for, such as PSLF, Income-Driven Plans, etc.

Waiting…

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It just occurred to me that our quarterly column, the “Student Loan Sidebar,” which appears in our local newsletter called the Cramdown which is sent to fellow bar members and our judiciary for the Middle District of Florida, Tampa Division, is something that everyone may want to see.  These are linked on our home page with no pay wall here.  This version is a little easier to read as it is exactly as it shows in the printed copy.  The Spring version is up now, and the Summer copy will drop any day now.  The full copy of the Cramdown by the Tampa Bay Bankruptcy Bar Association can be found on its website here.

These are regular student debt updates that I have been writing for a few years.  They are directed to our local bar association and include the recent happenings and what attorneys need to know about student loans (for themselves, or their clients).  They are only 1-2 pages in length, have practice pointers and are designed to raise awareness of what the Department of Education has been up to, or recent cases that are likely to impact local folks.  They are easy reads.  Lawyers who don’t practice in the student loan field, don’t know a lot about student loans.  You don’t have to know a lot about your loans to read these, nor do you have to be an attorney.

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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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I just wanted to flag that as of  7/1/ 2022, PSLF Certification & Application Forms must be submitted to MOHELA.  Section 7 of the form has been updated to reflect the new submission instructions if it is accessed using this link. However, if you generate the form using the PSLF Help Tool or access it from the FSA Forms Library, the instructions still say to send everything to FedLoan.

Hopefully, FSA will change this soon, but until they do, this could cause confusion.

We can still use the old form despite the changes in the document, but we would now submit it to Mohela.

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I know the Borrower Defense to Repayment Program has undergone so many changes, and been impacted by political and practical concerns that sometimes none of us knew which way was up, however, the recent Sweet settlement gives hope!  And some much needed finality.  (Remember the settlement is not yet final and could change)  Here’s a Facebook note posted by Nic Brown who has been a very vocal advocate in helping others obtain student debt relief.  His actions to encourage others to speak out, be a class member for various class actions and file claims where warranted, kept the pressure on.  I’m sure many who followed in his footsteps will finally be debt free!

Nic’s story:

In 2008 I graduated from a “college” that promised me a lot in the beginning and ended up being nothing more than a fraud at the end.

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Whoo Hoo!  In a class action Sweet v. Cardona, the parties, including the Department of Education, have just announced a settlement of Borrower Defense to Repayment claims (“BDTR”).  It’s still early, and we don’t yet know if this settlement will be approved by the Court or if some of the named schools will oppose it.  We anticipate that the listed schools who are still in business will oppose the settlement or petition to have their school removed from the presumptive list.  Here is a copy of the filed settlement agreement.  So while this isn’t final, it’s certainly a huge step in the likely direction of where these BDTR applications are headed.  It’s been a long time coming, and will result in much needed relief for student loan borrowers.

What should you know?  Well, first of all, here is a list of schools that are presently in line for a full discharge.

For a FAQ, please go here.   One of the parties who has been instrumental in obtaining this settlement, the Project on Predatory Student Lending, has prepared detailed questions and answers for those who attended these schools or have allegations of fraud under the BDTR program.

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A close friend’s husband was diagnosed with a rare form of leukemia several years ago.  Little did we know at the time that it was quite likely due to his early childhood spent at Camp LeJeune.  I learned that his mother used to mix his baby formula with water which came from the base’s water treatment facility.  No one knew at that time from the early 50s to late 80s, the drinking water supply at the Camp LeJeune Marine Corps base in North Carolina was heavily contaminated with toxic, carcinogenic chemicals.  The levels of toxicity were thousands of times higher than the maximum safe limits set by the EPA.

After many medical procedures and seemingly truckloads of medications later, my friend’s husband, is still among us; however, his life trajectory is much different now.  Same with his family.  A new normal one might say.

I’ve been reading up on the subject a lot over the past few days.  I’ve learned that many, if not most, individuals who have lived at Camp LeJeune at some point in their lives, have not had the opportunity to even try and show culpability or obtain damages for the litany of health problems that have plagued them throughout the many years.  This is because the government typically has sovereign immunity protection where it cannot be sued.  Even when water contamination at Camp LeJeune is expected to be one of the worst cases, if not the worst contamination event in the history of the United States.  Also, how do you prove causation over forty years?

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If you have significant debt but have been told that you cannot file a Chapter 13 consumer bankruptcy, now you can file bankruptcy and not risk dismissal by the U.S. Trustees office.  This change occurred because the Bankruptcy Threshold Adjustment and Technical Corrections Act was signed into law yesterday.  Prior to this Act, someone with high debt was forced into a Chapter 11 — which is extraordinarily expensive and time consuming for the average consumer.  A Chapter 13 is much more cost-effective and efficient to reorganize someone’s finances.

While the name of this Act is thoroughly boring, it is very practical and necessary.  This Act fixes a recurring problem that has reared its head more in the past year than ever before.  Student debt has reached such a high number for many borrowers, that it was actually preventing someone from filing bankruptcy to address that student debt, or even to get rid of ordinary household debt or stop a foreclosure.

Now the debt limit for an individual filing a Chapter 13 is $2.75 million and the Act also removes the distinction between secured and unsecured debt.  This new law is temporary and will sunset on June 21, 2024.  So basically, this means that if you wait two years to file, you will NOT receive the benefit of this debt increase and may again, be prohibited from filing bankruptcy.

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On Friday, the Senate passed a bill that would provide relief to thousands who have been trapped in a long battle with the Department of Education after a married couple had the misfortune of consolidating their loans.  While at first blush that may have seemed like a good idea, the joint spousal loan was not eligible for some of the best relief out there including income-driven plans and public service forgiveness.  We’ve tried to correct this problem by filing an adversary action in bankruptcy to obtain a similar result for our clients who were simply told “no” by the Department.  We were successful in doing so, up until the DeVos administration backtracked on us.

The Joint Consolidation Loan Separation (JCLs) Act of 2021 will:

  • Allow borrowers to submit an application to the Department of Education to split the JCL into two separate federal direct loans.
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This week, the parties in Sweet v. Cardona filed a motion with the court that they had reached a settlement in principle to resolve the case. As a quick refresher, this case challenged 1) the Department’s failure to issue timely adjudications on borrower defense claims and 2) the Department’s blanket denials of thousands of borrower defense claims during the DeVos administration.

We will learn more in the coming days about the contents of the settlement, but I have every reason to be optimistic that it will be pretty darn good.  So stay tuned.

In the meantime, if you’ve attended a for-profit school and was defrauded in any way, please file a Borrower Defense to Repayment application here:  https://studentaid.gov/borrower-defense/

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