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Jesse Barrientes: Well, you mentioned the plan payment. How do I go about paying the trustee? So assume now we have gone through the numbers and we know what my disposable income is. And by the way, that’s pretty lean, right? There’s nothing else built in that budget. There’s nothing for entertainment or anything else.+ Read More
The post Chapter 13: 7 appeared first on David M. Siegel.
Grandma passes away and you inherit her retirement funds. If forced to file bankruptcy, will you be able to save the inheritance from the creditors?
The bankruptcy court allows personal debtors in a Chapter 7 case to claim as exempt certain personal property. Common exemptions are household items and equity in homes and cars. Included as exempt from creditors are personal retirement accounts.
Recently the U.S. Supreme court was asked whether a debtor can claim as exempt from creditors an inherited retirement account. The answer was "no" in most cases. Spouses who inherit a retirement account from their spouse are allowed to "rollover" the account into the living spouse's name. Under this circumstance, the surviving spouse may claim the monies exempt. Not exempt are inheritances outside the course of marriage, for example, parent to child.
Here are some more details from the case:
In 2001, daughter inherited $450,000 from an an IRA from her mother’s estate. In 2010 the daughter and her husband filed chapter 7 bankruptcy. They claimed the inheritance as exempt retirement funds. The Chapter 7 trustee and unsecured creditors objected to the claimed exemption on the ground that the funds in the inherited IRA were not “retirement funds” within the meaning of the statute. The Supreme Court held that the funds in an inherited IRA are not set aside for the debtor's retirement and thus are not "retirement funds" under the retirement exemption. The Court found that the daughter was prohibited from investing additional money in the account. Also, she was not required to take minimum annual distributions every year, but could withdraw the entire balance of the account at any time and for any reason without penalty. As such, the Supreme Court held the account did not have the characteristics of a typical retirement account.
Photo Credit:Quinn Dombrowski at Flickr
Because there is additional proof needed to show undue burden, the majority of those individuals who file bankruptcy do not file the additional adversary proceeding necessary to receive a discharge. This accounts for very low number of student loan discharges given to debtors by bankruptcy courts each year. The post Student Loan Debt and Bankruptcy appeared first on Tucson Bankruptcy Attorney.
Because there is additional proof needed to show undue burden, the majority of those individuals who file bankruptcy do not file the additional adversary proceeding necessary to receive a discharge. This accounts for very low number of student loan discharges given to debtors by bankruptcy courts each year. The post Student Loan Debt and Bankruptcy appeared first on Tucson Bankruptcy Attorney.
Probably the most frequent question I get from prospective clients is: "Will bankruptcy hurt my credit score?"
It's a fair question, but I usually find it a little amusing. It's a bit like the man who's drowning worrying about how he's dressed.
For most people, by the time they see a bankruptcy attorney the financial problem is extreme -- the garnishment has begun, the foreclosure is imminent, the summons has arrived setting a court date, or the collector calls are now coming every hour. And, of course, at this stage, the person's credit score is in the tank. It cannot get worse.
By clearing away debt, I explain, they will improve themselves to get a loan.
A recent survey of credit-risk managers at lenders by credit-score giant FICO, reported in the Washington Post, confirms what I have been saying all along: When it comes to qualifying for a loan, it's the amount of debt you are carrying, not your credit score that matters most.
"Researchers asked a representative sample of them what single factor makes them most hesitant to fund a loan request -- in other words, what's most likely to prompt them to say no.
Tops on the list? Surprise, it's not your credit scores. And it's not how much you've got for a down payment or what you have in the bank. It's your DTI -- your debt-to-income ratio. Nearly 60 percent of risk managers in the FICO study rated excessive DTIs as their No. 1 concern factor. . . "
Again, I repeat, for 60% of bankers it's the amount of debt the credit applicant is carrying that is the disqualifier, not the credit score!
"Debt-to-income ratios for home loans are the most direct indication about whether you are going to be able to afford to repay the money you want to borrow," says the article.
Basically, bankers look at two ratios to determine whether they will qualify an applicant for a home loan.
The first ratio looks at the ratio of the monthly payment for the loan you seek to your gross monthly income. Generally, lenders do not like to see a ratio for this of greater than 28%. Basically, they don't want you to buy a bigger house than you can afford.
The second ratio, the so-called "back end" ratio, is a ratio of your monthly recurring debt payments against your monthly gross income. The recurring debt payment total includes the proposed housing payment as well as your credit cards, car, student loans and payments on other debts. For most lenders, this ratio cannot exceed 43%. This is why amount of debt you are carrying can be such a deal-killer when applying for a loan.
For a lender, who cares about a bankruptcy in the past, it's the applicants current debt load, as well as income that matters.
If you have financial problems and are looking for guidance, contact us for a consultation. We'll ready to help.
Probably the most frequent question I get from prospective clients is: "Will bankruptcy hurt my credit score?"
It's a fair question, but I usually find it a little amusing. It's a bit like the man who's drowning worrying about how he's dressed.
