Blogs
By Artie Weinberger
The NY City Council has proposed a new bill targeting Uber, Lyft and other app.-based car services, Crain’s reported.
The bill was written by the new “For-Hire Vehicle Committee” of the City Council and will include tighter regulations and higher fees, including a new $2000 yearly fee for each car. App.- based drivers work independently using their own vehicles and obtain passengers via a smart phone app.
These services are also referred to as “e-hail” since the one requesting the car simply goes online to do so instead of hailing a cab in the street.
The fee is designed to slow the growth of these services, essentially pricing out some drivers. The app-based companies have come under scrutiny as their rapid growth has contributed to record levels of congestion in Manhattan while undermining the traditional hired-car industries, Crain’s reported.
Taxi medallion values have also plummeted. In the past selling taxi medallions was a giant industry in NYC, where dealers would sell medallions for as much as a million dollars. The number of medallions is capped at 135,000 in NYC, however with Uber there is no limit as basically any driver with a good automobile and driving record can sign up and jump on the app for passengers.
Many long time New Yorkers look at this effort as a “protection scheme” designed to protect the profits the City makes from the limited amount of Taxi medallions. Others point out the black car or TLC industry floods the street with cars, just as the app.-based drivers do, yet no new regulations are being proposed on the TLC industry.
The price of taxi medallions has dropped drastically in NYC; currently the price is around $186,000.
Mayor de Blasio in his recent budget included $1.2 billion in expected money to be obtained by auctioning 1,650 taxi medallions from fiscal years 2019 to 2023. That’s an average price of $728,000. Most analysts believe those numbers are unrealistic as recent auctions only managed to pull $186,000 or so for each medallion.
One can speculate the regulations proposed have alternative reasoning beyond “traffic congestion”.
The bill proposes also that any new license for an app-based service base would also have to meet city environmental requirements, which essentially mimics the standards of taxi-cabs. It must be noted that every car in NYC driven by anyone already has pass emissions inspections to receive a registration sticker.
One final proposal, would force app.-based drivers to be attached to a single base. Currently, an e-hail driver working for Uber can respond to a dispatch from any Uber base. This basically would change the entire business model.
“I have seen how Uber is not regulated—that what is being demanded of other members of the industry is not demanded of Uber. The point is to make it equal and fair”, Crain’s reported Councilman Ruben Diaz Sr., chairman of the new committee saying.
Copyright 2018 The Jewish Voice. All rights reserved.
By Liz Dominguez
Student loan debt is one of the major home-buying challenges for the millennial generation.
According to a survey by the National Association of REALTORS® (NAR), 83 percent of surveyed millennials said they are delaying their home-buying plans by a median of seven years in direct correlation to their student loan debt.
In today’s financial landscape—even with options such as loan consolidation, repayment restructuring and earnings-based, graduated payments—millennials are having difficulty paying bills, let alone freeing up their debt-to-income ratio and saving for a down payment.
For those struggling with overbearing debt, bankruptcy can be an intimidating option that is saved as a last resort; however, since 1998, student loan borrowers were not eligible for discharged student loans through bankruptcy until 2005, when Congress added an “undue hardship” condition, according to the Wall Street Journal. Even so, the law does not clearly define what it considers “undue hardship,” giving banks—which rarely grant loan forgiveness—the deciding power.
On Wednesday, the Education Department announced it is looking to clarify what constitutes “undue hardship” to give student loan debtors a better chance at having their loans expunged, and opportunities for more borrowers to apply for bankruptcy if needed.
“The U.S. Department of Education seeks to ensure that the congressional mandate to except student loans from bankruptcy discharge except in cases of undue hardship is appropriately implemented while also ensuring that borrowers for whom repayment of their student loans would be an undue hardship are not inadvertently discouraged from filing an adversary proceeding in their bankruptcy case,” according to an Office of Postsecondary Education, U.S. Department of Education statement.
