Help! I can’t afford my Student Loans!

Student Loans are a special kind of unsecured debt. This debt is non-dischargeable in bankruptcy, so while bankruptcy can help you free up funds for the payment of student loans by helping you to get rid of credit cards, repossessions, and old income tax obligations, in most cases it cannot get rid of your student loans. I often tell clients that it is easier to get rid of Uncle Sam (taxes) than it is to get rid of Aunt Sallie (student loans).

But, this does not mean you are stuck. There are things that you can do to help yourself with student loan payments that you cannot afford:

  1. Pick up the Phone.  Call your student loan  provider to see what programs are available to lower your payments or give you temporary relief from the payments. Just remember when you are on the phone to push to get information about all the programs available to you.  Do not just follow the instructions from the representative on the phone.  Servicers, such as Navient, are being sued by the U.S. Government for failure to provide borrowers with information and help.  In these suits, the servicers have claimed that in enrolling borrowers in the programs that were less time consuming and labor intensive for the servicers rather than the best program for the borrower that it was unreasonable for the borrower to expect the student loan servicer to act in the best interest of the borrower.  So be careful and do your homework!
  2. Get your Income Information Together.  An income based repayment plan may be a better option than temporary relief from any payment.  It easy in a fit of financial panic to take the option that frees up the most monthly income for other items needing your attention, but this decision may bite you in the butt later when payments must be made and the balance is quite a bit bigger than you remember.  You must choose which option is the best fit for you.  Which is best for you? The program that gives you the lowest payment or the program that most affordably allows you to pay off the student loan?
  3. Stick to the Plan.  If you default on a plan to repay or modified payment, work to either cure the default or research a new plan that is a better fit.  A good resolution is not a default ruining your credit report and your student loan balance getting larger.
  4. Refinance.  Refinancing part or all of your student loan may be a good solution.  There are a variety of companies that allow for the refinancing of student loans.  Refinancing may make the payment more manageable by extending the terms of repayment and lowering the interest rate.  Some companies allow you to extend the payments out to 25 years.  The downside is that the options for forbearance or deferment may not be available once the loan is refinanced.  There are a variety of websites that provide information about student loan refinance, such as Credible.com, Studentloanhero.com, and Consumeradvocate.org. Once again, make sure to do your research!

 

bankruptcy affect spouse

Will filing bankruptcy affect my non-filing spouse?

I am often asked whether filing bankruptcy affect the non-filing spouse. Simply the answer is yes, the bankruptcy will likely affect your spouse. See below for the descriptions of how your non-filing spouse could be effected.

I am often asked this when consulting with a prospective client where one spouse is in financial trouble and the other non-filing spouse has a good job and little to no debt issue. Often, the situation is that the spouse in the better financial situation does not want the other spouse’s debt issues to impact his/her income or the assets that they hold jointly.

Things to know about filing bankruptcy when you are married:

  1. It is not a requirement that a married couple both file bankruptcy together. You can file your bankruptcy without including your spouse as one of the Debtors in the case, but it will indicate on the bankruptcy filing that you are married and that your spouse did not file.
  2. Your non-filing spouse will have to provide income information. Bankruptcy requires a lot of financial disclosures. The bankruptcy process takes into account the household size, household income and household debts. This information is used in the means test to determine whether a person is eligible to file chapter 7 bankruptcy. Alternatively, in a chapter 13 bankruptcy, the information determines the plan payment amount and the length of the plan (36 or 60 months). This means even though your spouse did not file bankruptcy, the non-filing spouse will have to provide information for the disclosures to be accurate.
  3. The non-filing spouse’s credit should not be effected. Your spouse is not providing his/her social security number, so his/her creditors and/or employment will not be notified of a bankruptcy. However, be warned that joint accounts will show that the obligation was included in a bankruptcy and automatic payments may stop. You may have to pay with good, old fashion checks since the electronic and phone payment options may not be available for the first few months of your bankruptcy.
  4. The trustee will know if you try to hide your non-filing spouse’s income. A federal bankruptcy filing is done under penalty of perjury. In addition to the filing, you will need to provide support documentation and testimony to support your filing information. The trustee will be looking at bank statements, paychecks, tax returns and other financial documentation. Once the trustee finds out that you tried to hide your non-filing spouse’s income, then the trustee will likely get more aggressive because he/she will be wondering what else you were trying to hide.
  5. Household Income is the standard even if you keep everything separate. Unfortunately, even if you are a couple that keeps your finances separate, the bankruptcy process looks at the expenses of the household all coming out of the same pot of income.

