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Unlike Chapter 7, which is a liquidation bankruptcy, Chapter 13 requires debtors to create a reorganization plan lasting three to five years. Under the reorganization plan, the debtor makes monthly payments on various debts, some of which must be paid off in full in order for the plan to succeed and the bankruptcy to be discharged. While every debtor’s reorganization plan will ultimately be unique, there are a few basic principles that generally apply in California Chapter 13 cases. Our Roseville bankruptcy attorneys explain some key information about the payments that are generally required in Chapter 13 reorganization plans.
How Much Do I Have to Pay in Chapter 13?
If you are a resident of Folsom, Sacramento, or Roseville who plans to file for Chapter 13 bankruptcy, you will likely do so in U.S. Bankruptcy Court for the Eastern District of California, which has jurisdiction over Sacramento and Placer Counties, among many others. Your Roseville Chapter 13 lawyer will assist you with this process and the documentation that is required.
The court will assign a person called a “trustee,” who will oversee the bankruptcy proceedings, to your case. One of the trustee’s most important jobs is to distribute your monthly payments amongst your creditors, according to how your debts are categorized. Generally speaking, debts are paid in the following order in Chapter 13:
1. Secured Debts – Debts secured by collateral, such as mortgage debt, where the collateral is your house.
2. Priority Debts – Debts which are given special priority despite not being secured by collateral. Examples include alimony, child support, certain tax-related debts, and any earnings you may owe employees, where applicable.
3. Unsecured Debts – This category covers all other debts, ranging from medical debt to personal loan debt to credit card debt.
Chapter 13 debtors are generally required to pay secured debts and priority debts in full, plus interest. Unsecured debts are of lesser importance in bankruptcy. Creditors holding unsecured claims are not necessarily required to be paid in full, but must receive at least the amount they would have received if you had filed for Chapter 7 bankruptcy. This standard is called the “best interest of creditors test.” Moreover, Chapter 13 cases require the debtor to put all of his or her disposable income toward the plan. Additionally, some debtors are approved for a three-year plan, while others are required to disperse payments over a period of five years, which, perhaps needless to say, can have a significant effect on payment amounts.
These factors – the duration of your repayment plan, the amount of disposable income you have, and your ratio of secured debts to unsecured debts to priority debts – all have an impact on the amount of you will pay in order to satisfy your Chapter 13 plan. If the plan becomes too expensive and unmanageable while the case is underway, you may be required to convert your case to a Chapter 7 bankruptcy.
California Chapter 13 Payment Calculator
Be wary of any Chapter 13 payment calculators you find on the internet. There are numerous websites that feature these calculators, but no matter how much detail they require you to input, they invariably fail to account for the financial complexity of reorganization bankruptcy. An online bankruptcy calculator may be able to give you a rough idea, but you should not rely on the calculator’s estimate as an accurate reflection of what your final plan will be.
Remember, the repayment plan you propose must gain approval from the bankruptcy court. Moreover, one or more of your creditors might object to the Chapter 13 plan that you initially propose. Many pitfalls can arise in a Chapter 13 bankruptcy case, which is why it is so critical to be assisted and represented by a knowledgeable Folsom Chapter 13 attorney with prior experience handling cases similar to yours.
Contact Our Roseville Chapter 13 Bankruptcy Attorneys
Bankruptcy has an unfair and rather exaggerated reputation. Despite the many pernicious myths about bankruptcy, the reality is often quite different, and many people go on to say that filing was one of the best financial decisions they ever made. Not only can bankruptcy help erase liability for various debts – it can also help you protect your car from repossession, save your home from foreclosure, and put an end to harassment by debt collectors.
If you’re a California resident and are struggling to manage debt that has grown too overwhelming, we urge you to contact The Bankruptcy Group for a free and completely confidential consultation regarding your legal options. Chapter 13 or Chapter 7 bankruptcy may be the optimal solution for getting your finances back on track. For a free consultation with our Sacramento Chapter 13 attorneys, contact The Bankruptcy Group at (800) 920-5351 today.