While bankruptcy does not eliminate the option of home-buying, it does delay the process, as most lenders will not grant mortgages unless a period of time has passed. In order to understand what the overall impact may be, the most common types of bankruptcy must be considered:
- Chapter 7 – Liquidates assets to pay as much of the debt as possible—a blank slate in the financial world.
- Chapters 11 and 13 – Restructures the debt and sets up a repayment plan approved by the court. Chapter 11 has no limit on the amount of money owed, while Chapter 13 filers must have a steady income less than $394,725 in unsecured debt and less than $1,184,200 in secured debt, according to Debt.org.
According to realtor.com®, most individuals who file for bankruptcy will have to wait at least two years before they are considered for a home loan; and lenders are more lenient with Chapter 11 and 13 bankruptcy filers. It is also highly dependent upon each individual’s personal experience and the type of loan being applied for—some may have to wait up to four years. Credit also needs to be taken into consideration, as it can depend on how quickly an individual repairs their credit score; however, certain loan programs that can help millennial buyers purchase with low down payments and low credit scores, such as FHA and VA loans, may be less stringent with their bankruptcy restrictions.
As student loan debt is a widespread home-buying obstacle for the millennial generation (and may be passed along to future generations, as well), it is crucial that the problem be addressed within the real estate community. Is the solution in more lending programs with lessened restrictions or increased eligibility for bankruptcy?
Some sources say that increasing bankruptcy eligibility to expunge more student loan debt will only spur heightened interest rates by lenders and increased tuitions by educational institutions. If that is the case, future generations will have even more difficulty managing their student loan debt repayment and saving for a down payment. A rise in bankruptcy applicants may, however, incentivize the creation of more government-sponsored mortgage programs targeted toward those suffering from high student loan debt.
The Education Department is seeking public comments on which factors should be considered “undue hardship” in bankruptcy cases dealing with student loan debt. Interested individuals must submit their responses by May 22, 2018 through the Federal eRulemaking Portal or via U.S. mail, commercial delivery or hand delivery to Jean-Didier Gaina, U.S. Department of Education, Office of Postsecondary Education, 400 Maryland Avenue SW, Washington, DC 20202-6110.
© 2018 RISMedia. All Rights Reserved.
By James Doubek
The vast majority of Uber and Lyft drivers are earning less than minimum wage and almost a third of them are actually losing money by driving, according to researchers at the Massachusetts Institute of Technology.
A working paper by Stephen M. Zoepf, Stella Chen, Paa Adu and Gonzalo Pozo at MIT's Center for Energy and Environmental Policy Research says the median pretax profit earned from driving is $3.37 per hour after taking expenses into account. Seventy-four percent of drivers earn less than their state's minimum wage, the researchers say.
Thirty percent of drivers "are actually losing money once vehicle expenses are included," the authors found.
The conclusions are based on surveys of more than 1,100 drivers who told researchers about their revenue, how many miles they drove and what type of car they used. The study's authors then combined that with typical costs associated with a certain car's insurance, maintenance, gas and depreciation, which was gathered in data from Edmunds, Kelley Blue Book and the Environmental Protection Agency.
Drivers earning the median amount of revenue are getting $0.59 per mile driven, researchers say, but expenses work out to $0.30 per mile, meaning a driver makes a median profit of $0.29 for each mile.
An Uber spokesperson responded to the finding in a statement to The Guardian:
"While the paper is certainly attention grabbing, its methodology and findings are deeply flawed. We've reached out to the paper's authors to share our concerns and suggest ways we might work together to refine their approach."
The newspaper also noted, "Other studies and surveys have found higher hourly earnings for Uber drivers, in part because there are numerous ways to report income and to calculate costs and time and miles spent on the job."
MIT authors also calculated that it's possible for billions of dollars in driver profits to be untaxed because "nearly half of drivers can declare a loss on their taxes." Drivers are able to use the IRS standard mileage rate deduction to write off some of the costs of using a car for business. In 2016, that number was $0.54 per mile. "Because of this deduction, most ride-hailing drivers are able to declare profits that are substantially lower," researchers write.