To find out details and information about how a bankruptcy filing could affect your spouse in your particular situation, schedule your free consultation (305) 278-0811 with one of the bankruptcy attorneys in our office!

quiet title

Florida Supreme Court decides Bartram Quiet Title Case

On November 3, 2016, the Florida Supreme Court released its Quiet Title decision in Bartram v. U.S. Bank, N.A.  The court affirmed the decision of the Fifth District Court of Appeals. In layman’s terms, the homeowners lost and the lenders won. The court held that the lender could sue based on new defaults that occurred even when the initial defaulted payments and acceleration were past the five-year statute of limitations.

The court rationalized that the dismissal of the foreclosure action returned the parties back to where they were before the acceleration and the foreclosure action was filed. Therefore, if the lender lists the newer defaults on the payments that were not barred by the five-year statute of limitations, the lender can file a new foreclosure and fix the deficiencies of the old foreclosure case that was dismissed.

This means that for a homeowner to win in a quiet title action the note would have to come due (reach its maturity date), then have five years pass in order to render all payments under the loan due and all barred by the statute of limitations. In this situation, the lender would be out of luck because the five-year statute of limitations will have run and there is no possibility for new defaults to restart the clock allowing a lender additional attempts to get the property back if the foreclosure was dismissed.

 

consultation

Initial Bankruptcy Consultation: What to expect

Your initial bankruptcy consultation is your first meeting with a bankruptcy office. In this meeting, you will decide if the firm and bankruptcy attorney are the right fit for you and make you feel comfortable. Additionally, you will be given the information and education to decide if filing bankruptcy is the right choice for you and your family.

It is important to have access to an experienced bankruptcy attorney for this meeting. Not all offices provide access to an attorney for their new client bankruptcy consultations. For our office, your initial consultation will always be with an attorney. We do it this because it is important that you start with a relationship with the person who is going to guide you through the process and give you legal advice. Paraprofessionals and/or a receptionist should not be the one to give you legal advice since it is your attorney that has the training and experience with the court! That being said, you will be working with the staff and other attorney in the office as well because you are hiring the firm, but you should have access to your first point of contact for explanations and guidance along the way.

Attorneys routinely provide a free initial bankruptcy consultation. Our office offers free consultations though there are a few exceptions. The consultation can take a while, but this is because you will have our undivided attention during this time and our attorneys will sit with you until all your questions are answered.

The initial consultation involves discussing your current situation and problems to see if bankruptcy can help. Prospective clients often ask what they should bring to the initial bankruptcy consultation. It is not necessary to bring anything with you to the initial consultation at our office, but it may be helpful to bring information about your current income, expenses, debts and any pending lawsuits. There will be an intake form that needs to be filled out. Think about the bankruptcy consultation as a doctor’s appointment where you are getting a problem checked out. The doctor can’t just tell you what is wrong and how to fix it without you answering a lot of questions and providing information about what is going on with you right now. The bankruptcy consultation is like a doctor’s appointment for your financial situation. The more detailed the information provided to us in the consultation, the better our recommendations will be!

Please call our office (305) 278-0811 to schedule your initial bankruptcy consultation with our office!

Why am I Being Sued for Foreclosure After Getting a Discharge in Bankruptcy?

Many clients come return to our office after we have helped them successfully discharge their debts in bankruptcy.  Some ask, “Why am I being sued for foreclosure after getting a discharge in bankruptcy?”  “Didn’t I give that property back in the bankruptcy?”

This scenario highlights two important issues:  Does filing a bankruptcy change ownership of property? Has the bank violated my rights by suing me after I got my discharge in bankruptcy?

Does Bankruptcy Change Ownership?

Sometimes a Chapter 7 Trustee will take a property and sell it.  This clearly takes it out of the debtor’s name, but this is a rare occurrence.  Most people with equity in a non-exempt property will not file a Chapter 7.  Instead, they will opt for a Chapter 13 to save it.  In most Chapter 7s, the Trustee will not take the property, either because it is homestead or otherwise exempt, or because it has no equity (the property is “underwater”).

After the Debtor receives their discharge, if the Chapter 7 Trustee has not sold the property the bankruptcy closes without any transfer of ownership.  And although the Debtor no longer has an obligation to repay the money borrowed, the lender still has the right to take it back from the Debtor through a foreclosure.

Has the Lender Violated the Debtor’s Rights?