The post How Much Do You Have to Pay Back in a Chapter 13 Bankruptcy in California? appeared first on The Bankruptcy Group, P.C..
By Damon Trent
Whether you’re drowning in debt because of unemployment, medical bills, or just good old-fashioned spending—in 2016, almost 772,000 Americans found themselves in one of those situations—you’ve probably considered declaring personal bankruptcy, an option designed to allow people in financial distress to hit the reset button. But does it work? And should you consider it? Here’s what you need to know.
When should I consider bankruptcy?Anytime you find yourself with more debt than you can handle, bankruptcy is an option worth exploring. Bruce Weiner, a New York bankruptcy attorney, says that in nearly 40 years of practice he’s found “a good thumbnail is when the amount you owe starts to approach what you make in a year.” (Note: Some debts—like taxes, child support, and mortgages—aren’t usually eligible for bankruptcy relief, so if you owe those, you’ll have to pay them even if you file for bankruptcy.)
The U.S. offers a half-dozen forms of bankruptcy to choose from, each named for the chapter of the law that established it. The most popular for individuals are Chapters 7 and 13.
Chapter 7Also known as “liquidation” bankruptcy, Chapter 7 is by far the most common form of personal bankruptcy in the United States (versus Chapter 11 for businesses).
After you file your paperwork, the judge appoints a “trustee,” whose job it is to sell (“liquidate”) any assets you have and distribute the proceeds among the people to whom you owe money.
Luckily, this won’t leave you naked and homeless. Part of the trustee’s job is to ensure that you’re left with the resources you need to live and work. Plus, any money you earn from that day forward is yours to keep.
Chapter 13If you have a steady income, Chapter 13 offers a somewhat gentler solution. Instead of selling your assets, a Chapter 13 trustee works out a legally binding plan for paying back your debts, or a percentage of them, over a fixed time period, usually three to five years.
Along with letting you keep your stuff, in some cases Chapter 13 can apply to common types of debt that Chapter 7 doesn’t cover.
What happens when I file?Different kinds of personal bankruptcy all share one glorious feature: the “automatic stay.”
The day you file your paperwork, your creditors are legally barred from trying to collect their debts. That means no more lawsuits. No more “Final Demand” on red-trimmed envelopes. No more voicemails demanding you call the sinister “Mr. Peterson” back “immediately.” Instantly, those headaches are gone for good. And soon your debts are also gone—or “discharged,” in legal terms.
What’s the catch?There’s one great reason not to file for bankruptcy: Your credit score takes a hit. Of course, if you haven’t paid a bill for a year or two, your score may already be in the basement. If not, you can expect a drop of several hundred points. And that black mark stays on your record for eons—a decade for Chapter 7, eight years for Chapter 13.
In many cases, though, declaring bankruptcy will actually leave you with a higher credit score than if you simply allowed your debts to fester. Weiner says that many of his clients are shocked to start receiving offers for credit cards and mortgages only months after filing for bankruptcy.
So, going bankrupt is good?No. Bankruptcy is unpleasant, and intrusive, and creates an indelible record of a low point in your life.
“Nobody wants to end up here,” says Weiner. But it beats the constant, crushing stress of unpayable debt.
Not only that, but, well, bankruptcy is also fundamentally American. That’s why it’s in the Constitution. The Founding Fathers knew that if this land was going to be a place where citizens could dream big and take risks, they also had to have what Weiner calls “the freedom to fail.”
That freedom is yours to enjoy— if you’re ever unlucky enough to need it.
Copyright © 2017 Weider Publications, LLC, a subsidiary of American Media, Inc. All rights reserved.
On April 26, 2017, the White House unveiled a plan to provide “tax relief to both our corporations that will help grow jobs, and to middle Americans.” In a briefing, Secretary of the Treasury Steven Mnuchin and Director of the National Economic Council Gary Cohn admitted that the President’s plan takes away a critical benefit for student loan borrowers.