"If drivers are fully able to capitalize on these losses for tax purposes, 73.5% of an estimated U.S. market $4.8B in annual ride-hailing driver profit is untaxed," they add.
According to MIT researchers, 80 percent of drivers said they work less than 40 hours per week. An NPR/Marist poll in January found that 1 in 5 jobs in the U.S. is held by a contract worker; contractors often juggle multiple part-time jobs.
Uber and Lyft both have "notoriously high" turnover rates among drivers. A report last year said just 4 percent of Uber drivers work for the company for at least a year.
NPR's Aarti Shahani reported in December that Lyft began a program to give drivers "access to discounted GED and college courses online" in a recruiting effort.
It was only last year that Uber introduced the option to tip drivers into its app for customers. Recode listed the initiatives Uber rolled out in 2017 in order to appeal to drivers, including 24-hour phone support, paid wait time and paying drivers if customers cancel after a certain amount of time.
Both Uber and Lyft have been fighting legal battles for years against initiatives to classify their drivers as "employees" instead of "independent contractors" — meaning drivers don't receive benefits like health care or sick leave.
© 2018 npr. All rights reserved.
By Aaron Elstein
First Jersey Credit Union of Wayne, N.J., was closed Wednesday by the National Credit Union Administration. Its accounts were transferred to the USAlliance Federal Credit Union of Rye, N.Y. First Jersey had more than 9,000 members and $86 million in assets.
Like Melrose Credit Union, Montauk Credit Union and Lomto Federal Credit Union, First Jersey was seized after too many of its taxi-medallion loans went bad. Keith Leggett, an economist who tracks credit unions, estimates that taxi medallions accounted for nearly 20% of First Jersey’s loan book at one point. Medallions in New York have lost about 80% of their value in the past five years amid the rise of Uber and other e-hailing apps.
First Jersey, chartered in 1929, hasn’t had a profitable year since 2013. It piled up about $15 million in losses during the past four years.
The credit union had been trying to avoid the fate it suffered Wednesday by auctioning medallions.
On Jan. 11 in the rotunda of the state Supreme Court building, it sold six to a bulk buyer for $1.11 million, or $185,000 apiece. In early 2014 individual medallions were selling for about $800,000. Prices are much lower now because medallions generate less revenue than they once did and because once-prolific medallion lenders are no longer financing such purchases.
© 2018 Crain Communications Inc. All rights reserved.
Life for the next 20++ years – caught between a rock and a hard place.
I make over $150K annually and I need to file bankruptcy
Query from a new doctor:
I am a newly graduated medical professional and single mom. In the past six months I have earned more than 80K. I think this disqualifies me from Chapter 7. Even though I make six figures, I have A TON of student loans (private and federal). When I combine rent, childcare, student loan payments I am actually IN THE HOLE at the end of the month. I need relief. I am not interested in a Chapter 13. My credit is horrible and I need to buy a house before my son starts kindergarten. What can I do? I’ve already tried deferment, income based repayment options, etc. I’m paying the lowest I already can on all the loans. My debt is mostly student loans (which bankruptcy cannot help with), medical bills, bills from a failed medical practice and a car repossession (went through hard times after divorce) totaling around 100K. Any insight much appreciated!
ANSWER: The good news – bankruptcy can help with credit card, medical debt and the repossessed vehicle. The bad news – if your income is above a set limit then you may not have a choice – chapter 13 may be your only bankruptcy option. More bad news – unfortunately as the law exists now, bankruptcy is not a option to deal with student loans if you have the ability to pay some or all of the loans over the next 20-25 years.
Student loan debt currently stands at over 1.4 TRILLION dollars
This is the next financial crisis and will affect many generations – inability to purchase a home or finance a new vehicle, along with challenges paying basic living expenses.
According to Credit Slips:
Student loan defaults do not result in home foreclosures. They result in wage garnishments, seizure of tax refunds and the inability to buy a home or new car.
