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Here at Shenwick & Associates, many of the people we work with have student loan debt. This should come as no surprise, considering that Americans owe more in student loan debt than credit card debt. We’ve written about student loan debt and how difficult it is to discharge in bankruptcy previously (mostly recently here). This month, we wanted to tell you about a pending case that may offer hope for some student loan debtors.
Let’s start by looking at the relevant provision of the Bankruptcy Code. Section 523 governs exceptions to the discharge of debt, and § 523(a)(8) provides that:
A discharge under section 727, 1141, 1228(a), 1228(b), or 1328(b) of this title does not discharge an individual debtor from any debt-unless excepting such debt from discharge under this paragraph would impose an undue hardship on the debtor and the debtor's dependents, for-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 an obligation to repay funds received as an educational benefit, scholarship, or stipend[.]
This case (Haas v. Navient Solutions) revolves around the question of what an “educational benefit” is. One of the co–plaintiffs (Haas) borrowed money to prepare for the Texas bar exam in 2009. The other co–plaintiff (Shahbazi) borrowed money to attend a unaccredited technical school in Virginia in 2002. Haas filed for bankruptcy in 2015 and Shahbazi filed for bankruptcy in 2011. In both cases, the debtors listed the debt to Navient’s predecessors (which we will just refer to Navient, since two Navient entities are the co–defendants) as non–priority general unsecured claims instead of priority unsecured claims. Navient was notified of the discharge, but instead of filing adversary proceedings (bankruptcy litigation) to contest the dischargeability of these debts, Navient and various collection agencies continued to try to collect on these debts, which the co–plaintiffs allege to be in violation of the discharge injunction in § 524(a)(2) of the Bankruptcy Code.
So Haas and Shahbazi filed their own adversary proceeding against Navient, contending that the debts they were incurred were not “Qualified Education Loans” excepted from discharge, but instead “Consumer Education Loans” that targeted students attending unaccredited schools, and seeking class–action status. Navient moved to dismiss the case, which was denied last month.
The case is far from over, and if even if the plaintiffs and their class are successful, this would only affect a small portion of student loan debtors. In our experience, most clients have qualified educational loans, which are very difficult to discharge in bankruptcy without undue hardship. However, for student loan debtors who have been on the ropes since the seminal Brunnerdecision and the changes to dischargeability of educational loans in BAPCPA, this is welcome news. For any questions about your student loan debt, please contact Jim Shenwick.
Foreclosures have been on the rise since 2008. From 2007 to 2009 around 3 million homeowners were facing foreclosure. That number has tripled in size. This housing collapse combined with economic hardships and millions of homeowners being “upside down” or “underwater” in their homes has led to a housing crisis in the United States. Stop a Foreclosure immediately by reviewing some of the facts below.
Americans are turning towards filing Chapter 13 bankruptcy in order to stop an impending foreclosure sale. The original purpose of Chapter 13 bankruptcy was to allow a person who was facing financial ruin to place all of their debt into one large amount which would then be restructured and paid off one month at a time over a three to five year period.
In general, a Chapter 13 bankruptcy requires more than just a home being “underwater” for a court to rule in your favor. If your income is adequate for making your mortgage payments and you have no real noteworthy debt, then you probably won’t qualify for a Chapter 13 bankruptcy. Of course, your circumstances may be different or there might be other conditions that apply. But simply being “underwater” by your mortgage loan and behind on your payments is generally not enough to qualify.
If your financial situation is temporarily in disorder because of unexpected bills, medical emergencies, major vehicle repairs, etc., notifying your lender is critical. It is very possible that the lender may offer a temporary deferment of your payments or provide you with re-payment terms which allow you to temporarily reduce your payments owed in return for an extension of your mortgage. Contacting an experienced, knowledgeable attorney – a true expert in Tacoma Bankruptcy – can give you the advice and representation you need when facing such a situation.
Stop Foreclosure with a Tacoma Bankruptcy Attorney
When you file either a Chapter 13 or Chapter 7 bankruptcy, the court automatically issues an order (called the order for relief) that includes an “automatic stay.” The automatic stay directs your creditors to cease their collection activities immediately. No excuses. If your home is scheduled for a foreclosure sale, the sale will be legally postponed while the bankruptcy is pending – typically for three to four months.
However, there are two exceptions to this general rule:
Motion to lift the stay: If the lender obtains the bankruptcy court’s permission to proceed with the sale (by filing a “motion to lift the stay”), you may not get the full three to four months. But even then, the bankruptcy will typically postpone the sale by at least two months, or even more if the lender is slow in pursuing the motion to lift the automatic stay.
