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Upon the filing of a bankruptcy petition, an automatic stay goes into effect which provides a debtor with immediate protection from collection efforts by creditors. But the automatic stay is not without limitations.
In a recent opinion, the U.S. Court of Appeals for the Sixth Circuit recently considered whether the automatic stay should apply to prevent a foreclosure sale in a case in which the debtor’s good faith, actions and credibility in filing for Chapter 13 were called into question.[1] The Sixth Circuit ruled against the debtor, affirming the bankruptcy court’s earlier findings that the debtor’s actions were “outrageous.” Read More ›
Tags: 6th Circuit Court of Appeals, Chapter 13
Third-Party Citations One of the ways that a creditor with a judgment against you can attempt to collect a debt is to attach or seize your bank account. This is done by filing a third-party citation to discover assets in the Circuit Court and having it served upon the bank. Once the bank receives notice+ Read More
The post Bankruptcy Will Unfreeze A Bank Account, But Not Overnight appeared first on David M. Siegel.
Ten years after the passage of the “new” bankruptcy law we find a new class of Americans “the permanently insolvent”. You won’t find reference to this group in any financial magazine. But, hundreds of thousands of Americans are in a position of being hounded mercilessly by debt collectors, but unable to afford to file for bankruptcy.
Their poor credit docs not allow them to obtain credit to buy a home, vehicle or even get a credit card. They tend to be part of the group that uses payday loans or title loans. By falling into the trap of using these high interest loans (sometimes as much as 750%) they are forever trapped.
“The reform has generated a substitution, from formal bankruptcy to insolvency,” said Stefania Albanesi, lead author of “Insolvency After the 2005 Bankruptcy Reform,” a new study by economists at the Federal Reserve Bank of New York and Columbia University.
“Since insolvents are unable to repay debt, they are subject to collection actions and financial judgments and have difficulties obtaining unsecured credit,” she said. “This is particularly bad for low income individuals, as they have little savings and sometimes rely on debt to face unforeseen expenses and the like.”
The study, which was published in January and summarized this week in a Federal Reserve blog post, reached a variety of conclusions about the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005. Few of the economists’ findings were encouraging for consumers.
- The bottom lines of credit card companies, banks and other financial institutions have been nourished by the act, which was
proposed by Wall Street interests, passed by Congress, and signed by President George W. Bush on April 20, 2005. It went into effect Oct. 17, 2005. “We cite research … suggesting that profitability has risen for credit card companies as a result of BAPCPA,” Albanesi said. - But consumers have suffered. Low income Americans, those most in the need of help, have been the most deeply damaged by changes that made it more difficult and far more expensive to file for protection under bankruptcy laws. “Our analysis suggests that the 2005 bankruptcy reform caused a decline in bankruptcy filings, which were replaced by a sizable rise in insolvency and foreclosure,” the study’s authors reported. “We show that insolvency is a state associated with a high degree of financial distress in comparison to bankruptcy. This consequence of BAPCPA is potentially welfare reducing for households.”
- Though it may not seem to matter if you are bankrupt or insolvent — after all, you’re broke either way — the differences are profound for consumers, especially those struggling to begin anew.
Read more: http://www.creditcards.com/credit-card-news/bankruptcy-law-insolvent-1276.php#ixzz3TpoGwB8a
The post Too Poor to File Bankruptcy – a New Class of Americans appeared first on Diane L. Drain - Phoenix Bankruptcy & Foreclosure Attorney.
Hundreds of thousands of Americans are hounded mercilessly by debt collectors, but unable to afford to file for bankruptcy.
Ten years after the passage of the “new” bankruptcy law we find a new class of Americans “the permanently insolvent”. You won’t find reference to this group in any financial magazine. But, hundreds of thousands of Americans are in a position of being hounded mercilessly by debt collectors, but unable to afford to file for bankruptcy.
“The reform has generated a substitution, from formal bankruptcy to insolvency,” said Stefania Albanesi, lead author of “Insolvency After the 2005 Bankruptcy Reform,” a new study by economists at the Federal Reserve Bank of New York and Columbia University.
“Since insolvents are unable to repay debt, they are subject to collection actions and financial judgments and have difficulties obtaining unsecured credit,” she said. “This is particularly bad for low income individuals, as they have little savings and sometimes rely on debt to face unforeseen expenses and the like.”
Their poor credit docs not allow them to obtain credit to buy a home, vehicle or even get a credit card. They tend to be part of the group that uses payday loans or title loans. By falling into the trap of using these high interest loans (sometimes as much as 750%) they are forever trapped.