Under the plan, which looks to slash corporate tax rates in an effort to spur a business expansion, the federal tax deduction for interest paid on student loans would be eliminated.
This comes on the heels of well-publicized moves by the U.S. Department of Education to strip away various consumer protections for borrowers in default.
Existing Student Loan Interest Deduction Rules
The student loan interest deduction is one of the few tax benefits that favors the taxpayer with limited income who doesn’t own a home, has no children, and otherwise would be hard-pressed to find a way to lower his or her tax bill.
Under current law, taxpayers with income of less than $80,000 ($160,000 if filing a joint return) can deduct from their taxes the amount paid for interest on qualified student loans. This adjustment to income, available to taxpayers even if they don’t itemize their deductions, can reduce the amount of income subject to tax by up to $2,500 per year.
For interest on the loan to be deductible, it must have been incurred for payment of qualified educational expenses of the taxpayer, his or her spouse, or a dependent. Loans taken from relatives or an employer’s retirement plan don’t count, but the loan doesn’t lose its status if the taxpayer later gets divorced or the dependent becomes self-supporting. A student loan for your child, for example, would qualify even if the child eventually moves out of the house and gets a job of his or her own.
The student must be enrolled at least half-time in a program leading to a degree or certification at a college, university, vocational school, or other postsecondary educational institution eligible to receive federal student loans. Certain educational institutions located outside the United States, as well as institutions conducting internship or residency programs leading to a degree or certificate from an institution of higher education, a hospital, or a health care facility that offers postgraduate training also qualify.
The deduction provides a benefit to millions of taxpayers each year as they try to balance their student loan obligations with the demands of making ends meet. Given the income limitations, it comes as no surprise that the student loan interest deduction is important to people who need the money most.
This is exactly the benefit the Trump tax reform plan seeks to eliminate. But the Administration claims the overall benefit to the middle class will far outweigh the loss of this crucial deduction.
Who Benefits From the Administration’s Plan?
The White House plan doubles the standard deduction from the current $6,350 for single taxpayers and $12,700 for married taxpayers filing joint returns. It also does away with the alternative minimum tax as well as the estate tax. In exchange, all other deductions except those for mortgage interest, charitable giving and retirement savings are eliminated.
There’s no doubt that doubling the standard deduction will help millions of people, effectively giving $24,000 in tax-free money to married couples. But the alternative minimum tax, or AMT, is another story entirely.
AMT is a complex system that requires taxpayers to pay the higher of either their tax calculated under regular income tax rules or their tax calculated under the alternative minimum tax (AMT) rules. Given the way the numbers are calculated, AMT is more likely to hit households with higher incomes. In fact, according to the Tax Policy Center, 30.9% of households with income between $200,000 and $500,000 will be affected by the AMT in 2017. Married couples filing joint tax returns in 2017 will not be subject to AMT at all if their income is below $84,500.
The repeal of the so-called “death tax”, pitched as a tax cut for the middle-class, is also laughable. The IRS currently exempts the first $5.49 million of an estate’s value from taxation (though some states such as Massachusetts and Oregon have a lower limit). The estate tax does not affect people who die with less than $5.49 million worth of assets. In fact, according to the Joint Committee on Taxation, 99.8% of estates owe no estate tax at all. That means only the estates of the wealthiest 0.2 percent of Americans are impacted by estate taxes.
In the end, it’s the wealthy and super-wealthy who benefit from the tax plan.
Guess Who Bears the Tax Burden?
Over 44 million Americans have student loan debt, with average monthly payments at about $350. According to a 2011 analysis of IRS Statistics of Income data performed by the Association of American Universities, over five million taxpayers benefited from the student loan interest deduction.
These are people with income below $80,000, or $160,000 for married couples filing a joint return.
