Blogs
The Eight Circuit Bankruptcy Appellate Panel (8th BAP) affirmed the discharge of a $27,000 of federal student loan debt despite the fact that the debtor, Sara Fern, was eligible to pay nothing in an Income Based Repayment (IBR) plan. See In re Fern.
The debtor is a 35 year old single mom of three children, ages 3, 11 and 16. She originally sought a degree as an accounting clerk, but after being unable to complete the required coursework she changed studies and obtained a degree as a beautician. After graduating she attempted to start her own business and rented space in a tanning salon, but her efforts failed. For the past 6 years she has worked for the same employer earning $1,506.78 of take-home pay. She also receives food stamps and rental assistance but does not receive any child support. Her income has been consistent and she has no savings. The court noted that her income is not likely to improve.
Based on these factors the Department of Education opposed the debtor’s discharge request for the reason that she qualifies for a zero monthly “payment” under an Income Based Repayment plan. The 8th Circuit has previously stated that student loans should not be discharged when a debtor can afford to make a modified payment through an income-based repayment plan. Educ. Credit Mgmt. Corp. v. Jesperson, 571 F. 3d 775(8th Cir 2009). The DOE argued that if the monthly income-based payment would be zero, how could the loans be a hardship?
The bankruptcy appeals court disagreed.
We do not interpret Jesperson to stand for the proposition that a monthly payment obligation in the amount of zero automatically constitutes an ability to pay.
The court distinguished the Jesperson opinion from a case involving a low-income debtor who qualifies for a zero monthly student loan payment. The Jesperson case involved an attorney who graduated with $300,000 of student loan debt. The debtor in Jesperson was young attorney in good health with no dependents, and he had the ability to substantially increase his income. Jesperson was a case where the debtor’s self-imposed conditions limited his income. In contrast, Sara Fern was working to her full potential while raising three minor children with no assistance. And, even though a zero monthly payment does not affect a debtor’s current monthly income, it does constitute an emotional burden and it causes long-term damage to the debtor’s credit rating thus affecting the cost of borrowing for car loans, etc.
Is the 8th Circuit becoming lenient on student loans? Nobody could ever argue that the conservative judges of the 8th Circuit are lenient, but they have become more skeptical of income-based repayment plans when there is no evidence that a debtor’s income will ever change.
Image courtesy of Flickr and Chuck Falzone.
The Eight Circuit Bankruptcy Appellate Panel (8th BAP) affirmed the discharge of a $27,000 of federal student loan debt despite the fact that the debtor, Sara Fern, was eligible to pay nothing in an Income Based Repayment (IBR) plan. See In re Fern.
The debtor is a 35 year old single mom of three children, ages 3, 11 and 16. She originally sought a degree as an accounting clerk, but after being unable to complete the required coursework she changed studies and obtained a degree as a beautician. After graduating she attempted to start her own business and rented space in a tanning salon, but her efforts failed. For the past 6 years she has worked for the same employer earning $1,506.78 of take-home pay. She also receives food stamps and rental assistance but does not receive any child support. Her income has been consistent and she has no savings. The court noted that her income is not likely to improve.
Based on these factors the Department of Education opposed the debtor’s discharge request for the reason that she qualifies for a zero monthly “payment” under an Income Based Repayment plan. The 8th Circuit has previously stated that student loans should not be discharged when a debtor can afford to make a modified payment through an income-based repayment plan. Educ. Credit Mgmt. Corp. v. Jesperson, 571 F. 3d 775(8th Cir 2009). The DOE argued that if the monthly income-based payment would be zero, how could the loans be a hardship?
The bankruptcy appeals court disagreed.
We do not interpret Jesperson to stand for the proposition that a monthly payment obligation in the amount of zero automatically constitutes an ability to pay.
The court distinguished the Jesperson opinion from a case involving a low-income debtor who qualifies for a zero monthly student loan payment. The Jesperson case involved an attorney who graduated with $300,000 of student loan debt. The debtor in Jesperson was young attorney in good health with no dependents, and he had the ability to substantially increase his income. Jesperson was a case where the debtor’s self-imposed conditions limited his income. In contrast, Sara Fern was working to her full potential while raising three minor children with no assistance. And, even though a zero monthly payment does not affect a debtor’s current monthly income, it does constitute an emotional burden and it causes long-term damage to the debtor’s credit rating thus affecting the cost of borrowing for car loans, etc.
Is the 8th Circuit becoming lenient on student loans? Nobody could ever argue that the conservative judges of the 8th Circuit are lenient, but they have become more skeptical of income-based repayment plans when there is no evidence that a debtor’s income will ever change.