Student loan debt is growing more rapidly than borrower income. The similarity to the trend in home loan debt leading to the subprime mortgage bubble has been widely noted. Student loan debt in 1990 represented about 30% of a college graduate’s annual earnings; student debt will surpass 100% of a graduate’s annual earnings by 2023. Total student loan debt also reflects more students going to college, which is a good thing, but the per-borrower debt is on an unsustainable path. Unlike the subprime mortgage bubble, the student loan bubble will not explode and drag down the bond market, banks and other financial institutions. This is because 1) a 100% taxpayer bailout is built into the student loan funding system and 2) defaults do not lead to massive losses. Instead, this generation of students will pay a steadily increasing tax on their incomes, putting a permanent drag on home and car buying and economic growth generally. Student loan defaults do not result in home foreclosures and distressed asset sales. They result in wage garnishments, tax refund intercepts and refinancing via consolidation loans, and mounting federal budget outlays. In many cases, borrowers in default repay the original debt, interest at above-market rates, and 25% collection fees. In other words, defaulting student loan borrowers will remain in a sweatbox for most of their working lives. Proposals to cut back on income-driven repayment options will only aggravate the burden, further shifting responsibility for funding education from taxpayers to a generation of students.
Student loan trap
Defaulting student loan borrowers will remain in a sweatbox for most of their working lives
Instead of a 2008-style crisis, the student loan bubble will be a permanent and heavy drag on economic growth. An entire generation of borrowers cannot buy homes or cars, and will have their spending permanently impaired. When a tipping point will be reached, and when that generation of borrowers will take up their pitchforks, is impossible to guess.
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About the Author:
Diane L. Drain is a well known and respected Arizona bankruptcy attorney. She is an expert in both consumer bankruptcy and Arizona foreclosure. Since 1985 she has been a dedicated advocate for her clients and spokesperson for Arizona citizens. As a teacher and retired law professor, Diane believes in offering everyone, not just her clients, advice about the Arizona bankruptcy and foreclosure laws. She is also a mentor to hundreds of Arizona attorneys. 
I would be flattered if you connected with me on GOOGLE+
*Important Note from Diane: Everything on this web site is available for educational purposes only, is not intended to provide legal advice nor create an attorney client relationship between you, me, or the author of any article. Any information in this web site should not be used as a substitute for competent legal advice from an attorney familiar with your personal circumstances and licensed to practice law in your state.*
A few related blogs:
Do Student Loans Die With You
Did Navient Illegal Charge Student Loan Borrowers?
Citibank Deceives Student Loan Borrowers
Tool to Help Navigate Student Loan Repayment Programs
The post Student Loan Debt Mounting Daily appeared first on Diane L. Drain - Phoenix Bankruptcy & Foreclosure Attorney.
Bank of America holding customers hostage…
One Very Pissed Off Judge Slams Bank of America
In re Sundquist v. Bank of America, Case No. 10-35624 (Bankruptcy court, E.D. CA. 1/18/18)
Bank of America, with a gun to the Sundquists’ heads…
This motion to dismiss began as a hostage standoff. Bank of America, with a gun to the Sundquists’ heads, said it would pay them several million dollars more than the $6,074,581.50 awarded to them, but only if this court first dismisses the adversary proceeding so as to vitiate the opinion in Sundquist v. Bank of America (In re Sundquist), 566 B.R. 563 (Bankr. E.D. Cal. 2017).
There being no legal obstacle to Bank of America paying the Sundquists without any judicial action, this was a naked effort to coerce this court to erase the record. No chance. No dice.
To name and to shame Bank of America on the public record in an opinion that stays on the books serves a valuable purpose…
This court remains persuaded that the conduct warranting significant damages resulted from a corporate culture that facilitates, and is unwilling to correct, the problems that Bank of America visited upon the Sundquists. Other courts have cited the decision. It has potentially useful implications regarding the efficacy of §§ 329(b) and 362(k) (1) as bankruptcy remedies.