None of these couples will have to worry about estate taxes because not only are they alive (estate taxes are taxes on the estate, not the beneficiaries) but their income is far below the $5.49 million mark. Even those subject to AMT are still able to deduct their student loan interest so long as they fall within income limits.
In other words, the burden imposed by the loss of the student loan interest deduction will be felt by households with more than $24,000 in annual income. The benefits of the new tax proposal, however, will be felt solely by those who make enough money that they would not qualify for the deduction in the first place.
Don’t Want to Lose Your Tax Deduction for Student Loans?
If you think this sounds like a raw deal, now’s the time to contact your Congressional representatives and let them know. Tell them you want them to vote against the 2017 Tax Reform for Economic Growth and American Jobs. Let them know the tax reform proposal will hurt you financially, and that you oppose it.
If you don’t let your elected officials know how you feel about the tax reform, how can you expect them to know?
Learn More Here
- Briefing by Secretary of the Treasury Steven Mnuchin and Director of the National Economic Council Gary Cohn (full text)
- Find Your Representative in the US House of Representatives
- Find Your U.S. Senator
- Instructions for IRS Form 6251, Alternative Minimum Tax
- Student Loan Debt Statistics for 2017, from Student Loan Hero
- Bankrate’s 2017 Tax Guide
The post How Trump’s Tax Reform Plan Will Affect Student Loan Borrowers appeared first on Shaev & Fleischman LLP.
On April 26, 2017, the White House unveiled a plan to provide "tax relief to both our corporations that will help grow jobs, and to middle Americans." In a briefing, Secretary of the Treasury Steven Mnuchin and Director of the National Economic Council Gary Cohn admitted that the President's plan takes away a critical Read the article
The post How Trump’s Tax Reform Affected Student Loan Borrowers appeared first on Shaev & Fleischman P.C..
On April 26, 2017, the White House unveiled a plan to provide “tax relief to both our corporations that will help grow jobs, and to middle Americans.” In a briefing, Secretary of the Treasury Steven Mnuchin and Director of the National Economic Council Gary Cohn admitted that the President’s plan takes away a critical benefit for student loan borrowers.
Under the plan, which looks to slash corporate tax rates in an effort to spur a business expansion, the federal tax deduction for interest paid on student loans would be eliminated.
This comes on the heels of well-publicized moves by the U.S. Department of Education to strip away various consumer protections for borrowers in default.
Existing Student Loan Interest Deduction Rules
The student loan interest deduction is one of the few tax benefits that favors the taxpayer with limited income who doesn’t own a home, has no children, and otherwise would be hard-pressed to find a way to lower his or her tax bill.
Under current law, taxpayers with income of less than $80,000 ($160,000 if filing a joint return) can deduct from their taxes the amount paid for interest on qualified student loans. This adjustment to income, available to taxpayers even if they don’t itemize their deductions, can reduce the amount of income subject to tax by up to $2,500 per year.
For interest on the loan to be deductible, it must have been incurred for payment of qualified educational expenses of the taxpayer, his or her spouse, or a dependent. Loans taken from relatives or an employer’s retirement plan don’t count, but the loan doesn’t lose its status if the taxpayer later gets divorced or the dependent becomes self-supporting. A student loan for your child, for example, would qualify even if the child eventually moves out of the house and gets a job of his or her own.
The student must be enrolled at least half-time in a program leading to a degree or certification at a college, university, vocational school, or other postsecondary educational institution eligible to receive federal student loans. Certain educational institutions located outside the United States, as well as institutions conducting internship or residency programs leading to a degree or certificate from an institution of higher education, a hospital, or a health care facility that offers postgraduate training also qualify.
The deduction provides a benefit to millions of taxpayers each year as they try to balance their student loan obligations with the demands of making ends meet. Given the income limitations, it comes as no surprise that the student loan interest deduction is important to people who need the money most.