Image courtesy of Flickr and Chuck Falzone.
After Bankruptcy Mistakes: Navy Fed does the Right Thing; Wells Fargo Makes More Excuses. Everybody makes mistakes. Banks do, too. When you file bankruptcy, the banks you owe money to don’t always do what they are supposed to do. This is a true story of Navy Fed admitting their mistake and fixing it. Wells Fargo […]
After Bankruptcy Mistakes: Navy Fed does the Right Thing; Wells Fargo Makes More Excuses. Everybody makes mistakes. Banks do, too. When you file bankruptcy, the banks you owe money to don’t always do what they are supposed to do. This is a true story of Navy Fed admitting their mistake and fixing it. Wells Fargo […]
The post Navy Fed does the Right Thing; Wells Fargo Makes More Excuses by Robert Weed appeared first on Robert Weed.
After Bankruptcy Mistakes: Navy Fed does the Right Thing; Wells Fargo Makes More Excuses. Everybody makes mistakes. Banks do, too. When you file bankruptcy, the banks you owe money to don’t always do what they are supposed to do. This is a true story of Navy Fed admitting their mistake and fixing it. Wells Fargo […]The post Navy Fed does the Right Thing; Wells Fargo Makes More Excuses by Robert Weed appeared first on Robert Weed.
Fear Of Failure To List Creditors There is a fear that many chapter 7 debtors have with regard to failing to properly list creditors. The bankruptcy code provides that creditors be given due process with regard to the bankruptcy filing. This means that creditors must be given notice of the bankruptcy so that they have+ Read More
The post Chapter 7 Debtor Brings Motion To Reopen In Aurora appeared first on David M. Siegel.
Some of our Wynn at Law, LLC bankruptcy filing clients have such tremendous anxiety over the Section 341 meeting of creditors. They’ll imagine intimidation like in the photo. For some, it’s the hang up that keeps them from filing. For others, it’s the cause of more than a few sleepless nights. I put a lot of value in the statement that 90 percent of what you worry about never comes true. The creditor meeting falls into that category.
This meeting isn’t a hearing. It’s not even in a courtroom. You’re under oath of course. However, there isn’t a judge. Here’s the two-step for taking the terror out of the topic:
First, it’s required. There isn’t a way out of it, so you go through it in order to clear the path for your financial future.
Second, most of your creditors won’t show up at all! They’re all invited by law. In reality, they know you’re represented by competent counsel and it’s usually financially unrealistic for the creditor to spend the time and staff hours to come to your hearing. The ones who do show up may just want to know about recent cash advances or revolving credit charges to find out if you were on a spree you had no intention of paying back. Or the lender on secured property (a car or house) might show to find out if you’re reaffirming the loan or giving back the property. We’ll have already talked this through in our office. No worries.
In a previous post (http://wynnatlaw.blogspot.com/2017/02/attorney-shannon-wynn-honestly-you...), I mentioned the value of honesty. If you’ve accidentally missed something, Wynn at Law, LLC can amend the filing before the meeting. Your creditors won’t think your hiding something if you aren’t hiding anything. Again, no worries. If they do show, and they do ask questions, commonly they’ll want to know things we’ve already covered in advance. For example, if you’re getting an income tax refund (http://wynnatlaw.blogspot.com/2017/01/attorney-shannon-wynn-even-in.html) or if anyone owes you money or holds property that belongs to you or if you’ve recently transferred property. None of this is an ambush because you’ve already covered it with Wynn at Law, LLC.
*The content and material in this original post is for informational purposes only and does not constitute legal advice.
The post Demystify the creditor meeting in two steps appeared first on Wynn at Law, LLC.
Some of our Wynn at Law, LLC bankruptcy filing clients have such tremendous anxiety over the Section 341 meeting of creditors. They’ll imagine intimidation like in the photo. For some, it’s the hang up that keeps them from filing. For others, it’s the cause of more than a few sleepless nights. I put a lot of value in the statement that 90 percent of what you worry about never comes true. The creditor meeting falls into that category.
This meeting isn’t a hearing. It’s not even in a courtroom. You’re under oath of course. However, there isn’t a judge. Here’s the two-step for taking the terror out of the topic:
First, it’s required. There isn’t a way out of it, so you go through it in order to clear the path for your financial future.
