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https://www.tampabankruptcylawyerblog.com/wp-content/uploads/sites/10/2015/07/christie_d._arkovich_p.a_1_small.jpgIt’s extremely important when consolidating federal loans that you do not add any Parent Plus loans to the consolidation of your own loans.  It will taint the new loan and disallow many favorable options.

Here’s an excellent example from a current client (Cecelia) who came to see us before she did anything — just to make sure what she was doing was correct.  Can’t express how valuable that decision turned out to be.

By keeping a very small Parent plus loan of $3,000 apart from all of her other loans totaling in the low six figures, this client is estimated to have an IBR payment of $191 starting in approximately 90 days.  Had she not come to see us for advice first and consolidated all of her loans (as her servicer would have had her do), her loans would only be eligible for ICR and a payment of $1600.

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foreclosureIn a recent case, Harbin v. Roundpoint Mortgage Co., No. 18-11713 (11th Cir. Dec. 17, 2018), the Eleventh Circuit confronted a situation where a borrower applied for a loan modification and was told that the foreclosure sale was “temporarily postponed.”  This borrower decided not to file bankruptcy to stop the foreclosure when she was told this by her mortgage company.  Who wouldn’t?  When the sale went through anyway, she sued.  The appellate court held that the borrower “reasonably could have believed . . . that the foreclosure had been ‘suspended temporarily'” and that the statement was ‘material’ because it was the key to [the borrower’s] decision whether to file for bankruptcy before the June 3 sale.”

Beware out there – consult with a foreclosure defense attorney or a bankruptcy attorney to make sure you know what’s going on with your home if it is in foreclosure — and the various options on how to keep your home.

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https://www.tampabankruptcylawyerblog.com/wp-content/uploads/sites/10/2015/07/christie_d._arkovich_p.a_1_small.jpgAnyone with a federal HEAL student loan, should be aware that additional consequences can occur in the event of default.  One of these consequences is exclusion from Medicare, Medicaid and all Federal health care programs pursuant to 42 U.S.C. Sec. 1320a-7(b)(14) for failure to pay your Health Education Assistance Loan(s) (“HEAL”).

It is possible to enter into consolidation or rehabilitation to cure a default.  Then a payment plan can be set up based upon your income.  If the matter has been referred to the Department of Justice, and a judgment has already been entered, then a Repayment Agreement is possible to avoid such an outcome.

In Florida, a default on federal HEAL loans may also cause the suspension of the practitioner’s license.  Kinda hard to repay that student loan while unemployed.  If you own your own practice, can you imagine the harm if your entire practice was shut down without warning?

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https://www.tampabankruptcylawyerblog.com/wp-content/uploads/sites/10/2015/07/christie_d._arkovich_p.a_1_small.jpgOn January 31, 2019, Judge Stong of the Eastern District of New York denied the Motion to Dismiss filed by SLM Corporation, Sallie Mae, Inc., Navient Solutions, LLC and Navient Credit Finance Corp.  In this Memorandum Decision, the Court dealt a blow to the private student loan defendants when it permitted Plaintiff to proceed with its case (note a Motion to Dismiss is a preliminary motion and the case is far from over).  In re Homaidan, Adv. Pro. No. 17-01085 (E.D. N.Y. 2019).

A nearly identical ruling was made the same day in In re Tashanna Golden, Adv. Pro. No. 17-01995 by the same Judge.

These cases dealt with Tuition Answer loans which the Plaintiff alleges are not “qualified education loan[s]” under the Bankruptcy Code Section 523(a)(8)(B), and for that reason, they were discharged in his Chapter 7 bankruptcy case.  The Plaintiff argues that loans of this nature are excluded from the scope of his bankruptcy discharge and therefore any attempt to collect the debt after the bankruptcy discharge amount were impermissible and a violation of the discharge order.

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https://www.tampabankruptcylawyerblog.com/wp-content/uploads/sites/10/2015/07/christie_d._arkovich_p.a_1_small.jpgDischarge by disability is something that I don’t see enough borrowers take advantage of to eliminate student loan debt.  Today, there was a story in the Wall Street Journal, “Over 60, and Crushed by Student Loan Debt” focusing on the large increase of borrowers over age 60 who have student loan debt and are facing garnishment by social security.

For many who are faced with this dilemma, there can be easy solutions.  First, there are up to eight different income driven plans which for someone on social security, may result in a zero payment to close to it.  The key is making sure you pick the correct plan, and ignore a servicer who tells you that your loans are ineligible for IDR.  There is always a way.  Remember the servicer represents the creditor and not you.  You are not their customer.  Their legal position in pending lawsuits is they don’t have to explain all of your options.  Reach out to a qualified student loan attorney to learn what you need to know.

Second, and perhaps even better, many people in this situation will qualify for a Total and Permanent Disability (“TPD”) Discharge for federal student loans.  Some are afraid of doing this feeling they still need to work part-time to pay their other bills.  No problem, the Department of Education allows some income from employment – up to the poverty guidelines for a family of two which in Florida for 2019 is $16,910.  I thought it was higher, but it’s still likely high enough for most.  Also, even if you are a family of one, they use a family of two.  Why I don’t know, but they do.  There is a three year monitoring period where you are required to annually certify that you have not exceeded that in employment earnings.  Note, this does not include income from passive investments.  And perhaps the best news of all, a TPD discharge is tax free through 2025 per certain budget laws passed in early 2018.