This is exactly the benefit the Trump tax reform plan seeks to eliminate. But the Administration claims the overall benefit to the middle class will far outweigh the loss of this crucial deduction.
Who Benefits From the Administration’s Plan?
The White House plan doubles the standard deduction from the current $6,350 for single taxpayers and $12,700 for married taxpayers filing joint returns. It also does away with the alternative minimum tax as well as the estate tax. In exchange, all other deductions except those for mortgage interest, charitable giving and retirement savings are eliminated.
There’s no doubt that doubling the standard deduction will help millions of people, effectively giving $24,000 in tax-free money to married couples. But the alternative minimum tax, or AMT, is another story entirely.
AMT is a complex system that requires taxpayers to pay the higher of either their tax calculated under regular income tax rules or their tax calculated under the alternative minimum tax (AMT) rules. Given the way the numbers are calculated, AMT is more likely to hit households with higher incomes. In fact, according to the Tax Policy Center, 30.9% of households with income between $200,000 and $500,000 will be affected by the AMT in 2017. Married couples filing joint tax returns in 2017 will not be subject to AMT at all if their income is below $84,500.
The repeal of the so-called “death tax”, pitched as a tax cut for the middle-class, is also laughable. The IRS currently exempts the first $5.49 million of an estate’s value from taxation (though some states such as Massachusetts and Oregon have a lower limit). The estate tax does not affect people who die with less than $5.49 million worth of assets. In fact, according to the Joint Committee on Taxation, 99.8% of estates owe no estate tax at all. That means only the estates of the wealthiest 0.2 percent of Americans are impacted by estate taxes.
In the end, it’s the wealthy and super-wealthy who benefit from the tax plan.
Guess Who Bears the Tax Burden?
Over 44 million Americans have student loan debt, with average monthly payments at about $350. According to a 2011 analysis of IRS Statistics of Income data performed by the Association of American Universities, over five million taxpayers benefited from the student loan interest deduction.
These are people with income below $80,000, or $160,000 for married couples filing a joint return.
None of these couples will have to worry about estate taxes because not only are they alive (estate taxes are taxes on the estate, not the beneficiaries) but their income is far below the $5.49 million mark. Even those subject to AMT are still able to deduct their student loan interest so long as they fall within income limits.
In other words, the burden imposed by the loss of the student loan interest deduction will be felt by households with more than $24,000 in annual income. The benefits of the new tax proposal, however, will be felt solely by those who make enough money that they would not qualify for the deduction in the first place.
Don’t Want to Lose Your Tax Deduction for Student Loans?
If you think this sounds like a raw deal, now’s the time to contact your Congressional representatives and let them know. Tell them you want them to vote against the 2017 Tax Reform for Economic Growth and American Jobs. Let them know the tax reform proposal will hurt you financially, and that you oppose it.
If you don’t let your elected officials know how you feel about the tax reform, how can you expect them to know?
Learn More Here
- Briefing by Secretary of the Treasury Steven Mnuchin and Director of the National Economic Council Gary Cohn (full text)
- Find Your Representative in the US House of Representatives
- Find Your U.S. Senator
- Instructions for IRS Form 6251, Alternative Minimum Tax
- Student Loan Debt Statistics for 2017, from Student Loan Hero
- Bankrate’s 2017 Tax Guide
The post How Trump’s Tax Reform Plan Will Affect Student Loan Borrowers appeared first on Shaev & Fleischman P.C..
Our firm has defended a number of student loan lawsuits brought by National Collegiate Student Loan Trust over the past 5 years. I’ve also spoken about the company at a number of bar events around the country, and teach graduates of The Student Loan Law Workshop how to understand the issues presented by private student loan entities.