Second, most of your creditors won’t show up at all! They’re all invited by law. In reality, they know you’re represented by competent counsel and it’s usually financially unrealistic for the creditor to spend the time and staff hours to come to your hearing. The ones who do show up may just want to know about recent cash advances or revolving credit charges to find out if you were on a spree you had no intention of paying back. Or the lender on secured property (a car or house) might show to find out if you’re reaffirming the loan or giving back the property. We’ll have already talked this through in our office. No worries.
In a previous post (http://wynnatlaw.blogspot.com/2017/02/attorney-shannon-wynn-honestly-you...), I mentioned the value of honesty. If you’ve accidentally missed something, Wynn at Law, LLC can amend the filing before the meeting. Your creditors won’t think your hiding something if you aren’t hiding anything. Again, no worries. If they do show, and they do ask questions, commonly they’ll want to know things we’ve already covered in advance. For example, if you’re getting an income tax refund (http://wynnatlaw.blogspot.com/2017/01/attorney-shannon-wynn-even-in.html) or if anyone owes you money or holds property that belongs to you or if you’ve recently transferred property. None of this is an ambush because you’ve already covered it with Wynn at Law, LLC.
*The content and material in this original post is for informational purposes only and does not constitute legal advice.
When Wynn at Law, LLC works with bankruptcy clients, we emphasize brutal honesty benefits them more than it would embarrass them. Bankruptcy isn’t meant to shame a debtor. It’s meant to help the debtor move out from under an unmovable mountain of bills. Honesty can be thought of as a carrot and stick.
The first way honesty benefits you is that full disclosure is required in the process. This isn’t negotiable. All debts. All assets. All income. You can’t intentionally hold something out or even omit something by accident. If the court or creditors find that you withheld debts or income, you may lose your bankruptcy discharge.
That’s the stick. The consequences could be as severe as facing an FBI investigation. Omission is still fraud even if it really is by accident that you left something out. The penalties you may face from missing debts or assets far outweigh the potential positives.
The carrot is that by being honest with yourself about your spending habits you can make changes needed to emerge from a bankruptcy on great footing. This honest self-evaluation of your spending missteps is a benefit of a bankruptcy filing, not a judgment about your shortcomings. Not everyone spends their way onto the Wynn at Law doorstep. A sudden and massive medical bill can wipe out years of being a responsible budgeter and credit card customer. But it also throws a light on all of your spending including your insurance, which may have been your only spending misstep. Wynn at Law, LLC is not an insurance agent or financial planner, but maybe you will want to consider one coming out of the filing.
Maybe you’re overspending on vacations or vehicles. Maybe it was a job loss and no rainy-day fund. Maybe it was just a matter of getting in too far, too fast with all those attractive revolving credit offers. Bankruptcy helps you see the pitfalls to avoid in your financial future. We are not here to judge. We are here to help.
*The content and material in this original post is for informational purposes only and does not constitute legal advice.
The post Honestly, you have to be honest appeared first on Wynn at Law, LLC.
When Wynn at Law, LLC works with bankruptcy clients, we emphasize brutal honesty benefits them more than it would embarrass them. Bankruptcy isn’t meant to shame a debtor. It’s meant to help the debtor move out from under an unmovable mountain of bills. Honesty can be thought of as a carrot and stick.
The first way honesty benefits you is that full disclosure is required in the process. This isn’t negotiable. All debts. All assets. All income. You can’t intentionally hold something out or even omit something by accident. If the court or creditors find that you withheld debts or income, you may lose your bankruptcy discharge.
That’s the stick. The consequences could be as severe as facing an FBI investigation. Omission is still fraud even if it really is by accident that you left something out. The penalties you may face from missing debts or assets far outweigh the potential positives.
The carrot is that by being honest with yourself about your spending habits you can make changes needed to emerge from a bankruptcy on great footing. This honest self-evaluation of your spending missteps is a benefit of a bankruptcy filing, not a judgment about your shortcomings. Not everyone spends their way onto the Wynn at Law doorstep. A sudden and massive medical bill can wipe out years of being a responsible budgeter and credit card customer. But it also throws a light on all of your spending including your insurance, which may have been your only spending misstep. Wynn at Law, LLC is not an insurance agent or financial planner, but maybe you will want to consider one coming out of the filing.
Maybe you’re overspending on vacations or vehicles. Maybe it was a job loss and no rainy-day fund. Maybe it was just a matter of getting in too far, too fast with all those attractive revolving credit offers. Bankruptcy helps you see the pitfalls to avoid in your financial future. We are not here to judge. We are here to help.
*The content and material in this original post is for informational purposes only and does not constitute legal advice.
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.