To name and to shame Bank of America on the public record in an opinion that stays on the books serves a valuable purpose casting sunlight on practices that affect ordinary consumers. Other persons dealing with Bank of America will be able to gauge their experiences against what has been revealed in this case.
Additional blogs:
Bank of America Holds Family Hostage According to Judge
Bank of America Penalized $45 million for wrongful foreclosure
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About the Author:
Diane L. Drain
Diane L. Drain is a well known and respected Arizona bankruptcy attorney. She is an expert in both consumer bankruptcy and Arizona foreclosure. Since 1985 she has been a dedicated advocate for her clients and spokesperson for Arizona citizens. As a teacher and retired law professor, Diane believes in offering everyone, not just her clients, advice about the Arizona bankruptcy and foreclosure laws. She is also a mentor to hundreds of Arizona attorneys.
I would be flattered if you connected with me on GOOGLE+
*Important Note from Diane: Everything on this web site is available for educational purposes only, is not intended to provide legal advice nor create an attorney client relationship between you, me, or the author of any article. Any information in this web site should not be used as a substitute for competent legal advice from an attorney familiar with your personal circumstances and licensed to practice law in your state.*
The post Very Pissed Off Judge Slams Bank of America appeared first on Diane L. Drain - Phoenix Bankruptcy & Foreclosure Attorney.
Do you have a plan as you wonder through your life? If not, why not? It is okay if your plan is to live each day to its fullest or to plan each new stage of your life over several years. The important point is that you do not let life and those around you dictate your future. The following is a perfect summary of how I live my life:
Thank you to my daughter, Threse Mitchell, for sharing this note (no her name is not misspelled). My prayer for each of you is to live your life following these ideals.
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About the Author:
Diane L. Drain is a well known and respected Arizona bankruptcy attorney. She is an expert in both consumer bankruptcy and Arizona foreclosure. Since 1985 she has been a dedicated advocate for her clients and spokesperson for Arizona citizens. As a teacher and retired law professor, Diane believes in offering everyone, not just her clients, advice about the Arizona bankruptcy and foreclosure laws. She is also a mentor to hundreds of Arizona attorneys.
I would be flattered if you connected with me on GOOGLE+
*Important Note from Diane: Everything on this web site is available for educational purposes only, is not intended to provide legal advice nor create an attorney client relationship between you, me, or the author of any article. Any information in this web site should not be used as a substitute for competent legal advice from an attorney familiar with your personal circumstances and licensed to practice law in your state.*
The post How Do You Choose to Live Your Life? appeared first on Diane L. Drain - Phoenix Bankruptcy & Foreclosure Attorney.
The Only 3 Times Filing Bankruptcy Is Worth It
By Cathy Moran (Summary from Ms. Moran’s blog, link below to full blog post) Ms. Moran is a tireless champion for the education and protection of the consumer.
“Facing financial trouble, there are only three times when it makes sense to file bankruptcy. None of them is labeled “last resort”. Yet financial-advice gurus keep saying, bankruptcy should be your last resort.
That kind of thinking keeps people suffering too long, risking worse than financial embarrassment, and wasting money when repayment is a lost cause.
Putting emotions to the side, let’s walk through those three situations when filing bankruptcy is justified.
1. You have a crisis
Foreclosure, repossession, or wage garnishment threaten the foundation of your finances. Without a house, a car, and a paycheck, not much about day-to-day life is manageable.
Bankruptcy gets you a moment to consider the big picture, and provides the legal forgiveness of most unsecured debts. It’s the long term effect of the discharge that is precious.
2. You see the big picture
It doesn’t require a crisis to look at your balance sheet and realize you can’t dig your way out of a financial hole.
A lifetime of minimum payments on suffocating debt is no life. Keep making minimum payments and the debt doesn’t even die of old age, because payments extend the statute of limitations.
It doesn’t matter how got you into debt: most bankruptcies result from events the individual didn’t control, like job loss, illness, or divorce.
