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We are about to file a case in the Orlando Division this week based upon the recent discharge of private student loan debt for a non-accredited school that was not listed on the Federal Codes List.  We are relying upon a decision last Spring In re Decena, 549 B.R. 11 (Bankr. E.D. N.Y. 2016), where debts owed on private loans to attend a “for-profit” university not accredited by the United States fell within the exception to discharge of § 523(a)(8). See also In re: Meyer, Case No. 15-13193 (Bankr. N.D. Ohio 2016) and In re: Swenson, Case No. 16-00022 (Bankr. W.D. Wis. 2016).

Unfortunately, I just learned today that In re Decena was just reversed on other grounds on November 29, 2016 when it came to light that the service was improper.  We noted the zip code they used in their service was incorrect last week when we were putting the finishing touches on our Complaint.  Then today I read that the decision was overturned because the bank, Citizens Bank, was served by U.S. Mail rather than certified mail on an officer of the bank as required.

Fortunately, two other jurisdictions in Ohio and Wisconsin agreed with the analysis put forth in In re Decena and are good law.  It is not likely that the New York Judge in In re Decena will materially change his position after service is properly effectuated and the saga continues, but… you never know.

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Great news! – Please read all the way to the bottom — there is now a strong probability of discharging federal loans for ITT’s former students, going back up to 12 years – provided you can show you learned of the fraud within the past 4 yrs under Florida’s discovery rule.  This may include anyone who just recently learned of the misrepresentations now that the school has officially closed for instance.

My thoughts on the new Nov 1 Regs implementing the Borrower Defense to Repayment (DBTR) program have been on their own little roller coaster.  This is the program recently announced to help former students of for-profit schools who were defrauded.  Corinthian, Everest, ITT etc.  The school doesn’t have to be closed, but it will be easier to prove a claim if they have closed.

When the Regs first came out I was very disappointed to learn that they were going to apply a statute of limitations that would vary state to state and likely be too limited to cover most of our clients.  I believed we would be limited to 4 years here in Florida for most claims.  For students attending in 2003-2012 which is practically everyone I speak with, this was devastating news.  However there was a little silver lining.  In the Regs it briefly mentions that they would apply any state discovery or equitable tolling rules.  One brief sentence on page 177 out of nearly 1000 pages.

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loan modOne item not getting a lot of press but it probably should is the expiration of the Treasury Department’s Making Homes Affordable MHA HAMP program on December 30, 2016.  More info can be found here.  The good news is that the deadline won’t cancel any pending mod applications.

The general deadline for HAMP is that a borrower must submit an initial application by Dec. 30; and then the mod effective date must be by Sept. 1, 2017 (which means the trial plan would have to start no later than June 2017, if you work backwards – so it will be important to keep the pressure on servicers to get those applications completed and evaluated timely).

For Streamline HAMPs, the borrower is not required to submit an initial package, however, the modification effective date must be on or before December 1, 2017 (includes all of next year).  Notwithstanding the foregoing, to be considered for a Streamline HAMP Offer after December 30, 2016, the borrower must have submitted at least one component of a Loss Mitigation Application on or before December 30, 2016 for which the servicer has not sent a Non-Approval Notice.  The Modification Effective Date of the loan must be on or before December 1, 2017.  Evidence of borrower submission must be provided by postmark or other independent indicator such as date and time stamp (electronic or otherwise).

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Recently I’ve been researching the student loan system and how things work in non-U.S. based medical schools.  Unbelievably there are three dozen island medical schools.  That’s a crazy high number, just how many islands are there in the Caribbean anyway?

Federal student loan aid is generally not available for these schools.  Although they are technically “accredited”, the accreditation itself is something unusual at best and regulated by the Islands themselves in large part.  And while the Department of Education recognizes ACCM (Accreditation Commission on Colleges of Medicine), many individual states do not.  So it’s a bit of buyer beware, there are success stories for those committing to the hard work to pass the various U.S. tests and are willing to limit their practice, internships, residencies and rotations to certain states, but there are also stories of high student loan debt with little to show for it.

So where does the bankruptcy relief come in?  Well for one, private student loans may be dischargeable in bankruptcy when the debt incurred is not for a qualified educational loan and/or an ineligible institution.  In a recent case, In re Decena, 549 B.R. 11 (Bankr. E.D. N.Y. 2016), debts owed on private loans, to attend a “for-profit” university, not accredited by the United States fell within the exception to discharge of § 523(a)(8).  We are looking to expand this ruling to Florida in a case we are planning on filing next month.

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Well the final regs are out now.  But they are 927 pages.  This is gonna take a while to read through — and looking at Halloween costumes on Facebook is winning out right now.

More to come later….

Happy Halloween everyone!!

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CDA oct 14 2016 ITT Action News
ABC Action News interviewed two of our clients who have attended ITT and IADT:

You can click on the ABC Action News above or type the above link into your browser.

