Will Bankruptcy Forgive Student Loans?
Will student loans ever be forgiven during bankruptcy? The answer is: PERHAPS! President Obama spoke to the Georgia Institute of Technology recently on March 10, saying that his administration is looking into the idea. He revealed that he’d ordered officials to look into whether or not making student loans forgivable during bankruptcy would be helpful to millions of Americans who are under the burden of severe student debt.
The White House has made a series of efforts to alleviate student debt in America and student loan forgiveness during bankruptcy is the latest. Currently, bankruptcy laws protect student debt by being wiped away by a bankruptcy filing. However, with the tremendous, crippling weight of student loans, lawmakers are seeking new, flexible ways to students from a future trajectory of financial hardship. The goal is to make college more affordable for young people so that once they graduate, they aren’t so burdened with debt that they can’t do anything else.
The WSJ offered the following numbers on U.S. student debts:
- -In the last seven years, U.S. student debt has more than doubled.
- -Almost 25% of current borrowers are behind on their payments.
- – The average student loan debt nationwide is right below $30K.
- -The government lends 90% of the national student debt.
In his speech, President Obama offered only a few first ideas and details of this effort. It wasn’t clear whether or not an eventual proposal would address only loans issued by the Federal Government, or would also somehow affect private loans as well, such as those issued by firms like Wells Fargo & Co. and the like.
Obviously, the president’s interest in changing bankruptcy law is still in its formative stages, but even if the White House did come up with a change, it would likely face huge opposition in the Republican-controlled Congress. As the WSJ also reports, it is still unclear how effective changing bankruptcy law would be in really helping borrowers anyway. They report that only 713 bankruptcy filings in 2014 were filed to seek student loan relief.
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Some of history’s most successful business owners including a past president have gone through bankruptcy. Henry Ford, Walt Disney, even Abraham Lincoln all went through bankruptcy. Bankruptcy can actually be good for society, allowing people to make mistakes and recover from them and move on. Without bankruptcy, we wouldn’t have the Ford Motor Company (Ford’s second try) or Abraham Lincoln wouldn’t have gone into politics ( he first had a failed general store). Let’s demystify bankruptcy today by laying down the facts:
In order to qualify for Chapter 7 Bankruptcy, there are seven basic requirements:
- – Client’s annual income must be below the median
- – $52,384.00 for an individual with no dependents
- -$65,802.00 for couple with no dependants ( for each dependant add about $9,000 to $10,000)
- – Filed prior bankruptcy in the last 8 years?
- -Equity in the home?
- -Amount of unsecured debt (credit cards, medical bills, auto deficiencies, and mortgage deficiencies)
Once a client qualifies for bankruptcy they usually ask if they’re going to lose anything/everything and the answer is usually no. Most clients don’t lose anything they own. However, everybody’s situation is different and it depends on your own individual circumstances. Following are a list of exemptions:
-Homestead $125,000 (up to) State
-Wildcard $12,725 Ind $25,450 JT
-Household $12,250 Ind $24,500 JT
-Jewelry $1,550 Ind $31,00 JT
-Tools Trade $2,300 Ind $4,600 JT
-Auto $3,675 Ind $7,350 JT
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Bankruptcy Fees are Goin’ UP!
As of June 1st, 2014 the Bankruptcy Court will be increasing its fees for filing and general services. Periodically the filing fees in the U.S. federal and state courts do increase and that’s why we’re seeing this happen. If you are considering filing bankruptcy, now may be a good time to get going on filing that petition in order to avoid the fee increase. It may not be a huge increase, but it’s still an increase and if you’re at the point of considering bankruptcy you obviously have a desire to start being smart with every penny you’ve got!
More: –Should I File Bankruptcy?
There are several bankruptcy fees that will increase on June 1st under amendments to the Bankruptcy Court Miscellaneous Fee Schedule that were approved in March by the Judicial Conference of the United States.
– The adversary filing fee in bankruptcy proceedings will increase from $293 to $350, a $57 increase. This new fee is equivalent to civil filing fees in federal district courts.
To learn more about the bankruptcy process or the different types of bankruptcy, or anything bankruptcy related for that matter, check out our blog or these specific articles:
Bankruptcy Filings are Dropping Across the Nation
Bankruptcies, both of personal and business nature, continued to steadily drop throughout 2013 across the nation. This is both shocking and interesting as bankruptcies were actually predicted to rise by at least 8% in 2013. Business bankruptcies in particular, actually dropped 24%. This is the lowest they’ve been since 2006 and this trend is expected to continue through this new year of 2014.
2012 filings showed double digit reductions in many states across the nation. Arizona alone reported a 19% decrease. Hawaii saw an 18% decrease. This trend does seem to be domestic which is pretty interesting. As our state’s bankruptcy filings fall, those of places such as Belgium saw a 9.4% increase and The Republic of Cyprus almost entirely filed for bankruptcy as a whole in March of 2013 before they asked for help and therefore managed to stay financially afloat.
Obviously most people try to avoid bankruptcy as it has a negative stigma and can be costly. This fact coupled with the increased availability of consumer credit markets means the option for people to borrow rather than file for bankruptcy becomes more favorable and will consequently continue the downward trend in filing for bankruptcy.
Should you choose to file for bankruptcy in 2014, Advantage Legal Group is here to help. For more information on bankruptcy, check out these blogs:
If you’re trying to do a mortgage modification on a home that is not your primary residence, your best bet is to go through the mortgage modification program, as opposed to the mortgage mediation program. The mortgage modification program generally aims for payment of about 31% of your gross income and is done usually under the HAMP program. Although, there are standard modifications available through your lender, which could go up as high as 42% of your gross income.
Declaring Chapter 7 Bankruptcy in Washington – Welcome! My name is Jonathan Smith and I am a bankruptcy attorney in Bellevue, Washington.
Hi, I am Jonathan Smith and I am an attorney serving Western Washington. We do bankruptcies, mortgage mediation, mortgage modifications and short sales.
Hi my name is Jonathan Smith and I am an attorney here in Western Washington. My law firm does bankruptcies, as well as mortgage modification, mortgage mediation and short sales.