For most people, by the time they see a bankruptcy attorney the financial problem is extreme -- the garnishment has begun, the foreclosure is imminent, the summons has arrived setting a court date, or the collector calls are now coming every hour. And, of course, at this stage, the person's credit score is in the tank. It cannot get worse.
By clearing away debt, I explain, they will improve themselves to get a loan.
A recent survey of credit-risk managers at lenders by credit-score giant FICO, reported in the Washington Post, confirms what I have been saying all along: When it comes to qualifying for a loan, it's the amount of debt you are carrying, not your credit score that matters most.
"Researchers asked a representative sample of them what single factor makes them most hesitant to fund a loan request -- in other words, what's most likely to prompt them to say no.
Tops on the list? Surprise, it's not your credit scores. And it's not how much you've got for a down payment or what you have in the bank. It's your DTI -- your debt-to-income ratio. Nearly 60 percent of risk managers in the FICO study rated excessive DTIs as their No. 1 concern factor. . . "
Again, I repeat, for 60% of bankers it's the amount of debt the credit applicant is carrying that is the disqualifier, not the credit score!
"Debt-to-income ratios for home loans are the most direct indication about whether you are going to be able to afford to repay the money you want to borrow," says the article.
Basically, bankers look at two ratios to determine whether they will qualify an applicant for a home loan.
The first ratio looks at the ratio of the monthly payment for the loan you seek to your gross monthly income. Generally, lenders do not like to see a ratio for this of greater than 28%. Basically, they don't want you to buy a bigger house than you can afford.
The second ratio, the so-called "back end" ratio, is a ratio of your monthly recurring debt payments against your monthly gross income. The recurring debt payment total includes the proposed housing payment as well as your credit cards, car, student loans and payments on other debts. For most lenders, this ratio cannot exceed 43%. This is why amount of debt you are carrying can be such a deal-killer when applying for a loan.
For a lender, who cares about a bankruptcy in the past, it's the applicants current debt load, as well as income that matters.
If you have financial problems and are looking for guidance, contact us for a consultation. We'll ready to help.
Probably the most frequent question I get from prospective clients is: “Will bankruptcy hurt my credit score?”
It’s a fair question, but I usually find it a little amusing. It’s a bit like the man who’s drowning worrying about how he’s dressed.
For most people, by the time they see a bankruptcy attorney the financial problem is extreme — the garnishment has begun, the foreclosure is imminent, the summons has arrived setting a court date, or the collector calls are now coming every hour. And, of course, at this stage, the person’s credit score is in the tank. It cannot get worse.
By clearing away debt, I explain, they will improve themselves to get a loan.
A recent survey of credit-risk managers at lenders by credit-score giant FICO, reported in the Washington Post, confirms what I have been saying all along: When it comes to qualifying for a loan, it’s the amount of debt you are carrying, not your credit score that matters most.
“Researchers asked a representative sample of them what single factor makes them most hesitant to fund a loan request — in other words, what’s most likely to prompt them to say no.
Tops on the list? Surprise, it’s not your credit scores. And it’s not how much you’ve got for a down payment or what you have in the bank. It’s your DTI — your debt-to-income ratio. Nearly 60 percent of risk managers in the FICO study rated excessive DTIs as their No. 1 concern factor. . . “
Again, I repeat, for 60% of bankers it’s the amount of debt the credit applicant is carrying that is the disqualifier, not the credit score!
“Debt-to-income ratios for home loans are the most direct indication about whether you are going to be able to afford to repay the money you want to borrow,” says the article.
Basically, bankers look at two ratios to determine whether they will qualify an applicant for a home loan.
The first ratio looks at the ratio of the monthly payment for the loan you seek to your gross monthly income. Generally, lenders do not like to see a ratio for this of greater than 28%. Basically, they don’t want you to buy a bigger house than you can afford.
The second ratio, the so-called “back end” ratio, is a ratio of your monthly recurring debt payments against your monthly gross income. The recurring debt payment total includes the proposed housing payment as well as your credit cards, car, student loans and payments on other debts. For most lenders, this ratio cannot exceed 43%. This is why amount of debt you are carrying can be such a deal-killer when applying for a loan.
For a lender, who cares about a bankruptcy in the past, it’s the applicants current debt load, as well as income that matters.
If you have financial problems and are looking for guidance, contact us for a consultation. We’ll ready to help.
Probably the most frequent question I get from prospective clients is: “Will bankruptcy hurt my credit score?”
It’s a fair question, but I usually find it a little amusing. It’s a bit like the man who’s drowning worrying about how he’s dressed.
For most people, by the time they see a bankruptcy attorney the financial problem is extreme — the garnishment has begun, the foreclosure is imminent, the summons has arrived setting a court date, or the collector calls are now coming every hour. And, of course, at this stage, the person’s credit score is in the tank. It cannot get worse.
By clearing away debt, I explain, they will improve themselves to get a loan.
A recent survey of credit-risk managers at lenders by credit-score giant FICO, reported in the Washington Post, confirms what I have been saying all along: When it comes to qualifying for a loan, it’s the amount of debt you are carrying, not your credit score that matters most.
