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arkovich_law-narrowThe debt limits of a Chapter 13 bankruptcy are dropping considerably tomorrow, June 21, 2024.  The Bankruptcy Courts are reverting back to a two part test that limits eligibility to a maximum of $465,275 for unsecured debt and $1,395,875 for secured debt.  Importantly, there is no talk of an extension for this federal mandate.

What will this mean?  Well, many with high debt will be forced into a much more expensive Chapter 11 bankruptcy if they cannot swing a Chapter 7.  Also, there will be a few who are presently in a Chapter 13 bankruptcy who do not want to dismiss because their high debt would prevent them from re-filing.  And having too high of debt is not an automatic qualifier for a Chapter 7.  Instead, in Florida like elsewhere, we look at someone’s actual income and expenses and determine if they are eligible.  Filing a Chapter 7 is most beneficial as there is no plan payment but it can be risky in that there is no automatic stay for co-borrowers, no automatic right to dismiss and you can lose non-exempt assets to the bankruptcy trustee.  Many other differences also exist.

It’s important to have an experienced bankruptcy attorney on your side.  We’ve been filing cases for years.  If you’d like to know what your particular situation would look like, please reach out to us.  We have a free consultation – we charge for those with student loans as those are much more difficult cases – but it’s still free for others.

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Christie_1The Biden administration’s overhaul of the Department of Education has put a lot of things on hold during the pandemic, but has created a number of good programs and fixed existing programs that should be taken advantage of now.

If your student loans are in default for instance, while rehabs basically weren’t available during Covid, there is a new program ending September 30 called Fresh Start.  Enrolling your federal loans in Fresh Start will both cure the default and give you credit during the pandemic for Income Driven Plans.  If you’ve been waiting to cure a default – that time is now until September 30.

If you had a garnishment that you are waiting to restart before taking action or contacting us, the On Ramp expires September 30.  That was the government’s decision to halt negative reporting and collection actions for anyone who hasn’t made payments since the pause ended last fall.  That means garnishment and other collection action will restart in early October.  It’s best to utilize Fresh Start now to bring the loans out of default and get the most credit possible during the pandemic.  Fresh Start didn’t used to exist and it has made rehab unnecessary to get out of default.  That means no need to catch up payments or make 9 on time payments to cure a default.

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We will be speaking at the Orlando Student Loan and Bankruptcy Workshop on June 7, 2024 along with Laurie K. Weatherford, Chapter 13 Trustee, Orlando Division, and Robert and Tammy Branson.  For our fellow attorneys who practice bankruptcy, this is not one to miss.  The cost to attend is only $350 for an attorney and will offer 6.0 CLE credits.

  • The 2022 guidelines from the Department of Justice on federal student loan adversaries are working. Don’t be left behind!
  • Debtors are receiving discharges.
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Christie_1We’ve confirmed through the NCLC that the new regulation allowing credit for IDR for anyone in bankruptcy will NOT apply to FFEL loans.  Or Perkins loans, or unconsolidated Parent Plus loans.  So it’s best to consolidate to Direct Loans before filing, but now that the 4/30 deadline has passed, it’s best to wait until 7/1 to obtain the IDR credit through the IDR Audit which will average the credit between all of your loans.  If you consolidate in the next two months – 5/1 through 7/1, you may not receive any former IDR credit that you’ve built up, nor any through forbearances and deferments that may count via the IDR audit.  Also, keep in mind the double consolidation window remains open for those with Parent Plus loans through July 2025.  And before you say it, it’s a lot to know – our heads are swimming too!  .

Also, you will NOT receive credit for plan payments made before July 2024.  But if your case is pending, you will receive IDR credit for any plan payments made thereafter.

It’s important to know these rules to get the most student loan debt discharged in bankruptcy.  If your bankruptcy attorney isn’t able to help you with this, make sure to talk with student loan counsel — before filing!!