Perhaps more important is whether the bank has violated a Debtor’s rights by suing after entry of a bankruptcy discharge.  The discharge order creates an injunction against all creditors from trying to enforce a discharged debt against a Debtor.  Creditors can seek enforcement against property upon which they have a mortgage, but cannot seek payment from the Debtor.

Sometimes a lender will seek payment from a Debtor after entry of a discharge.  If this happens, the lender has violated the court’s discharge order and injunction.  The result can be that the lender will have to pay damages, and reimburse court costs and attorney fees.

Call Us

If a lender has sued you after you received your discharge in bankruptcy, cull us to discuss your rights.

 

bankruptcy attorneys

Why do Bankruptcy Attorneys ask so many questions?

Why do Bankruptcy Attorneys ask so many questions? Two words: due diligence. All attorneys have a duty under the Florida Bar to be candid with the court when making disclosures and presenting a client’s case. Bankruptcy Attorneys have an even higher burden.

As Bankruptcy Attorneys, we are responsible for helping you in the bankruptcy process and also ensuring the bankruptcy schedules are accurate and correct. Bankruptcy is about disclosure. A debtor provides the required information and cooperates in exchange for a discharge of the debtor’s debts. Failure to make the disclosures or do the work necessary to get the information together can result in dire consequences for the client/debtor and for the attorney.

Bankruptcy Code section 11 U.S.C. 526(a)(2) requires Bankruptcy Attorneys as a debt relief agency to certify the bankruptcy paperwork by the client. By signing the bankruptcy paperwork, the Bankruptcy Attorney is certifying that he or she has done a reasonable investigation into the numbers and information in the bankruptcy schedules.

If a reasonable inquiry is not done by the debtor’s Bankruptcy Attorneys, then the attorneys themselves can be sanctioned by the court.

This doesn’t mean amendments to the petition and schedules are not common place, it just means that the process needs to be taken seriously and the questions that Bankruptcy Attorneys ask are important! It may seems like we are being nosy, but we are really trying to protect you, give you good advice, and protect ourselves.

Call us today for your free consultation (305) 278-0811, but be prepared for some questions!

 

non-dischargeable debts

What is a non-dischargeable debt in bankruptcy?

When I first meet with a potential client, we discuss what debts are non-dischargeable debts under the bankruptcy code and what debts bankruptcy can help with. This is often the part of the consultation where we discuss the reason driving the client to file bankruptcy and the goals of the case. Bankruptcy can help with the client’s debts in most cases, but with certain debts the help is not in the form of a discharge of the obligation entirely.

What debts can bankruptcy help with?

Unsecured debts are debts that do not have collateral to look toward if the clients stops paying on the balance. These debts outside of bankruptcy could confiscate paid off cars, garnish wages, and/or freeze bank accounts for payment through a lawsuit and judgment. Unsecured debts in a chapter 7 bankruptcy often do not receive any payment. In a chapter 13 bankruptcy, this class of creditors often receives pennies on the dollar before the remainder of the obligation is discharged.

Unsecured Debts that can be discharged in bankruptcy:

  • credit cards
  • hospital bills
  • home or investment property foreclosure deficiencies
  • repossession deficiencies
  • business guarantees
  • IRS tax penalties

Secured Debts are obligations where if you stop paying the lender, the creditor/lender can repossess the collateral. The personal obligation can be discharged leaving only the lien for the following Secured Debts:

  • car leases
  • equipment leases
  • car loans
  • promissory note obligations to first mortgagees and/or second mortgagees (lien stays on property) on a property that client decides to surrender
  • HOA obligations on a property that client decides to surrender

What are non-dischargeable debts in bankruptcy?

There are other debts that may be unsecured, but are not dischargeable under the bankruptcy code provision 523.

These debts are examples of debts that cannot be discharged:

  • domestic support obligations (only child support and alimony in chapter 13; any DSO in a chapter 7)
  • IRS tax debt
  • student loans
  • trust account debts-Sales Tax and 941 obligations
  • debts procured from a misrepresentation or fraud

For more questions about your debts and whether bankruptcy can help, call the bankruptcy attorneys at the Bankruptcy Law Offices of James Schwitalla for your free consultation (305) 278-0811!

Workman's Comp Claim

Workman’s Comp Claim in Bankruptcy

Many people who file bankruptcy have a workman’s comp claim. Their other debts driving to bankruptcy for debt solutions, but client often are concerned that the bankruptcy will cause the client to lose the money coming to them from their workman’s compensation claim.

Good news! Florida provides an exemption for workman’s compensation claims. Florida statute 769.05 prevents courts from garnishing or executing against the funds received. This statute provides an exemption in bankruptcy that protects the asset from seizure by a chapter 7 trustee and consideration for an increase in plan payment by the chapter 13 trustee.

