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disclosures.jpgToo late for many, but at least a step in the right direction, Senator Al Franken (D-Minn) introduced the Understanding the True Cost of College Act on May 24, 2012.

Were you aware that the Truth in Lending Act which requires disclosure of the cost of credit in home and vehicle purchases specifically excluded student loans? I just found this out myself. An education is an expensive purchase. If you make the wrong decision, bankruptcy is not available in most cases to simply give it back. But yet the powers that be decided that students and their parents didn’t need to be informed when making decisions as to what college to attend and how much financial aid to obtain.

This bill is intended to attack the complete lack of transparency that currently exists. Instead of wondering how this could have happened during the exit interview, basic minimum information will be required to be disclosed PRIOR to incurring the debt. Things such as the costs of tuition, fees, room and board, books and supplies, the amount of financial aid that the student does not have to repay, and the net amount the student will have to pay.

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student loan reform.jpgLast month, it was well publicized that student loan interest rates were about to double unless Congress acted. Actually, this only involved subsidized Stafford loan interest rates. However, President Obama made the most of it and traveled around the country garnering support to help students. At the last minute, Congress voted to stop the increase. CNN reports that the rate would have gone from 3.4 to 6.8. However, this is only for a small portion of loans and doesn’t address the large mostly unaffordable monthly payments that unemployed or underemployed students are facing.

However, real reforms are on the horizon or already exist that are not being publicized at all. I won’t go into great detail about these programs because mis-application of the available programs by students seeking to reduce their student loan burden could cause further damage. This is too big of deal to screw up. Many options are a one time only thing, and the wrong step can cause an expensive default.

It is very important to consult with an attorney experienced in student loan law. Up until now, there really hasn’t been much available legal advice in this area except for the standard line: you can’t discharge student loans in a bankruptcy without an undue hardship. I can’t count the hundreds of times I myself have said that. However, I have recently learned that there are things a student can do OUTSIDE of bankruptcy to manage or survive their student loan debt. Please see our Student Loan Survival Center for more information.

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car title.jpg This debtor in South Florida recently lost his free and clear car in bankruptcy (actually the debtor was allowed to pay for the one-half interest in a Chapter 13 so it wasn’t quite as bad as it initially appears). Joint ownership is getting murkier and legal advise is definitely needed to preserve vehicles, money in bank accounts and even real property. Other bankruptcy cases in South Florida have recently attacked the “bare legal title” concept. These situations often arise when debtors share bank accounts, vehicles or even real property with parents, children or other relatives. Generally, we can show that the debtor held bare legal title only for probate or other purposes and the property is not subject to turnover by the bankruptcy court. However, the law in this area is getting rather murky. The facts in this case were as follows: a vehicle purchased by a debtor’s mother, but titled in the name of the debtor and his mother, and the debtor paid the insurance and maintenance. In re Fletcher, 2012 WL 2062394 (Bankr. S.D. Fla., March 6, 2012).

Under Florida law, when a person’s name appears on title to property, a rebuttable presumption arises in bankruptcy that the person has a beneficial interest in the property, although that interest may be an equal interest or a factional share. The burden then shifts to the debtor to prove by competent, clear, and compelling evidence she does not hold a beneficial interest in the property. In re Kirk, 381 B.R. 800 (Bankr. M.D. Fla. 2007).

Thus, here, although the debtor’s mother supplied the funds to purchase a motor vehicle, the debtor held a beneficial interest in the vehicle, and the vehicle was subject to turnover to the Chapter 7 trustee, where the vehicle was titled in the name of the debtor and the debtor’s mother, and the debtor paid for the insurance on, and the maintenance of, the vehicle.

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What if I’ve co-signed my children’s student loan debt that is now in default?

Here in Tampa, Florida, I just read an outrageous story today in Nation of Change that exemplifies the problems in the world of student loans. Basically, shortly out of college, this man’s son was killed in a car accident. Most of his student loans were private and co-signed by his father who makes $21,000 a year as a gardener. Private loans survive someone’s disability or death.