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Christie_1While we try to get the most information out there through our blogs, monthly newsletters and You Tube Channel Student Loan Sidebar please remember that the information in our videos and this blog does not and is not intended to constitute legal advice.  Instead, all information and content are for general informational purposes – and may not be the most up to date – see the date we produce the video for example.

Please contact us for a strategy session where we review your particular loans and how best to position yourself to create the life that you want with as little debt as possible.

 

 

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Christie_1Bankruptcy is finally working for people with student loans — I expect to have a series up shortly about all the ways a bankruptcy can help now with both federal and private student loans.  This didn’t used to be true, and you may find people out there who follow those old rules and say that bankruptcy cannot help with student loans.  I’m afraid that after the IDR audit expires (deadline next Tues – 4/30), bankruptcy will in fact be one of the best – and often overlooked options to reduce crazy student loan debt.

Total and Permanent Disability discharges are also going strong — and never mentioned by loan servicers in our experience!  I just ran our numbers for 2023 and we had 28 TPD matters last year.  Discharges in as little as three months start to finish.  Something else that shouldn’t be overlooked if you find that you cannot work a full time job doing what you used to do.  That’s not exactly the wording that the TPD application uses, but it’s a way that we describe the process which we have found is more accurate than can you dress and feed yourself.  Remember, this is not an SSD review, it’s a vocational review of your ability to work.  We look at a lot of employment related factors, and our doctor can review your medical records and see you by Zoom or in person here in Tampa.  You can be anywhere though – even outside of Florida, even outside of the U.S. for us to help.

Double consolidation for those with Parent Plus loans is working to get people into the lower SAVE payment rather than getting stuck in a multi thousand dollar ICR payment.  There are rules and recommended procedures to do this though – see our videos or set a strategy session with us before you try that on your own.

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Christie_1Don’t forget, next Tues the 30th, is the consolidation application deadline for the IDR account adjustment – often referred to as the IDR Audit.  It’s also the last day before the PSLF processing pause goes into effect, so you may wish to download your payment tracking data from MOHELA before that date.

For more info on the PSLF processing pause:  https://studentloanborrowerassistance.org/the-pslf-processing-pause-what-you-should-know/

For more info on the IDR Audit and how it can help you obtain forgiveness by consolidating before 4/30:  https://studentloanborrowerassistance.org/last-chance-for-many-to-get-more-credit-toward-student-loan-cancellation/.

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Christie_1As we race toward the 4/30/24 deadline for submitting a consolidation application for the IDR Audit deadline, please know that Nelnet has the following phone and email.  They will accept a consolidation application by email.  We recommend calling them a few days after to verify receipt of the application.  There was no hold time as of today!

Nelnet Consolidation 866-426-6765

DirectLoanConsol@nelnet.net

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Christie_1Many questions surround the possibility and even probability of discharging student loans in bankruptcy.  The law around student loan dischargeability hasn’t changed in many years, the way I understand it – it’s just that newer theories on applying that law to private student loans have come to the forefront in recent years and then we had the rise of the Federal attestation process even more recently this past year.  The new bankruptcy IDR rules go into effect in July this summer and apply to any pending case.  There have also been a few class actions allowing for more certainty of discharge of loans after the fact even if an adversary action against then lender isn’t filed in the bankruptcy.  These involve situations where the loans are non-qualified education loans etc.

Bottom line, is that it’s finally working.  We are starting to see successful discharges of both private and federal student loans on a regular basis now.  This never used to be the case.

In fact, with today’s political uncertainties, it may be better to get a court ruling of dischargeability now rather than wait and see if some of the recent guidelines retract after the election.  A court ruling will withstand all of that.  Food for thought.

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Christie_1We’ve received some repeat questions lately by parents whose children are still in college.  Basically, they are worried that there isn’t enough time to get a double consolidation done to get into SAVE.

Here’s the rules:

  • The loan does have to be fully disbursed.
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