Foreclosure notice already filed: Unfortunately, bankruptcy’s automatic stay won’t stop the clock on the advance notice that most states require before a foreclosure sale can be held (or a motion to lift the stay can be filed). For example, before selling a home in Oregon, a lender has to give the owner at least three months’ notice. If you receive a three-month notice of default, and then file for bankruptcy after two months have passed, the three-month period will elapse after you have been in bankruptcy for only one month. At that time the lender could file a motion to lift the stay and ask the court for permission to schedule the foreclosure sale. This doesn’t mean the lender’s motion would be granted, but it is best to have an experienced Tacoma attorney on your side in an effort to prevent that from happening.
Many people will do whatever they can to stay in their home for the indefinite future. If that describes you, and you’re behind on your mortgage payments with no feasible way to get current, the only way to keep your home may be to file a Chapter 13 bankruptcy. Chapter 13 bankruptcy lets you pay off the “arrearage” (late unpaid payments) over the length of a repayment plan you propose – five years in some cases. But you’ll need enough income to at least meet your current mortgage payment at the same time you’re paying off the arrearage. Assuming you make all the required payments up to the end of the repayment plan, you’ll avoid foreclosure and keep your home.
2nd and 3rd mortgage payments: Chapter 13 may also help you eliminate the payments on your second or third mortgage. That’s because, if your first mortgage is secured by the entire value of your home (which is possible if the home has dropped in value), you may no longer have any equity with which to secure the later mortgages. That allows the Chapter 13 court to “strip off” the second and third mortgages and re-categorize them as unsecured debt – which, under Chapter 13, takes last priority and often does not have to be paid back at all.
Schedule a Free Consultation with Your Tacoma Bankruptcy Attorney
When it comes time to file for bankruptcy, you need a compassionate and skilled attorney who will be able to guide you through the process as cleanly as possible. Northwest Debt Relief Law Firm, we can help you with filing for Chapter 7, Chapter 11, and Chapter 13 bankruptcy in Washington State. We will be there every step of the way to help navigate you through the often-complex and difficult bankruptcy process.
Give us a call at (253) 780-8008 to schedule a free consultation with one of our bankruptcy attorneys. If you have any other questions about bankruptcy, one of our attorneys will be more than happy to offer advice on your particular situation.
The post How to Stop a Foreclosure on Your Home in Tacoma appeared first on Portland Bankruptcy Attorney | Northwest Debt Relief.
Foreclosures have been on the rise since 2008. From 2007 to 2009 around 3 million homeowners were facing foreclosure. That number has tripled in size. This housing collapse combined with economic hardships and millions of homeowners being “upside down” or “underwater” in their homes has led to a housing crisis in the United States. Stop a Foreclosure immediately by reviewing some of the facts below.
Americans are turning towards filing Chapter 13 bankruptcy in order to stop an impending foreclosure sale. The original purpose of Chapter 13 bankruptcy was to allow a person who was facing financial ruin to place all of their debt into one large amount which would then be restructured and paid off one month at a time over a three to five year period.
In general, a Chapter 13 bankruptcy requires more than just a home being “underwater” for a court to rule in your favor. If your income is adequate for making your mortgage payments and you have no real noteworthy debt, then you probably won’t qualify for a Chapter 13 bankruptcy. Of course, your circumstances may be different or there might be other conditions that apply. But simply being “underwater” by your mortgage loan and behind on your payments is generally not enough to qualify.
If your financial situation is temporarily in disorder because of unexpected bills, medical emergencies, major vehicle repairs, etc., notifying your lender is critical. It is very possible that the lender may offer a temporary deferment of your payments or provide you with re-payment terms which allow you to temporarily reduce your payments owed in return for an extension of your mortgage. Contacting an experienced, knowledgeable attorney – a true expert in Tacoma Bankruptcy – can give you the advice and representation you need when facing such a situation.
Stop Foreclosure with a Tacoma Bankruptcy Attorney
When you file either a Chapter 13 or Chapter 7 bankruptcy, the court automatically issues an order (called the order for relief) that includes an “automatic stay.” The automatic stay directs your creditors to cease their collection activities immediately. No excuses. If your home is scheduled for a foreclosure sale, the sale will be legally postponed while the bankruptcy is pending – typically for three to four months.