3. You’re worrying yourself sick
How we feel about owing money has a huge impact on physical and mental health… stress kills.
And stress makes us stupid: actually, measurably less likely to make good decisions going forward. Collection pressures force too many folks make foolish choices about which creditor to pay.
Reasons to file overlap
The sooner you look at the big picture provided by bankruptcy, the less likely you are to waste money trying to pay impossible debts or make catastrophic decisions like invading retirement or borrowing against your house to pay dischargeable debts.”
True story of retired couple who made wrong choices about who to pay.
Read Cathy’s complete blog…
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About the Author:
Diane L. Drain is a well known and respected Arizona bankruptcy attorney. She is an expert in both consumer bankruptcy and Arizona foreclosure. Since 1985 she has been a dedicated advocate for her clients and spokesperson for Arizona citizens. As a teacher and retired law professor, Diane believes in offering everyone, not just her clients, advice about the Arizona bankruptcy and foreclosure laws. She is also a mentor to hundreds of Arizona attorneys.
I would be flattered if you connected with me on GOOGLE+
*Important Note from Diane: Everything on this web site is available for educational purposes only, is not intended to provide legal advice nor create an attorney client relationship between you, me, or the author of any article. Any information in this web site should not be used as a substitute for competent legal advice from an attorney familiar with your personal circumstances and licensed to practice law in your state.*
The post The Only 3 Times Filing Bankruptcy Is Worth It appeared first on Diane L. Drain - Phoenix Bankruptcy & Foreclosure Attorney.
By Judith Ohikuare
In ye olden days, people were routinely tossed into debtors' prisons for bills in arrears. And, just this month, the ACLU charged that private debt collectors around the country have manipulated local courts and prosecutors' offices to resurrect the practice today. The shame that comes with being unable to pay a bill can be bad enough without the stress of being locked up for it. If you've been contacted by a creditor or collector, the first thing to do is to not freak out. You're not alone: Last year, the Consumer Financial Protection Bureau (CFPB) found that one-in-three people with a credit record had been contacted by a creditor or collector. Here are a few things to know if you're facing this issue and are wondering where to start.What Does It Mean When A Bill Goes Into Collections?The most basic thing to know about a collector is that they're calling to ask you to pay a bill. Debts that a collector may seek can include loans (such as a car loan or student loan), and past-due bills, such as a doctor's bill or a phone bill. "When you haven’t paid a bill for a certain amount of time, typically a few months, that service provider can send your account to a third party that deals with the effort of getting that debt from you," explains Lisa Rowan a lifestyle and personal finance expert at The Penny Hoarder. "That outside company is a collections agency that specializes in getting people to pay their bills, and they can often be aggressive." Some laws have been established to prevent debt collectors from harassing people who owe money, so don't feel like you have to be silent about shady tactics. "Don't panic!" Rowan advises. "Yes, they want your money, but debt collectors are not permitted to harass you or even call you outside of reasonable hours of the day. Before you respond to a late notice or call from a collector, go through your files (contracts, bills, estimates) and make sure you are informed about your situation. Think about some options, whether it be a payment plan or a lump-sum negotiation offer, before you call back or respond by mail." She also advises tamping down on worst-case scenarios by talking to a trusted friend or family member who can help you look over any paperwork with you, or sit in on a phone call.Is There Any Recourse Before A Bill Goes Into Collections?Contact your service provider (a doctor’s office, for example) directly instead of waiting for the bill to get sent to collections as many companies will offer payment plans, Rowan advises. If you're unable or too freaked out to make a plan with the company, commit to making one yourself. "Partial payments won't stop the overdue notices from coming, but showing progress on your balance can prevent your bill from going to collections," she adds. Once you get going, you might help your case by taking a deep breath and calling or writing to the company to let them know you are making progress and will keep doing so until you're back in the black.What Is The Potential Impact Of A Bill Going Into Collections?Debt collectors can report your unpaid debt to the major credit bureaus, who mark them on your report as delinquencies. Rowan