The debt (over six figures) has changed hands many times and has been wrung through the Wall Street securitization process. He doesn’t know the exact amount or who is owed. But the debt collectors are all over this poor guy.

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Back in 2009, the Florida legislature realized that tenants needed some protection from the foreclosure crisis. The resulting Protecting Tenants in Foreclosure Act protects tenants from eviction because of foreclosure on the properties they occupy. These provisions took effect on May 20, 2009, and originally were scheduled to expire on December 31, 2012.

However, the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) changed the expiration date to December 31, 2014.

We still do not know if the Mortgage Debt Relief Forgiveness Act will be extended past December 31, 2012. This Act allows a waiver for certain qualifying homesteads of the tax consequences of forgiven debt such as in a short sale.

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house money.jpgHere’s an example in Tampa, Florida this month for one of our foreclosure clients who wanted to keep her house and avoid the possibility of a deficiency judgment:

New monthly payment: $933.45 with escrow Old monthly payment: $1,491.35

New interest rate: 4% fixed Old interest rate: 7.75 % fixed

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To cram down property owned jointly, both spouses have to file a Chapter 13 bankruptcy. The Bankruptcy Court for the Southern District of Florida held recently that a Chapter 13 debtor whose spouse does not join in the debtor’s bankruptcy petition is not permitted to cram down a claim secured by a lien on property owned by the debtor as a tenant by the entireties. If the debtor were allowed to cram down the claim, the court reasoned, his nonfiling wife would be granted the benefit of having filed for bankruptcy without having to carry any of the burdens, and the Code does not permit this. In re Alvarez, 2012 WL 1425097 (Bankr. S.D. Fla., April 24, 2012).

Another approach is that the non-filing spouse could quit claim their interest in the property to the debtor. That way when the debtor files the bankruptcy, he or she is the sole owner of the property. We have found this works just as well.

Transfers of property especially shortly before filing a bankruptcy is a complex matter and should only be done after consultation with a qualified bankruptcy attorney. For a free consultation, please consider Arkovich Law

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Many people think it is advantageous to only list certain creditors in their bankruptcy. This is not permissible in a bankruptcy because all creditors must be listed. You cannot favor one creditor over another. However, you can always voluntarily pay a creditor back after a bankruptcy if you wish.

Besides the creditors have their own subscription system with a third party that monitors PACER filings where they will generally learn of a client’s bankruptcy filing even if not listed. Moreover, if the bankruptcy is an asset case, by not listing the creditor, you’ve actually cheated them of monies they would have received in the bankruptcy.

You only become legally obligated to repay a creditor after filing a Chapter 7 bankruptcy if you sign and file a Reaffirmation Agreement with that creditor. A Reaffirmation Agreement reaffirms the debt and sometimes can be advantageous to the debtor if he wants to retain an asset but can’t pay for it outright and in full.

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graduates student loan debt.jpgDebt collectors excel at taking advantage of student loan borrowers by misrepresenting the law and options available to borrowers.

Common violations we see in Florida are:

1) Misrepresenting that the collector may use federal powers such as Social Security offsets or administrative garnishment of wages;

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student loan debt bubble.jpgFor the first time ever, student loan debt has surpassed credit card debt as student loan debt reaches the $1 trillion mark per a recent Bloomberg article. Student loan debt collection has become big business. Contracted student loan debt collectors’ profits surpass $1 billion in 2011 alone! Little wonder when these private contractors make commissions as high as 20% or even 30% after a loan goes into default. Blackwater should consider expanding their profitable business from military contracting to include student loan collection work.

Who knew collecting debts from poor students could be so profitable. Bloomberg News reported last month that approximately 5 million federal education loans are in default.

What most students or graduates don’t know is that the government hires private companies as debt collectors for this defaulted student loan debt. And these debt collectors often ignore the law when doing so. FDCPA violations abound. Debt collectors are the subject of more complaints to the Federal Trade Commission than any other industry. We recommend student loan borrowers go on the offense and hire law firms to go after these debt collectors. These cases are handled on a contingency fee basis with no fees up front.

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