However, there are two exceptions to this general rule:
Motion to lift the stay: If the lender obtains the bankruptcy court’s permission to proceed with the sale (by filing a “motion to lift the stay”), you may not get the full three to four months. But even then, the bankruptcy will typically postpone the sale by at least two months, or even more if the lender is slow in pursuing the motion to lift the automatic stay.
Foreclosure notice already filed: Unfortunately, bankruptcy’s automatic stay won’t stop the clock on the advance notice that most states require before a foreclosure sale can be held (or a motion to lift the stay can be filed). For example, before selling a home in Oregon, a lender has to give the owner at least three months’ notice. If you receive a three-month notice of default, and then file for bankruptcy after two months have passed, the three-month period will elapse after you have been in bankruptcy for only one month. At that time the lender could file a motion to lift the stay and ask the court for permission to schedule the foreclosure sale. This doesn’t mean the lender’s motion would be granted, but it is best to have an experienced Tacoma attorney on your side in an effort to prevent that from happening.
Many people will do whatever they can to stay in their home for the indefinite future. If that describes you, and you’re behind on your mortgage payments with no feasible way to get current, the only way to keep your home may be to file a Chapter 13 bankruptcy. Chapter 13 bankruptcy lets you pay off the “arrearage” (late unpaid payments) over the length of a repayment plan you propose – five years in some cases. But you’ll need enough income to at least meet your current mortgage payment at the same time you’re paying off the arrearage. Assuming you make all the required payments up to the end of the repayment plan, you’ll avoid foreclosure and keep your home.
2nd and 3rd mortgage payments: Chapter 13 may also help you eliminate the payments on your second or third mortgage. That’s because, if your first mortgage is secured by the entire value of your home (which is possible if the home has dropped in value), you may no longer have any equity with which to secure the later mortgages. That allows the Chapter 13 court to “strip off” the second and third mortgages and re-categorize them as unsecured debt – which, under Chapter 13, takes last priority and often does not have to be paid back at all.
Schedule a Free Consultation with Your Tacoma Bankruptcy Attorney
When it comes time to file for bankruptcy, you need a compassionate and skilled attorney who will be able to guide you through the process as cleanly as possible. Northwest Debt Relief Law Firm, we can help you with filing for Chapter 7, Chapter 11, and Chapter 13 bankruptcy in Washington State. We will be there every step of the way to help navigate you through the often-complex and difficult bankruptcy process.
Give us a call at (253) 780-8008 to schedule a free consultation with one of our bankruptcy attorneys. If you have any other questions about bankruptcy, one of our attorneys will be more than happy to offer advice on your particular situation.
The post How to Stop a Foreclosure on Your Home in Tacoma appeared first on Portland Bankruptcy Attorney | Northwest Debt Relief.
(Bloomberg) -- The FBI raid on the offices of President Donald Trump’s lawyer, Michael Cohen, included one surprising aspect: taxi medallions. Agents were seeking documents on Cohen’s ownership of “numerous” New York City taxi medallions, according to CNN.
That might not be as salacious as records showing payments to an adult film star or to a former Playboy Playmate, but taxi permits were once a bonanza for alternative asset investors. Prices for the permits jumped 60 percent from March 2011 to March of 2014 when they sold for $1 million each. The S&P 500’s total return in that period was 53.2 percent.
But the entrance of Uber and Lyft has slashed their value. Permit prices dropped almost 80 percent by March 2017 before recovering a bit over the last year. It’s not clear when Cohen made his investment.
©2018 Bloomberg L.P.
If you are a California resident who is struggling financially due to unemployment, it may be time to consider filing for bankruptcy, which can help you get a fresh start by reducing or eliminating many of the debts that you owe. However, while unemployment may help you qualify for certain types of bankruptcy, lacking a job could prevent you from choosing others. Continue reading to learn more about how job loss and unemployment could affect your ability to file bankruptcy in California. Then, contact the Roseville Chapter 7 lawyers of The Bankruptcy Group for a free legal consultation about your financial options for getting debt relief.
Do You Need a Job to File Chapter 7?
According to the Bureau of Labor Statistics, about 4.1% of Americans are currently unemployed. However, California’s unemployment rate is slightly higher than the national average, hovering around 4.3% as of February 2018.
Without a regular source of income, many unemployed Californians struggle to keep current on their mortgages, utility bills, credit card bills, and other expenses. For many families and individuals, a single medical bill or auto repair is all that stands between relative stability and total insolvency.