Given how vocal I’ve been about National Collegiate, a LOT of people from around the country have found this site and think our law firm is the right place to serve National Collegiate Student Loan Trust with legal papers. In fact, over the past 5 years some of the things I’ve received include:
- Chapter 13 bankruptcy trustee checks;
- Letters from borrowers addressed to National Collegiate;
- Notice of Commencement of bankruptcy cases filed by people who owe money to National Collegiate;
- Subpoenas to appear in courts around the country on behalf of National Collegiate; and
- Complaints filed by borrowers, consumer protection lawyers, and government entities against National Collegiate.
I Do NOT Represent National Collegiate Student Loan Trust
I am a student loan lawyer who helps people with their student loan problems.
My office defends lawsuits brought by companies such as National Collegiate Student Loan Trust, Navient, and the US Department of Education.
We represent people who need to file for bankruptcy protection.
We help people resolve their federal student loan problems and provide advice about consolidation, rehabilitation, loan forgiveness and discharge, income-dependent repayment options, and other administrative remedies.
We are not National Collegiate Student Loan Trust, and we do not have any connection with this entity. You should not send us any legal papers with the expectation that they will get to National Collegiate.
Where to Send Papers to National Collegiate Student Loan Trust
National Collegiate Student Loan Trust does not have a single office location; rather, the entities are governed and controlled by different companies. I recommend that you send any documents to all of the following places to maximize the likelihood that your mail goes to the right place:
The National Collegiate Student Loan Trust
c/o Wilmington Trust Company
Rodney Square North
1100 N Market St
Wilmington DE 19890
The National Collegiate Student Loan Trust
c/o Goal Structured Solutions, Inc.
402 W Broadway Suite 2000
San Diego, CA 92101
U.S Bank NA, Indenture Trustee
The National Collegiate Student Loan Trust
One Federal Street
3rd Floor Boston, MA 02110
Transworld Systems, Inc.
507 Prudential Road
Horsham PA 19044
Transworld Systems, Inc.
PO Box 15630
Wilmington, DE 19850
Odyssey Education Resources LLC
800 Corporate Drive
Ft. Lauderdale, FL 33334
American Education Services
P.O. Box 2461
Harrisburg, PA 17105-2461
This is the best list that I have right now, but it may be incomplete or incorrect. Do not rely on this list, and don’t get upset with me if any of the addresses are wrong.
You are responsible for tracking down the correct addresses for National Collegiate Student Loan Trust. My goal is to keep my staff from spending more time dealing with misdirected mail.
Thanks for getting in touch - now check your email for some very important information.
Do You Owe Money to National Collegiate?
Enter your information below. We'll get in touch to set up an appointment with one of our student loan lawyers.
There was an error submitting your subscription. Please try again.
Your First Name
Your Email Address
Your Cell Phone Number
YES - I Need Help!
The post National Collegiate Student Loan Trust Address appeared first on Shaev & Fleischman P.C..
Our firm has defended a number of student loan lawsuits brought by National Collegiate Student Loan Trust over the past 5 years. I’ve also spoken about the company at a number of bar events around the country, and teach graduates of The Student Loan Law Workshop how to understand the issues presented by private student loan entities.
Given how vocal I’ve been about National Collegiate, a LOT of people from around the country have found this site and think our law firm is the right place to serve National Collegiate Student Loan Trust with legal papers. In fact, over the past 5 years some of the things I’ve received include:
- Chapter 13 bankruptcy trustee checks;
- Letters from borrowers addressed to National Collegiate;
- Notice of Commencement of bankruptcy cases filed by people who owe money to National Collegiate;
- Subpoenas to appear in courts around the country on behalf of National Collegiate; and
- Complaints filed by borrowers, consumer protection lawyers, and government entities against National Collegiate.
I Do NOT Represent National Collegiate Student Loan Trust
I am a student loan lawyer who helps people with their student loan problems.
My office defends lawsuits brought by companies such as National Collegiate Student Loan Trust, Navient, and the US Department of Education.
We represent people who need to file for bankruptcy protection.
We help people resolve their federal student loan problems and provide advice about consolidation, rehabilitation, loan forgiveness and discharge, income-dependent repayment options, and other administrative remedies.