These students attended ITT and IADT here in Tampa several years ago and have tons of federal student loan debt for degrees that are essentially worthless.  Starting Nov 1, 2016 there is a new program called Borrower Defense to Repayment that may offer them relief.  Provided we can show false representations were made concerning things like job placement rates, accreditation and cost of attendance and link those to state law violations, we may be able to obtain a full discharge of federal student loans.

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loan modWe received a nice loan mod today with a P&I payment of only $746.  For our bartender client that is great news and very affordable!  She had even had a loan mod previously but had lost her job and was unable to pay so Wells Fargo filed another foreclosure action after the last one was dismissed.  We then delayed the foreclosure and kept re-applying after a denial for a loan mod as her income and expenses fluctuated.  We never gave up.

This client had an FHA loan and there are a number of hoops an FHA loan mod has to undergo.    The first question our client was what her payment would likely be to determine whether it would be affordable or whether she should simply look elsewhere to live and let this house go.  A target payment is determined by three values for an FHA loan:

  1. 31% of gross income;
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surrenderFlorida has a history of being unusually lenient when it comes to debtor protections in bankruptcy.  For one, we’ve opted out of the federal exemptions and have our own.  The homestead protections are some of the best in the country.  In some ways Florida’s exemptions are good, in others they are outdated.  For instance if a debtor owns a home they are allowed only $1,000 in personal property exemptions (plus other retirement account and homestead exemptions etc).  A middle class family filing bankruptcy when they are overwhelmed with bills, have personal belongings that total more than $1,000 particularly when they own a home.  This amount is outdated and not reflective of the times.

A recent switcharoo regarding a debtor’s homestead has caught many debtors unaware.  For the past several years, many debtors’ attorneys advised their clients to waive their homestead rights and instead select an option on their Statement of Financial Affairs (“SOFA”) to “surrender” their home even though they continued to live there.  Some of those clients wanted to defend a pending foreclosure or obtain a loan modification.  Some ran into trouble years later and then wanted to defend a foreclosure.  Perhaps a client ran into a mortgage loan servicer with poor recording skills that failed to correctly apply their payments and had to defend a foreclosure that should never have taken place.  Selecting “surrender” on the SOFA can have long reaching consequences because it can forever bar a client from challenging a foreclosure even years after the fact due to a new interpretation of what the term “surrender” should mean.

On October 4, 2016, the Eleventh Circuit Court of Appeals ruled that chapter 7 debtors who file a statement of intention to surrender real property in bankruptcy cannot later contest a foreclosure action, and bankruptcy courts have broad power and authority to sanction violations.  Failla v. CitiBank, N.A., case no. 15-15626 (11th Cir. October 4, 2016).   While Failla is a Chapter 7 case, there is a strong probability it will be argued in a Chapter 13 as well.

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Were you aware that when you tell a bill collector (including a student loan collector) to stop calling your cell phone, they must do so immediately?  Well usually.  It depends upon the type of telephone system the collector is using.  If they are manually dialing the phone, then they can continue to call you.  The reason is simple:  there is a human being on the other side making a conscious decision to call you at a certain time and date seeking payment.

But what if it is a machine calling you?  The Telephone Consumer Protection Act (TCPA) states that calls using an auto dialer or an ATDS must stop if you ask them to stop.  The reason is clear here as well:  a machine is capable of calling hundreds of thousands of people incessantly following a pre-determined script or campaign.  It often seems that nothing can stop it.  So a law was enacted to help protect people from a barrage of calls and save valuable minutes on their cell phone plans.  I had a client just last week tell us that when she spoke with someone asking the calls to stop, she was told she was on an autodialer and the calls couldn’t be stopped.  Really.  Well that statement certainly made it into a Complaint we prepared for filing.

In the last couple years, the industry has attempted to change its equipment to get around the TCPA.  They say that this equipment is TCPA compliant.  The equipment uses some parts human and some parts machinery.  So how much human intervention is enough to allow for the calls to continue?   The industry has taken to using entire systems that as a whole appear to be an ATDS, but each component standing on its own may not independently be an ATDS.  What capacity must the equipment have in order to fall under the TCPA’s protections? The answer I’m afraid is less than certain.

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This is great news!!  Many of us have been complaining about the Accrediting Council for Independent Colleges and Schools (“ACICS”) for the past year.  This is the accreditor for both Corinthian and ITT.  Both Corinthian and ITT were accredited up until the very day they filed bankruptcy.  What does that say about our for-profit accreditation process?

As CNN Money reported today, the fed pulled the plug on them finally.  I only wish this had happened years earlier, the signs were certainly there.

“For far too long, this delinquent and derelict accreditor has rubber stamped the flow of federal dollars to colleges and universities that engaged in widespread fraud and abuse,” said Democrat Senator Richard Blumenthal in a statement.

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