Fortunately, it isn’t necessary to struggle day in and day out just to make ends meet. If you are experiencing financial hardship due to job loss or prolonged unemployment, bankruptcy could be a potential solution.
While there are many types of bankruptcy, most cases fall into one of two categories: Chapter 7, also called “liquidation,” or Chapter 13, also called “reorganization.” Both provide debt relief, but through drastically different financial approaches. Therefore, unemployment may be an advantage in Chapter 7, yet a hindrance in Chapter 13. Our Rocklin Chapter 7 attorneys will begin by discussing Chapter 7 bankruptcy and unemployment. To read more about unemployment and Chapter 13, scroll down to the next section of this article.
You do not need a job to file for Chapter 7 in California. In fact, being unemployed can actually help you qualify for Chapter 7 due to a step of the bankruptcy process called “means testing.”
As the name implies, means testing measures (tests) your financial ability (means) to repay your creditors. If your household income falls below the California median income for a household of equivalent size – something which is more likely to occur if you are unemployed – you pass the means test and may therefore file for Chapter 7.
Because means testing considers your gross income over the past six months, it may be strategic to temporarily delay filing if the job loss occurred recently. If liquidation bankruptcy is appropriate for your situation, our Elk Grove Chapter 7 lawyers can help you determine the right time to file.
Can You File Chapter 13 if You Are Unemployed?
Technically speaking, you do not need a job to file for Chapter 13 in California. However, unemployment can become a major obstacle in Chapter 13, and could potentially prevent you from successfully completing the Chapter 13 process in Sacramento, Roseville, Elk Grove, Rocklin, or elsewhere in California. To understand why, you need to have some background about how Chapter 13 bankruptcy works.
In Chapter 13, debtors create a financial plan, known as a “reorganization plan,” with assistance from a Chapter 13 bankruptcy attorney. The purpose of the plan, which must be approved by the bankruptcy court, is to establish an agreement between you (the debtor) and the individuals or entities to whom you owe debts (your creditors). The plan, which lasts from three to five years depending on your financial situation, organizes your debts based on their importance, ensuring that priority debts, such as child support, and debts that are secured by collateral, such as auto loans, are the first to be repaid.
In order for a Chapter 13 debtor to continually stay current with his or her reorganization plan, which generally calls for monthly payments, the debtor must have sufficient disposable income – which is where unemployment can pose a problem. If the court determines that you lack enough disposable income to manage a reorganization plan successfully, you may need to file Chapter 7 instead. However, if you can demonstrate that you have adequate income from sources other than a job – for instance, Social Security benefits or money you’ve made by investing – you may be able to file Chapter 13 while unemployed.
California Bankruptcy Attorneys Can Help You Get Debt Relief
Unemployment does not necessarily have to prevent you from filing bankruptcy. If you are out of a job and need help clearing away your debts, personal bankruptcy could be a viable strategy. Depending on which type of bankruptcy you file, which exemptions you use, and other factors in your case, you could achieve financial goals like saving your home from foreclosure, getting caught up on past-due car payments, or delaying service shut-offs from nonpayment. Additionally, getting your debts under control can give you the freedom and flexibility to start building better credit in the future.
If you are unemployed, bankruptcy may offer financial hope. To learn more about whether Chapter 7 or Chapter 13 could be right for your situation, contact our Roseville bankruptcy attorneys online for a free consultation, or call us at (800) 920-5351.
The post Can You File Bankruptcy if You Are Unemployed in California? appeared first on The Bankruptcy Group, P.C..
If you are a California resident who is struggling financially due to unemployment, it may be time to consider filing for bankruptcy, which can help you get a fresh start by reducing or eliminating many of the debts that you owe. However, while unemployment may help you qualify for certain types of bankruptcy, lacking a […]
The post Can You File Bankruptcy if You Are Unemployed in California? appeared first on The Bankruptcy Group, P.C..
The March 2018 New York City Taxi & Limousine Commission (TLC) sales results have been released to the public. And as is our practice, provided below are James Shenwick’s comments about those sales results.