We are not National Collegiate Student Loan Trust, and we do not have any connection with this entity. You should not send us any legal papers with the expectation that they will get to National Collegiate.
Where to Send Papers to National Collegiate Student Loan Trust
National Collegiate Student Loan Trust does not have a single office location; rather, the entities are governed and controlled by different companies. I recommend that you send any documents to all of the following places to maximize the likelihood that your mail goes to the right place:
The National Collegiate Student Loan Trust
c/o Wilmington Trust Company
Rodney Square North
1100 N Market St
Wilmington DE 19890
The National Collegiate Student Loan Trust
c/o Goal Structured Solutions, Inc.
402 W Broadway Suite 2000
San Diego, CA 92101
U.S Bank NA, Indenture Trustee
The National Collegiate Student Loan Trust
One Federal Street
3rd Floor Boston, MA 02110
Transworld Systems, Inc.
507 Prudential Road
Horsham PA 19044
Transworld Systems, Inc.
PO Box 15630
Wilmington, DE 19850
Odyssey Education Resources LLC
800 Corporate Drive
Ft. Lauderdale, FL 33334
American Education Services
P.O. Box 2461
Harrisburg, PA 17105-2461
This is the best list that I have right now, but it may be incomplete or incorrect. Do not rely on this list, and don’t get upset with me if any of the addresses are wrong.
You are responsible for tracking down the correct addresses for National Collegiate Student Loan Trust. My goal is to keep my staff from spending more time dealing with misdirected mail.
Thanks for getting in touch - now check your email for some very important information.
Do You Owe Money to National Collegiate?
Enter your information below. We'll get in touch to set up an appointment with one of our student loan lawyers.
There was an error submitting your subscription. Please try again.
Your First Name
Your Email Address
Your Cell Phone Number
YES - I Need Help!
The post National Collegiate Student Loan Trust Address appeared first on Shaev & Fleischman LLP.
I've defended hundreds of lawsuits brought by National Collegiate Student Loan Trust over the past 7 years. I've shared my insights by writing countless articles about the company, and have spoken at dozens of bar events around the country in an effort to teach people about how National Collegiate works. Beyond that, I helped Read the article
The post Here’s how to get in touch with National Collegiate Student Loan Trust appeared first on Shaev & Fleischman P.C..
Our February post on taxi medallions and their significant loss in value generated much reader interest. In this month’s email, we’ll update readers on taxi medallions and related issues.
The New York Post reported earlier this month that a taxi medallion recently sold for $241,000-a new low. As recently as three years ago, taxi medallions were selling for $1,300,000-a drop in value of over 80%. And there are approximately 50,000 Uber drivers in NYC vs. approximately 13,587 yellow cab drivers.
With just 13,587 yellow cabs on New York City’s streets compared to about 50,000 cars from black cab and app services, New Yorkers now have more transportation options than ever before. In New York City, people took fewer trips and spent less on taxis during the first half of last year compared with 2015, according to a November securities filing from lender Medallion Financial Corp.
According to an article in Skift, 81 percent of Capital One's $690 million in loans for taxi medallions are at risk of default. The share of taxi medallion loans Capital One thinks its borrowers won’t be able to repay in full has nearly tripled over the past year, to 51.5 percent. Another 29 percent of Capital One’s loans are to stressed borrowers who could be at risk of default. And BankUnited told its investors in November that nearly 59 percent of its loans secured by taxi medallions were under water. Close to 95 percent of BankUnited’s loans were to New York City borrowers.
Many readers have asked us what the banks that loaned money to medallion owners can or are doing. Their options are as follows: 1. Close and go out of business; 2. File for chapter 7 or 11 bankruptcy and liquidate or attempt to reorganize; 3. Sell their non–performing loans to third parties such as hedge funds; 4. Restructure their loans from third parties; 5. Seek capital from third parties; or 6. Work to restructure their loans to medallion owners. Which strategy is optimal? The optimal strategy depends on the facts of each case.