The study, which was published in January and summarized this week in a Federal Reserve blog post, reached a variety of conclusions about the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005. Few of the economists’ findings were encouraging for consumers.
- The bottom lines of credit card companies, banks and other financial institutions have been nourished by the act, which was proposed by Wall Street interests, passed by Congress, and signed by President George W. Bush on April 20, 2005. It went into effect Oct. 17, 2005. “We cite research … suggesting that profitability has risen for credit card companies as a result of BAPCPA,” Albanesi said.
- But consumers have suffered. Low income Americans, those most in the need of help, have been the most deeply damaged by changes that made it more difficult and far more expensive to file for protection under bankruptcy laws. “Our analysis suggests that the 2005 bankruptcy reform caused a decline in bankruptcy filings, which were replaced by a sizable rise in insolvency and foreclosure,” the study’s authors reported. “We show that insolvency is a state associated with a high degree of financial distress in comparison to bankruptcy. This consequence of BAPCPA is potentially welfare reducing for households.”
- Though it may not seem to matter if you are bankrupt or insolvent — after all, you’re broke either way — the differences are profound for consumers, especially those struggling to begin anew.
Click here to read entire article...
The post Too Poor to File Bankruptcy – a New Class of Americans appeared first on Diane L. Drain - Phoenix Bankruptcy & Foreclosure Attorney.
Joel Nunez had a problem – he owed $120,000 in private student loans for a flight school.
Even worse, he hadn’t finished his education. Left in dire financial straits, he went to a bankruptcy lawyer.
You’re probably thinking that Joel Nunez was a fool for thinking that he could wipe out his private student loans in bankruptcy. After all, we’ve been conditioned to think that wiping out student loans in bankruptcy is a Herculean feat that is accomplished only in the more dire of circumstances.
But Joel’s lawyer did a little digging and found the most useful of loopholes. And in doing so, he realized that Joel didn’t actually have a student loan.
Student Loans Not Automatically Wiped Out In Bankruptcy
Certain student loans aren’t automatically wiped out under the US Bankruptcy Code. But in order to qualify as a student loan, the debt must be for:
(A)(i) an educational benefit overpayment or loan made, insured, or guaranteed by a governmental unit, or made under any program funded in whole or in part by a governmental unit or nonprofit institution; or (ii) an obligation to repay funds received as an educational benefit, scholarship, or stipend; or
(B) any other educational loan that is a qualified education loan, as defined in section 221(d)(1) of the Internal Revenue Code of 1986, incurred by a debtor who is an individual.
Was It A Qualified Education Loan?
According to the court decision, Joel enrolled in Wings of the Cascades, a flight school operated by Spirit Flight, Inc., in 2004. He received two loans from Key Bank USA, National Association (“Key Bank”), a forprofit banking institution.
Key Bank thought it was lending money as a student loan. As a forprofit banking institution, the only way the debt wouldn’t be wiped out in a bankruptcy would be if it was considered a qualified education loan under the Internal Revenue Code.
Under the Internal Revenue Code, a “qualified education loan” is a debt incurred by the taxpayer solely to pay qualified higher education expenses—
(A)which are incurred on behalf of the taxpayer, the taxpayer’s spouse, or any dependent of the taxpayer as of the time the indebtedness was incurred,
(B)which are paid or incurred within a reasonable period of time before or after the indebtedness is incurred, and
(C)which are attributable to education furnished during a period during which the recipient was an eligible student.
The Internal Revenue Code goes on to define qualified higher education expenses as the cost of attendance at an eligible educational institution.
Finally, the Internal Revenue Code defines an “eligible educational institution” as an institution which is described in section 481 of the Higher Education Act of 1965 (20 U.S.C. 1088), as in effect on the date of the enactment of this section, and which is eligible to participate in a program under title IV of such Act.
In other words, only the cost of attendance at an eligible educational institution are considered a qualified education loan that aren’t wiped out in bankruptcy.
The School Wasn’t An Eligible Educational Institution
The Federal School Code List contains the unique codes assigned by the Department of Education for schools participating in the Title IV federal student aid programs. Students can enter these codes on the Free Application for Federal Student Aid (FAFSA) to indicate which postsecondary schools they want to receive their financial application results.
The Federal School Code List is a searchable document in PDF and Excel format. The list will be updated on the first of February, May, August, and November of each calendar year.
You can find the list here.
Without sending you running off to check, Wings of the Cascades wasn’t on the list when Joel went there. Neither was Spirit Flight, Inc.
The school wasn’t an eligible educational institution.
And so Joel’s loan was wiped out in his bankruptcy case.