1. The volume of sales continues to remain low. In March, there were only 29 taxi medallion sales (excluding stock transfers).2. 14 of the 29 sales (almost half) were foreclosure or estate sales, which means that either: (1) the medallion owner defaulted on the bank loan and the banks were foreclosing to obtain possession of the medallion or; (2) the medallion owner died, and the estate was selling the medallion. We disregard these transfers in our analysis of the data, because we believe that they are outliers and not indicative of the true value of the medallion, which is a sale between a buyer and a seller under no pressure to sell (fair market value). An additional transfer was from an individual to an LLC for no consideration, which we have also excluded from our analysis.3. The 14 regular sales they ranged from a low of $163,333 (four medallions), to six medallions at $180,000, to two medallions at $225,000, and two medallions at the higher end of the price scale at $300,000 and $350,000.4. The low sales volume seems to indicate that at this stage of the market, not many parties are involved in selling or buying medallions, possibly due to the fear that medallion prices may further decrease.5. The median of March’s sales was $180,000, a $17,500 (9 %) decrease from February’s median sales of $197,500.6. However, politicians have spoken recently about capping the number of ride–share app drivers and/or instituting congestion pricing in Manhattan – either of these measures would stabilize or increase the price of medallions.
Please continue to read our blog to see what happens to medallion pricing in the future. Any individuals or businesses with questions about taxi medallion valuations or workouts should contact Jim Shenwick at (212) 541-6224 or via email at j[email protected].
By Danielle D'Onfro
Nestled among several potential blockbuster cases in the court’s penultimate week of argument this term, there’s a quiet personal bankruptcy case. The case, Lamar, Archer & Cofrin, LLP v. Appling, ostensibly concerns the breadth of the word “respecting” in the Bankruptcy Code.
But in simpler terms, the case is about how the Bankruptcy Code treats dishonest debtors. The goal of consumer bankruptcy is giving debtors a “fresh start” so that they can get on with their lives despite past financial missteps. The Bankruptcy Code does this by discharging debtors’ personal responsibility to repay many, but not all, obligations incurred before they filed their bankruptcy petitions. Of course, relieving debtors of their obligations necessitates that their creditors bear losses.
And that result, in turn, has its own ripple effects throughout the economy — from increasing the cost of credit for everyone to further bankruptcies when a creditor cannot itself absorb the loss. The Bankruptcy Code thus balances the competing goals of providing individuals the relief they need and minimizing unfairness to creditors. One way the Bankruptcy Code does this is by limiting bankruptcy’s discharge to “honest but unfortunate debtors.” Debtors remain personally liable for any non-dischargeable debt even after the conclusion of their cases, meaning that they can face wage garnishment and any other method of collection authorized under state law.
This case arises from a dispute between Lamar, Archer & Cofrin, LLP, an Atlanta law firm, and one of its former clients, R. Scott Appling. Like many bankruptcy disputes, this one involves questionable financial and strategic choices by both parties. In 2004, Appling hired Lamar and another firm to represent him in a dispute against the former owner of his business. By March 2005, Appling’s bill had grown to $60,000, which he could not (or would not) pay at the time. He allegedly induced Lamar to continue working on the case by explaining that he was expecting a tax refund of approximately $100,000 that would enable him to pay the outstanding bill. Appling contends that he never promised that the refund would be that large, but merely represented his accountant’s best estimate. In fact, Appling received a far smaller tax refund in October 2005 and promptly spent the money on business expenses. According to Lamar, in November 2005 Appling claimed to still be waiting for his tax refund; Lamar thus kept working for Appling until June 2006, when the firm learned the truth. The firm sued and won a judgment for $104,179 in Georgia state court in October 2012.
Three months later, Appling filed for Chapter 7 bankruptcy and Lamar filed an adversary proceeding in the Middle District of Georgia, seeking a determination that Appling’s $104,000 outstanding bill was non-dischargeable under 11 U.S.C. § 523(a)(2)(A) because it was “obtained by fraud.” That case went to trial in September 2014, in order to resolve the parties’ competing accounts of two conversations that had occurred nearly a decade earlier.
The provision at issue is 11 U.S.C. §523(a)(2), which states: “A discharge … does not discharge an individual debtor from any debt … for money, property, services, or an extension, renewal, or refinancing of credit, to the extent obtained by—(A) false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor’s or an insider’s financial condition.” Then, §523(a)(2)(B) says: “(B) use of a statement in writing—(i) that is materially false; (ii) respecting the debtor’s or an insider’s financial condition; (iii) on which the creditor to whom the debtor is liable for such money, property, services, or credit reasonably relied; and (iv) that the debtor caused to be made or published with intent to deceive.” Whether one should read an “or” between §523(a)(2)(A) and §523(a)(2)(B) is one of the issues in this case.