For medallion owners whose loans exceed the value of the medallions, the question remains as to what their strategy should be. The key issue for a medallion owner is whether to continue to own and make payments on a medallion loan, where the value of the medallion is far below the loan balance. For those medallion owners seeking specific advice, please see our post here. Any course of action chosen by a medallion owner involves NYS debtor/creditor law, bankruptcy law and tax law. Medallion owners are advised to seek legal counsel and to proceed with caution.
Many readers have also asked about timing. Assuming the bank or fund that made them the loan is in financial trouble, are they better off negotiating a settlement now or waiting to see what the future holds? This author has negotiated with buyers of distressed debt (defaulted or written off credit card debt) and often those creditors can be more difficult to deal with than banks.
However, in this author’s opinion, taxi medallion prices will continue to decrease in value or remain at these low levels, and taxi medallion owners need to develop a strategy to address these issues based on their own facts and circumstances. To discuss your situation regarding tax medallion ownership, please contact Jim Shenwick.
Our February post on taxi medallions and their significant loss in value generated much reader interest. In this month’s email, we’ll update readers on taxi medallions and related issues.
The New York Post reported earlier this month that a taxi medallion recently sold for $241,000-a new low. As recently as three years ago, taxi medallions were selling for $1,300,000-a drop in value of over 80%. And there are approximately 50,000 Uber drivers in NYC vs. approximately 13,587 yellow cab drivers.
With just 13,587 yellow cabs on New York City’s streets compared to about 50,000 cars from black cab and app services, New Yorkers now have more transportation options than ever before. In New York City, people took fewer trips and spent less on taxis during the first half of last year compared with 2015, according to a November securities filing from lender Medallion Financial Corp.
According to an article in Skift, 81 percent of Capital One's $690 million in loans for taxi medallions are at risk of default. The share of taxi medallion loans Capital One thinks its borrowers won’t be able to repay in full has nearly tripled over the past year, to 51.5 percent. Another 29 percent of Capital One’s loans are to stressed borrowers who could be at risk of default. And BankUnited told its investors in November that nearly 59 percent of its loans secured by taxi medallions were under water. Close to 95 percent of BankUnited’s loans were to New York City borrowers.
Many readers have asked us what the banks that loaned money to medallion owners can or are doing. Their options are as follows: 1. Close and go out of business; 2. File for chapter 7 or 11 bankruptcy and liquidate or attempt to reorganize; 3. Sell their non–performing loans to third parties such as hedge funds; 4. Restructure their loans from third parties; 5. Seek capital from third parties; or 6. Work to restructure their loans to medallion owners. Which strategy is optimal? The optimal strategy depends on the facts of each case.
For medallion owners whose loans exceed the value of the medallions, the question remains as to what their strategy should be. The key issue for a medallion owner is whether to continue to own and make payments on a medallion loan, where the value of the medallion is far below the loan balance. For those medallion owners seeking specific advice, please see our post here. Any course of action chosen by a medallion owner involves NYS debtor/creditor law, bankruptcy law and tax law. Medallion owners are advised to seek legal counsel and to proceed with caution.
Many readers have also asked about timing. Assuming the bank or fund that made them the loan is in financial trouble, are they better off negotiating a settlement now or waiting to see what the future holds? This author has negotiated with buyers of distressed debt (defaulted or written off credit card debt) and often those creditors can be more difficult to deal with than banks.
However, in this author’s opinion, taxi medallion prices will continue to decrease in value or remain at these low levels, and taxi medallion owners need to develop a strategy to address these issues based on their own facts and circumstances. To discuss your situation regarding tax medallion ownership, please contact Jim Shenwick.
Updated daily, this blog will keep you informed on the latest bankruptcy news! 
Learn more about how Bankruptcy works and what you need to know.