says an unpaid bill can affect your credit score for up to seven years. That's a long time — but it's not forever. Remember that an important factor of determining your credit score is your credit saturation limit: the ratio of total available credit you have to the amount you use. That ratio is ideally 30% or less. When you pay off debt — whether it's in collections or not, Rowan says — you are actively reducing that utilization rate. So focus on knocking out as much as you can, as soon as you can. "When that negative mark finally comes off your credit report, you’ll likely see an increase of about 14 points on your credit score, according to a study FICO conducted on its own data," Rowan says.Can You Ever Challenge Or Negotiate A Claim? You'll have more success doing so if you keep track of your paperwork. Before you speak to someone to set things straight, gather any records of what you spent and what you owe, Rowan says. Doing so will make it easier to avoid being steamrolled over the phone. "It's easy to get overwhelmed, but having whatever information handy can help you keep your cool and know where you stand," she explains. "So don’t throw out past-due bills, even if you know you can’t pay them right now. You need to be aware of the original charges and any late fees." If you're seeking a payment plan, be realistic rather than appeasing, she adds. Don't succumb to pressure to pay everything upfront if you simply can't and keep in mind what you can really afford to pay. "There may be fees for breaking the bill up into parts or accruing interest you'll need to keep in mind. For instance, if a bill collector wants you to pay $200 per month when you know you can only send in $150 per month reliably, tell them that," she says. "They'd rather get a smaller amount of money on a regular basis than have you flake on a payment plan." Finally, Rowan adds, you may also be able to drive a hard bargain by paying a large fraction of the full sum upfront in exchange for the full cost being forgiven. For example, if you owe $1,500 on a late bill but have $1,000 in your savings account, you can inquire about paying them that money on the terms that the bill goes away forever. "Ask about it," she urges. "They just might accept the offer. A business would rather wait a little while and get all the money it's owed" — you choosing to work out a payment plan directly with them, for example — "but the debt collection game is about making as much money as quickly as possible. A collector may take a smaller amount in exchange for being able to mark your name off the list." If they accept your terms, pat yourself on the back — and make sure to get whatever agreement you make in writing. © 2018 Refinery29
By Jessica Dickler
Student loan borrowers may finally have their day in court.
The Education Department said this week it will review when borrowers can discharge student loans, an indication it could become easier to expunge those loans in bankruptcy.
The department said it is seeking public comment on how to evaluate undue hardship claims asserted by student loan borrowers to determine whether there is any need to modify how those claims in bankruptcy are evaluated.
As of now, "it's almost impossible to discharge student loans in bankruptcy," said Mark Kantrowitz, a student loan expert. "The problem was undue hardship was never defined, and the case law has never led to a standardized definition."
Meanwhile, college-loan balances in the United States have jumped to an all-time high of $1.4 trillion, according to Experian. The average outstanding balance is $34,144, up 62 percent over the last 10 years.
Roughly 4.6 million borrowers were in default as of Sept. 30, also up significantly from previous years.
The national student loan default rate is now over 11 percent, according to Department of Education data. Student loans are considered in default if you fail to make a monthly payment for 270 days. Your loan becomes delinquent the first day after you miss a payment.
"I'm encouraged that they are asking the question," Kantrowitz said of the Department of Education's request for comment, although "this doesn't necessarily mean there will be any policy changes."
Still, he added, bankruptcy should only be considered as a very last resort.
People with unmanageable student debt have several options to consider:
For starters, you may be able to postpone payments with a deferment or forbearance. A deferment lets you put your loan on hold for up to three years. If you don't qualify for a deferment, forbearance lets you temporarily suspend payments for up to one year.
As a longer-term fix, income-based repayment plans allow you to pay a percentage of your income rather than a flat rate, as long as you are under a certain income threshold.
And in certain situations, you can have your federal student loan forgiven, canceled or discharged, although that often comes with its own administrative hurdles.
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