Articles Posted in Chapter 7 Bankruptcy

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arkovich_law-narrowThe Federal Reserve is meeting today and widely expected to start to reduce interest rates.  I last heard that there was a 55% likelihood for a .50 cut.  Frankly, I’d expect a .25 cut.  But if they want to reach a goal of 100 basis points cut by year end, they almost have to do a .50 cut today.

So one big question: how much and how quickly will that trickle down to ordinary consumer debt?

A lot of people would like to avoid bankruptcy.  I get it.   The Wall Street Journal published an article yesterday that while consumer credit debt is up 11% over last year, other sources of credit are drying up and no reasonable alternatives exist.

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arkovich_law-narrowWant to get out of debt by the end of the year?  It’s possible.  Really!  How, you ask?

File Chapter 7.  These bankruptcy cases only last three months –  90 days.

Wouldn’t it be nice to stop trying to juggle everything?  Feeling overwhelmed with your finances?

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arkovich_law-narrowThis month, lots of debt collectors are filing cases.  You may have been served recently.  First, don’t ignore it.  If you ignore a summons, it’s easy for the debt collector to get a judgment and start to garnish your wages or bank accounts.  Don’t do it.  We call that “low hanging fruit”.  They like when you default.  It’s an automatic win for them.

There are many possible defenses.  Perhaps their paperwork is bad.  Perhaps they tried to collect too aggressively and violated our consumer laws.  Maybe they waited too long to sue and the statute of limitations ran.  Something.  Anything.

You can also settle.  A settlement before they win.  After they win, they no longer want to settle on terms that you may find attractive.

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Christie_1Right now, there is a lot of confusion regarding our federal student loan program.  There are multiple federal cases and several injunctions that have pretty much frozen federal student loans.

A couple things are still working.  Total and Permanent Disability discharges of federal student loans, and filing bankruptcy on them.

We’ve written a summary published in the quarterly Cramdown publication for our readers which are primarily bankruptcy attorneys and judges in the Middle District of Florida – located here.  We discuss what’s working now in bankruptcy and how to obtain a discharge or IDR credit for Plan payments.  Please take a look and if this helps you – you can do this now and not wait for the elections or U.S. Supreme Court rulings.

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arkovich_law-narrowBankruptcy is all about full disclosure.  Tell the trustee or court whatever assets you have and in return you receive a full discharge of most debt.  The reason I say most debt is because there are rules re: IRS debt, student loan debt and secured debt such as vehicles, 401k loans, etc.

One thing that is often overlooked is potential consumer claims that a debtor may have in bankruptcy.  Things like claims against credit furnishers, debt collectors etc.  Not only should you disclose these potential claims in order to receive the discharge in bankruptcy, but by failing to disclose the claims you will face hurdles in pursuing them later.

Often a bankruptcy trustee doesn’t want to pursue the claim and simply abandons it.  Then you are free to pursue either during the bankruptcy or thereafter.  You also may have unused exemptions to protect such a claim in case you want to raise it later.

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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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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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FTX wants to pay customers back but based on crypto prices at the time of its bear market bankruptcy. So, not good.

In paperwork filed on December 27, FTX proposed prices for around 500 crypto assets. This includes:

  • Bitcoin at $16,871
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Christie_1Despite lots of changes in the landscape allowing the discharge of both federal and private student loan debt under the right circumstances, many people still believe that student debt survives a bankruptcy.

Private loans follow very different rules then federal as you probably know.

One thing I haven’t written much about are private loans for these vocational schools such as those for coding, helicopter, cosmetology etc.  If the school is NOT on the federal Title IV list for the years of attendance, those are dischargeable in a bankruptcy.

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Christie_1I just wrapped up an interview for badcredit.org for a story that they will run sometime in Nov or early December about the new rules allowing someone to discharge student loans in bankruptcy.  I’ll post links here when that story is ready.

Bottom line is that there is a growing awareness that private student loans can often be discharged in a bankruptcy as a non-education loan.  You’d be surprised at the results that we see!  Often a full discharge, or getting the balances dropped by 50-70% and interest reduced from 10-15% to 1-2%.  Very small payments spread over 20 or even more years.  And the kicker is that any discharge in bankruptcy is tax free forgiveness.  Who wouldn’t want to kick their private student loan to the curb…

But what about federal student loans?  In the past, we simply did not file these cases – it was nearly impossible to win a discharge of federal student loans.  I used to work for the other side running around the State of Florida trying these cases.  I think I lost one down in Miami.  One.  All the rest resulted in a win for the creditor (my client at that time before I moved to the consumer side of things).  But now since the new DOJ process is available, it is finally possible, if not probable.  Here’s the new results – see for yourself:

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