“Researchers asked a representative sample of them what single factor makes them most hesitant to fund a loan request — in other words, what’s most likely to prompt them to say no.
Tops on the list? Surprise, it’s not your credit scores. And it’s not how much you’ve got for a down payment or what you have in the bank. It’s your DTI — your debt-to-income ratio. Nearly 60 percent of risk managers in the FICO study rated excessive DTIs as their No. 1 concern factor. . . “
Again, I repeat, for 60% of bankers it’s the amount of debt the credit applicant is carrying that is the disqualifier, not the credit score!
“Debt-to-income ratios for home loans are the most direct indication about whether you are going to be able to afford to repay the money you want to borrow,” says the article.
Basically, bankers look at two ratios to determine whether they will qualify an applicant for a home loan.
The first ratio looks at the ratio of the monthly payment for the loan you seek to your gross monthly income. Generally, lenders do not like to see a ratio for this of greater than 28%. Basically, they don’t want you to buy a bigger house than you can afford.
The second ratio, the so-called “back end” ratio, is a ratio of your monthly recurring debt payments against your monthly gross income. The recurring debt payment total includes the proposed housing payment as well as your credit cards, car, student loans and payments on other debts. For most lenders, this ratio cannot exceed 43%. This is why amount of debt you are carrying can be such a deal-killer when applying for a loan.
For a lender, who cares about a bankruptcy in the past, it’s the applicants current debt load, as well as income that matters.
If you have financial problems and are looking for guidance, contact us for a consultation. We’ll ready to help.
The first important decision when filing bankruptcy is should I file? Most clients struggle with whether or not to file for bankruptcy. Even if the person has significant outstanding debt, there is still often a question as to whether or not filing bankruptcy is the right solution. People worry about their credit scores. People worry+ Read More
The post Three Important Decisions When Filing Bankruptcy appeared first on David M. Siegel.
When you’re looking at a significant private student loan debt, your options are limits to two – pay or don’t pay.
If you can afford to make the payments, you should do so as quickly as possible. The faster those private student loans are paid in full, the less you’ll wind up paying in interest charges.
But fail to make payments and you’ll find that there’s no help for you. Federal student loan programs such as income base repayment, Pay As You Earn, and rehabilitation simply don’t exist.
In fact, there’s no legal difference between a private student loan and a standard bank loan. The only time a distinction is drawn is when you’re in bankruptcy court, which is when you find out just how difficult it can be for most people to wipe out the obligation in bankruptcy.
When there are no formal repayment options, no bankruptcy relief and no ability to repay the debt … what do you do?
My recommendation (and it may be a controversial one) is to consider letting the default happen.
What Happens When You Default On Your Private Student Loans
Make no mistake – defaulting on your private student loans is serious business.
- You’ll go into collections and your credit score will suffer.
- You’ll receive phone calls and letters.
- The unpaid balance will be reported to the credit bureau each month.
- And the private student loan lender may sue you.
How To Minimize The Effects Of Default
You can stop the phone calls and letters by invoking the provisions of the state and federal debt collection laws. Demand that the collection stop contacting you, and any further collection efforts must stop. Any phone calls or letters from the collector received after this “cease and desist” letter is in their hands is a violation of the law.
If you dispute the debt to the debt collector, under the credit reporting laws that account must be listed as disputed. All further reporting must cease immediately.
But nothing’s perfect – the damage will be done to your credit score, and the student loan lender can still sue.
The Myth And Reality Of Student Loan Lawsuits
A private student loan lender can sue you for only a certain amount of time. Once the statute of limitations expires, the debt is unenforceable and goes away forever.
But let’s say that doesn’t happen, and the private student loan lender sues you within the time period allowed by law.
First, that’s unlikely to happen right away. While you wait for a lawsuit to come, you can save some money to put towards a possible settlement.
Second, remember that the lender is required to prove every aspect of your liability in order to get the right to collect any money from you. That’s right, a lawsuit is not the same as a judgment – and the only way for a private student loan lender to collect through either a wage garnishment or bank account levy is a judgment.
Without a judgment, there’s nothing the private student loan can do against you.
Third, if you defend the private student loan lawsuit then there’s a far better chance you can get the debt settled on good terms. Just as you’re afraid of losing the lawsuit, so is the lender’s lawyer. The lender is concerned that the proof they offer up isn’t good enough, the accounting not exact enough, and the chain of ownership from the original lender to what is undoubtedly a debt buyer not firm enough.
Risk And Reward
There’s always a risk when you default on a private student loan.
You may get sued and lose the case. On the flip side, defend the lawsuit and you’ll be dealing with a lawyer rather than a debt collector. the lawyer’s got a better chance of having authority to settle the case on better terms for you.
You may need to borrow money for a car or a home mortgage during this ordeal. On the flip side, if you can’t afford to pay the private student loan then your credit score is going to plummet anyway. Paying less than the amount due each month won’t help your score.
It’s not an easy choice to make, and it’s definitely something with which you want to discuss with a lawyer (as opposed to a debt settlement company, which typically won’t be in a position to give you legal advice). But for someone with a full understanding of the risks, this may be a winning solution.
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