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fcraMany of our clients are getting their feet back under them now from the bankruptcies and foreclosures of the past few years.  In our efforts to help them improve credit scores, we often will see an old creditor which reports a debt inaccurately after its been sold or transferred to another.  Some of these furnishers/creditors argue that once they sell the debt, they have no further responsibility to ensure accurate reporting for that debt.

This is not true.  The duty to report accurately does not end once ownership of an account transfers or is sold.  Any furnisher must re-investigate upon receipt of a dispute from a Credit Reporting Agency (CRA).  Failure to do so, opens both the furnisher and the CRA up to liability for an FCRA violation.  If the furnisher does not respond to the dispute, then the CRA must delete the tradeline.

Damages under the FCRA can be substantial and can include claims against all three of the CRAs as well as the furnisher if they do not abide by this law.  Statutory and actual damages are available as well as attorney’s fees and costs – which are usually handled on a contingency basis where fees and costs are only due in the event of a successful recovery.  Further information can be found on our website.

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law-gavelWhat happens to the original debt when a consumer files an unlawful debt collection lawsuit?  Sometimes the creditor will file a counterclaim to force the underlying debt to judgment in an effort to turn the tide in favor of the debt collector.

Fortunately, in the Middle District of Florida there are several good recent cases that prevent this outcome.  The federal court has ruled there is no subject matter jurisdiction because there is no supplemental jurisdiction over the counterclaim based on the fact that the counterclaim is permissive and would substantially predominate over the plaintiff’s claims, and because the “set off” position didn’t support supplemental jurisdiction.  See Della Vecchia v. Ally Financial, Inc., No. 8:17-cv-2977-T-23AAS, 2018 WL 907045 (M.D. Fla. Feb. 15, 2018); Vernell v. Ally Financial, Inc., et. al., No. 2:15-cv-674-FtM-38MRM, 2016 WL 931104, at *4 (M.D. Fla. Mar. 11, 2016).

This can be an important litigation concern that could force an early and minimal settlement if it weren’t for this case law favoring the consumer.

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https://www.tampabankruptcylawyerblog.com/wp-content/uploads/sites/10/2015/07/christie_d._arkovich_p.a_1_small.jpgOne key difference in the foreclosure crisis versus the student loan bubble is that many believe there is no possibility of relief.  That is something that we seek to change every day for our clients via affirmative lawsuits for discharge of what is really consumer debt as it was debt issued beyond the true cost of education, settlements for pennies on the dollar for private student loans owned by NCSLT or other investment trusts, lawsuits for consumer law violations such as the FCRA, FCCPA, FDCPA and the TCPA, and making sure our clients obtain all forgiveness possible.

But for many others who are not aware of these options, it is a common mis-perception that there is no way out.  In examining “What a Student Loan Bubble Bursting Might Look Like,” Allie Conti quoted Persis Yu, a staff attorney at the National Consumer Law Center, in arguing that short of fleeing abroad, or going underground, you can’t ever walk away from student debt.

Studies show that nearly 40 percent of borrowers are expected to default on their student loan payments by 2023.  For those who do not believe that we are in a bubble, I ask how do you explain such a high default rate?  The cost of education is simply creating an absurdly high student loan balance for many.  Student loan servicers push forbearance like a drug – which continues to increase the balance.  Interest is capitalizing at every turn  – whenever someone comes off forbearance or is late in renewing an income driven plan.  Whether we are in a bubble or not, it’s clear that the current system cannot continue unchecked — trapping a generation of students in servitude, straining taxpayers and the solvency of our own government.

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abc-action-newsThis week, Adam Walser of ABC Action News reports on the problem where licensed health care workers who are in default on their federal student loans are at risk of losing that license here in the State of Florida “Florida Board of Health Suspends Health Care Licenses Over Student Loan Defaults”.  We were interviewed by Adam:

“We’re not saying that people shouldn’t repay their loan,” said Arkovich. “We’re just saying that getting them fired probably isn’t the best way to go about that.”

By suspending healthcare workers’ licenses, which by the way only Florida has chosen to pursue this draconian measure, economists fear that many will be put out of work.  At a time when we are told there is a shortage of health care workers.  And in the State of Florida which likely has a greater than average number of health care workers caring for our elderly in nursing homes, assisted living facilities and rehabilitation centers.

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https://www.tampabankruptcylawyerblog.com/wp-content/uploads/sites/10/2015/07/christie_d._arkovich_p.a_1_small.jpgGenerally, approval is needed from the bankruptcy court to take on any new debt in the form of a new federal or private student loan.  This would include the filing of a refinance or even a consolidation application – as these are considered new loans.

ECMC, the guarantor of FFEL government backed loans, has a specific policy regarding regaining Title IV eligibility during a bankruptcy.  Whether a borrower is in a Chapter 7 or 13, they are required to make six consecutive payments in order to regain Title IV eligibility.

If the student loan debt is not listed, or if it is listed in the bankruptcy, but the plan provides for 0% to be paid to general unsecured creditors, then the borrower is not considered to have established a “satisfactory repayment arrangement” through their bankruptcy plan.

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