The provision at issue is 11 U.S.C. §523(a)(2), which states:
(a) A discharge … does not discharge an individual debtor from any debt— …
(2) for money, property, services, or an extension, renewal, or refinancing of credit, to the extent obtained by—
(A) false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor’s or an insider’s financial condition;
(B) use of a statement in writing—
(i) that is materially false;
(ii) respecting the debtor’s or an insider’s financial condition;
(iii) on which the creditor to whom the debtor is liable for such money, property, services, or credit reasonably relied; and
(iv) that the debtor caused to be made or published with intent to deceive.
Whether one should read an “or” between §523(a)(2)(A) and §523(a)(2)(B) is one of the issues in this case.
Appling filed a motion to dismiss, arguing that his debt did not fall within the exception under Section 523(a)(2)(A) because the alleged misrepresentation was a “statement respecting [his] financial condition.” The bankruptcy court denied the motion, reasoning that the term “statement respecting the debtor’s . . . financial condition” covers only statements about a debtor’s “overall financial condition or net worth.” Because Appling allegedly lied about a single asset — his tax refund — he did not lie about his overall financial condition. The court did not grapple with Section 523(a)(2)(B).
The U.S. Court of Appeals for the 11th Circuit reversed, joining the U.S. Court of Appeals for the 4th Circuit in holding that a statement about a single asset could be a statement respecting the debtor’s financial condition. It went on to find that Lamar could not bring a claim because Section 523(a)(2)(B) provides that misrepresentations about the debtor’s financial condition are only non-dischargeable if made in writing. The Supreme Court granted certiorari on the question of “whether (and, if so, when) a statement concerning a specific asset can be a ‘statement respecting the debtor’s … financial condition’ within Section 523(a)(2).”
In their briefing, the parties offer strikingly different interpretations of Section 523(a)(2). Lamar argues that the Supreme Court should follow the U.S. Courts of Appeals for the 8th, 10th and 5th Circuits and hold that statements about a single asset are not statements respecting the debtor’s financial condition. Under this view, only misrepresentations about the debtor’s overall personal balance sheet fall within Section 523(a)(2)(A)’s exception (really, the exception to the exception, because dischargeability is the norm).
Appling, for his part, contends that whatever statements he may have made about the tax refund were statements respecting his overall financial condition and therefore fell within the exception. He rests his argument on the ample precedent interpreting terms like “respecting” and “relating to” broadly. A group of law professors, represented by the Institute of Bankruptcy Policy, make a third, and perhaps more appealing, argument in an amicus brief supporting Appling. They maintain that this case need not test the boundaries of “respecting” because Appling actually intended to talk about his financial condition — his ability to pay his bills as they came due — when he spoke about his tax return.
Although the current Bankruptcy Code dates only to 1978, Congress built the code on nearly a century of prior bankruptcy practice. Both parties argue that this historical practice militates in favor of their desired reading of the statute, but Appling’s amici have the more sophisticated argument.
They argue that Section 523(a)(2)(A) in the 1978 Code merely re-enacted provisions from the Bankruptcy Act of 1898, as amended in 1903, 1926 and 1960. The 1903 and 1926 amendments to the code codified the discharge exception, they argue, but limited it to cases in which the debtor made a written misrepresentation. Consumer lenders, being a creative lot, realized that their debt would be non-dischargeable if the debtor lied in the origination process, and so they began requiring debtors to sign forms misrepresenting their assets in the origination process. Congress attempted to fix this problem in 1960 when it provided that false written financial statements regarding a debtor’s financial condition were not a basis for denying a discharge unless the lender actually relied on the falsehood. Before Congress replaced these provisions with Section 523(a)(2) in 1978, the weight of the case law held that a statement about any one of a debtor’s assets could be a statement about the debtor’s financial condition.
If Congress meant to incorporate this case law, then, many statements about a debtor’s assets would qualify under the exception to non-dischargeability. This interpretation is appealing in practical terms: If a homeowner says “my house is in foreclosure,” the listener knows something about that homeowner’s overall financial condition, just as she does if the same homeowner says “my net worth is a million dollars.” Lamar responds, though, that this approach stretches the word “respecting” too far, arguing that it “takes a sledgehammer” to the well-established principle that debt obtained by fraud is non-dischargeable.