What Does That Mean For You?
If you owe money for private student loans, check the Federal School Code List for the years in which you went to the school.
If it’s not on the list, your private student loan may be discharged in bankruptcy.
It’s not magic – just the way the law works.
The court’s decision can be found here.
The post When Is A Student Loan Not A Student Loan? appeared first on Bankruptcy and Student Loan Lawyers - 866.787.8078.
Recently I was invited to join a panel of some of the leading personal finance voices on the Money Mastermind Show.
The show, a weekly roundtable on personal finance issues, centered around student loan options. I was lucky to lend my voice to the show, which also included the following regular panelists:
- Glen Craig, personal finance writer and founder of Free From Broke.
- Kyle Prevost, freelance personal finance author and co-author of the book, More Money for Beer and Textbooks.
- Miranda Marquit, a freelance journalist and professional blogger specializing in personal finance, small business, and investing topics. Miranda writes at Planting Money Seeds.
- Peter Anderson, the founder of Bible Money Matters, one of the the Internet’s top Christian personal finance blogs.
- Tom Drake, the founder of Canadian Finance Blog, one of Canada’s top personal finance blogs.
We had a great conversation, and the time flew by. Here’s the video – you should watch it (you’ll also get a glimpse of my favorite piece of artwork in the background).
The post What if You Can’t Pay Your Student Loans? appeared first on Bankruptcy and Student Loan Lawyers - 866.787.8078.
Two years ago we posted a blog on the implications of Zombie Foreclosures for homeowners. Recent data shows that while the total number of zombie foreclosures are down, they represent a higher percentage of the foreclosure market. What is a zombie foreclosure? It is a home that was actively in a foreclosure proceeding but the bank […]
The post Zombie Foreclosures Part II: 2 Years Later….25% of Foreclosures are Zombie Homes! appeared first on Acclaim Legal Services, PLLC.
Over the past few weeks I have received several emails from bankruptcy prospects who have indicated to me that they didn’t feel that they could afford to file for bankruptcy relief. Most of the people that feel this way are mistaken. Now they may have checked on the Internet are called a few law firms+ Read More
The post If You Think That You Cannot Afford To File Bankruptcy, Think Again appeared first on David M. Siegel.
Bankruptcy Lawyer Secret If you had good experience with a restaurant, hairdresser, pastor, CPA or other professional, you would be likely to talk about that person and refer friends and family to that person. In the case of a bankruptcy lawyer, most people keep that information to themselves out of a fear of being viewed+ Read More
The post Why Keep Your Bankruptcy Lawyer A Secret? appeared first on David M. Siegel.
Well known cartoonist Charles D. Schultz was the creator of the Charlie Brown comic strip. A recent blog post article asks, "Did Charles Schultz coin the term 'security blanket?" What does this question about the coining of this term that was used in the Charlie Brown comic strip have to do with bankruptcy law?
What does a Security Blanket Represent
In the comic strip, Linus is best know for holding his "security blanket." The author of the blog post explains that a "blanket" is something held or carried to afford reassurance by its familiarity or "in extended use, a security blanket can also refer to anything offering reassurance, comfort, or a sense of security."
The author further relates that the use of a security blanket in the comic strip was explained back in the early 1980's, when the senior editor John Simpson of the Oxford English Dictionary wrote Charles M. Shultz when he was working on the entry for the phrase "security blanket".
Bankruptcy Security
By coincidence, the world of bankruptcy law also involves a lot of terminology relating to security and blankets, such as "security blankets", "blanket liens" or "blanket mortgages." As does Linus, these blankets are held for security - in this case to "secure" payment of obligations to pay, such as a mortgage promissory note.
Who Gets to Use the Blanket In many places, the value of the collateral security - the blanket - has fallen below the amount of the obligations to pay. The situation is therefore may presented: two persons want to hold or grab the blanket.
Traditional Model
One model may be that each says: "it is all mine." That is both grab the blanket (or in one instance a baby) and one says it is all mine and the other says it is all mine. That would be the "mine, mine, mine" model. In that instance, the ancient tradition provides for each party to be sworn and for the a court or King to make a determination of who gets to keep the entire blanket or baby.
Another Traditional Model
There are other traditional model though that would not involve the Court or the King, who likely have a house full of other work to do.
In this model, the parties would either share the blanket or divide the blanket between them. That would allow for both parties to stay warm. Some may prefer to share the blanket and others may prefer to divide the blanket and each use their own part.
Jordan E. Bublick - Miami Bankruptcy Lawyer - Kendall & Aventura Offices - (305) 891-4055 - www.bublicklaw.com
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