Florida’s exemption for workman’s compensation claims

This exemption has been strengthened by the Florida Supreme Court in Broward v. Jacksonville Medical Center held that the protection prevented judgment creditors and trustees tried to access the workman’s comp funds once the claimant received the claim funds and deposited them in a bank account. Broward v. Jacksonville Medical Center, 690 So.2d 589 (Fla. 1997). The important thing to note was that the funds were not commingled. This means the money was not deposited into a bank account with other money, so it is important to deposit the funds in its own account!

So if you are exploring bankruptcy, don’t worry because your workman’s comp claim is protected! To find out more about bankruptcy and what it can do to help you regain control of your financial situation, call to schedule your free consultation (305) 278-0811 or simply contact us here.

foreclosure

Modification after Foreclosure Judgment

Clients often come in for a consultation panicked that their lender has gotten a foreclosure judgment or a foreclosure sale has been set by the lender. The common concern by clients is can they get a modification after the entry of a foreclosure judgment or once the sale is set.

Time is of the Essence

The answer, like many legal questions, is maybe. Outside of bankruptcy, the lender may have a loan modification package that is pending review for approval of a mortgage modification, but understand that the lender will not hurry to process the package based on the judgment being entered or the foreclosure sale being set.

If the client is going to wait until the last minute to see if the modification is approved before the sale of the home, then it is important for the homeowner to know definitely the status of their loan modification package. If the package is deemed complete and the review has been pending for about a month, a modification could be on its way. If the lender is still asking for documents, then you are at a minimum 60 days out from receiving an approval letter. Sixty days is usually more time than exists before a foreclosure sale will be completed. Once the foreclosure sale is completed, a modification is not possible since the borrower is no longer the owner of the property. In the words of the lender, there is no obligation to modify for the borrower. Only a deficiency for the lender to pursue.

Modification inside of a Bankruptcy

When a foreclosure sale is set and time is of the essence, a bankruptcy can be a good vessel for the loan modification process. The bankruptcy stops the sale and efforts by the lender to take back the property through the bankruptcy filing’s automatic stay. The bankruptcy functions to allow a borrower time to go through the loan modification process to see if the borrower can save his or her home through the bankruptcy court’s Mortgage Modification Mediation program.

The court’s program allows the lender and the borrower to take 150 days to see if an agreement can be reached through mediation. The program enables to party’s to stick to a tighter time table than traditional loan modifications because the program’s portal allows the lender and the borrower’s counsel to communicate about documents, title issues, and programs are available to the loan and borrower.  Additionally, the mediations create a discussion forum to gain understanding about the loan and any modification that may be available. The open channel of communication and clarification limits the modifications that are denied based on lack of documents or technicalities from a failure to communicate.

If you have a foreclosure judgment or foreclosure sale set and want to keep your home, please call our office immediately to schedule a free consultation to see if bankruptcy and the Mortgage Modification Mediation program can help you to save your home. Our office can be reached at (305) 278-0811 or simply contact us here.

 

 

Tax Debt

Can I Discharge my Income Tax Debt?

Clients with income tax debt often come in for consultations feeling like there is no hope. Their tax debt could be based on 1099’s, penalties on past due tax debt, or a result of a business closing. Many people think you cannot discharge a taxes in bankruptcy because it is a debt owed to s government entity, but the bankruptcy code maps out the requirements for when taxes can be discharged.

If the taxes are not considered priority, then the tax debt can be discharged. For the tax debt to not be considered priority under bankruptcy code section 507(a)(8)(A), the below requirements must be met:

  1. The tax return was last due without penalty more than three years ago;
  2. The return was filed more than two years ago;
  3. The tax was assessed more than eight months ago; and
  4. You did not willfully attempt to evade or defeat the tax.  A recent opinion even held that the failure to file tax returns for years on end showed debtor did not try in good faith to comply with the tax laws and held the taxes non-dischargeable in bankruptcy even though conditions one through three, above, were met!

The most important thing is the returns MUST be filed. Often clients come in with tax debt and the client was too afraid to file the return knowing that tax debt would arise. Without a timely return, we cannot help, so the moral of the story: file your taxes even if you cannot pay them!

If you have tax obligations that you cannot pay, contact our office for analysis of how much of your taxes you have to pay and how much of it you can discharge in bankruptcy. The consultation is free. Contact us today to gain knowledge and information on how to gain back control of your financial life (305) 278-0811.