Depending on how it resolves the main issue in the case, the court may also need to decide how Section 523(a)(2)(B)’s “use of a statement in writing” language fits with Section 523(a)(2)(A)’s exception to non-dischargeability. Appling and the 11th Circuit treat this provision as an exception to the exception to the exception: Written fraudulent statements about the debtor’s financial condition on which the creditor relies render a debt non-dischargeable. In its opinion, the 11th Circuit explained that this rule “may seem harsh after the fact, especially in the case of fraud,” but “it gives creditors an incentive to create writings before the fact, which provide the court with reliable evidence upon which to make a decision.” The 11th Circuit’s reading seems like the most plausible interpretation of the statutory text. At the same time, though, it raises some difficulties. Lamar argues that this reading involves the court substituting its own policy preferences for those of Congress. Indeed, the 11th Circuit’s view is somewhat difficult to square with the very problem that the 1960 amendment sought to fix: shady lenders encouraging borrowers to falsify documents to render their debts non-dischargeable. Moreover, Lamar’s amicus, the National Federation of Independent Business Small Business Legal Center, raises additional states’ rights concerns, calling this reading an encroachment on the states’ prerogative to create their own statutes of frauds.
Frankly, it is surprising that the Supreme Court even chose to hear this case. Although the case largely turns on a legal question, the parties still seem to be fighting about factual premises, arguing about who said what to whom 10 years before the trial. That said, it is good to see the court willing to tolerate a slightly messy vehicle to bring much-needed clarity to the Bankruptcy Code, especially because, as I’ve observed before, messy vehicles are the norm in the bankruptcy world.
By Jillian Berman
A recent court ruling may offer hope for thousands of struggling borrowers looking to escape education-related debts.
A Texas bankruptcy judge denied a request by student loan company, Navient, last month to dismiss a class-action lawsuit accusing the firm of illegally collecting on loans that were discharged in bankruptcy. Navient is appealing.
Patricia Christel, a spokeswoman for the Navient, declined to comment on pending litigation, but noted in an email that the company supports reform “that would allow federal and private student loans to be dischargeable in bankruptcy for those who have made a good-faith effort to repay their student loans over a five-to-seven year period and who still experience financial difficulty.”
The decision last month means the case can move forward and it also offers the opportunity for an appellate court to weigh in on whether loans historically viewed as exempt from bankruptcy discharge can actually be wiped away in the process.
“This is one to watch for potential,” said John Rao, an attorney at the National Consumer Law Center and expert on consumer bankruptcies.
The ruling comes as lawyers across the country are increasingly looking to challenge the conventional wisdom that any type of student loan isn’t dischargeable in bankruptcy. It also comes as the Department of Education is reviewing the high standard student loan borrowers must meet in order to have their debts discharged in bankruptcy.
This case centers around a very specific type of debt — and a small share of Navient’s private loan portfolio — money loaned to borrowers to pay for unaccredited programs, such as bar exam study courses and K-12 educational expenses. The lawyers representing the class estimate that about 16,000 borrowers fall into this category, according to Austin Smith, one of those attorneys.
But if the appellate court rules in favor of the plaintiffs that could indicate that borrowers with similar loans from other companies could also be entitled to relief. “If I were advising other companies who have these loans and have taken similar positions as Navient — I would be worried,” said Dalié Jiménez, a professor of law at the University of California-Irvine’s School of Law.
Reasons for student loans to be exempt from discharge in bankruptcy
To discharge a loan in bankruptcy, they must fall into one of four categories:
1. A federal student loan.
2. A student loan made by a qualified nonprofit (say, by a school).
3. A qualified education loan, which could be made by a for-profit company, but would need to be made for qualified educational expenses; in other words, those incurred at an accredited program for the cost of attendance.
4. Funds received as an “educational benefit.”
Traditionally, bankruptcy courts have determined that the types of loans in question in this case can’t be discharged because they were received as an “educational benefit.” But recently, lawyers and judges have started to question whether loans to help borrowers study for the bar and other similar debts truly fit into that category.
“It does definitely reflect a trend of this kind of decision,” Rao said of the recent ruling.
In his order, the judge argues that the phrase “educational benefit,” likely refers to something different from simply a loan used for educational expenses. And, instead, refers to arrangements like money fronted by an employer for a worker to attend college that would need to be repaid if that employee leaves their job.
“By its use throughout [the provision], Congress was certainly aware of the term “loan” and is presumed to have made a conscious decision of when to use it and when to choose something different,” the order reads. The legislative history of funds with ‘educational benefit’ That rationale appears to be in line with the legislative history of the educational benefit term, according to a recent paper by Jason Iuliano, a fellow at the University of Pennsylvania School of Law. The paper argues that — by viewing funds received for educational benefit to mean loans — judges have been interpreting the educational benefit language too broadly. Iuliano notes that during congressional hearings around the time the language was added, an expert explained to members of Congress that it was meant to only exempt conditional grants from being discharged in bankruptcy. “It was an effort to stop this very, very narrow category of exceptions,” Iuliano said. “It just ballooned up to cover pretty much anything you can make a case that advances one’s education.”Judges have been using this broader interpretation in part because it’s been so rarely challenged historically, Iuliano said. Because of the popular narrative that student debt is impossible to discharge in bankruptcy, it’s extremely rare for debtors to actually attempt to do so. What’s more, lawyers have also historically shied away from representing student loan borrowers trying to discharge their debt in bankruptcy, Iuliano said.
Now that’s starting to change, said Rao. As more lawyers are beginning to challenge whether these debts are dischargeable in bankruptcy, judges are now hearing and carefully considering both arguments, he said. “Judges are not just going to automatically assume that the loan is entitled to this protection from discharge,” Rao said.
Of course, the case is far from over. And Iuliano notes that even if the judge rules in a way that’s the most favorably possible to the debtors, the ruling would still only cover a fraction of borrowers or those with these very specific types of loans from this company. Still, he said there’s reason to believe these borrowers tend to be worse off than others with student loans and so it would help those who are struggling the most.
“There’s probably a large swath of people that this applies to that they could get some fairly immediate relief,” Jiménez said.
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When deciding to file bankruptcy, Portland residents should consider several factors, including which type of bankruptcy petition to file, when to file it for maximum protection from creditors and how much of your property you can keep. Finding the appropriate Portland Bankruptcy Attorney can make the difference of having a smooth filing or the opposite.
Portland bankruptcy attorneys can be an invaluable resource in helping you work through these and other important issues. Although you are not required to use a lawyer to file bankruptcy, the Oregon Bankruptcy Court notes that it would be very difficult for someone without an experienced Portland bankruptcy lawyer to succeed in bankruptcy court.
Your Portland bankruptcy lawyer can explain your legal options, guide you through the bankruptcy process and advocate on your behalf when meeting with creditors and the bankruptcy trustee. This article will explain how an Portland bankruptcy lawyer can assist with your bankruptcy filing.
Which Form of Oregon Bankruptcy Is Right for You?
The first thing your Portland bankruptcy lawyer will help you to determine is whether to file a Chapter 7 or a Chapter 13 type of bankruptcy. These names refer to the United States Bankruptcy Code, and each type of bankruptcy has different rules.
In general, if you qualify under a means test that looks at your income and compares it to the amount you owe, you may be able to file Chapter 7 bankruptcy, which wipes out all of your debts. If you do not qualify under the means test, you will likely file a Chapter 13 bankruptcy, which requires you to pay back a portion of your debt over a period of several years. Your attorney can help you decide which type of bankruptcy you should file.
Understanding Oregon Bankruptcy Forms
There are many bankruptcy forms to be completed in filing an Oregon bankruptcy. Because Portland bankruptcy attorneys deal with these forms every day, they are in the best position to help you complete them. The courts are very tough about the information that must be provided, and incomplete or incorrect forms may cause your bankruptcy case to be dismissed or thrown out of court.
Your bankruptcy lawyer will ensure that the proper forms are filed with the court, that all necessary information is included and that you’ve supplied the appropriate supporting documents. If any filed forms need to be amended or modified, your lawyer can handle that as well.
Meeting With the Bankruptcy Trustee & Working With Creditors
Your Portland bankruptcy lawyer can help you prepare for your first meeting with the bankruptcy trustee and tell you what to expect there. He can then also go with you to the meeting, help you to make your best case and achieve the outcome you’re hoping for.
Your Portland bankruptcy attorney is also your best buffer if creditors illegally continue to try to collect money from you once your bankruptcy has been filed. Your attorney can handle notifying these creditors that they are in violation of the law and can ask the court to make the creditors stop contacting you.
Schedule a Free Consultation with Your Portland Bankruptcy Attorney
When it comes time to file for bankruptcy, you need a compassionate and skilled attorney who will be able to guide you through the process as cleanly as possible. Northwest Debt Relief Law Firm, we can help you with filing for Chapter 7, Chapter 11, and Chapter 13 bankruptcy in Portland, Oregon. We will be there every step of the way to help navigate you through the often-complex and difficult bankruptcy process.
Give us a call at (503) 912-8809 to schedule a free consultation with one of our bankruptcy attorneys. If you have any other questions about bankruptcy, one of our attorneys will be more than happy to offer advice on your particular situation.
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