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arkovich_law-narrowAs we are getting closer to a repayment start date, I wanted to briefly mention that there are several things that should be considered before choosing to refinance a federal student loan:

  • Income Driven Plan availability – the new Repaye program will have an incredibly low payment with ultimate forgiveness that should benefit all but the very highest of wage earners.
  • The IDR Waiver program is causing a one time account adjustment to occur this year giving forgiveness credit for any long term extended forbearances as well as complete write off of loans where repayment has exceeded 20 years for undergrad and 25 years for grad loans regardless of payment plan length.
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arkovich_law-narrowBankruptcy is not only for discharging credit cards!

New DOJ procedures allow us now to discharge federal student loans attesting to an undue hardship.  We are co-presenting a webinar for the American Bankruptcy Institute on February 27 outlining this new program and helping our colleagues identify clients who may be eligible and learning how a bankruptcy filing can now discharge federal student loans.

Also, folks are receiving notices to begin repayments of EIDL, SBA or unforgiven PPP loans.  Most of those loans are pretty sizable and can easily be discharged in a bankruptcy.  We don’t recommend waiting to file.  As it stands now, we don’t expect any challenges that these loans were fraudulently obtained, but that could change with a future administration.

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social-image-logo-ogNew IDR Terms Announced!  Sorry for the delay in getting this out, Covid has put me behind a week or so.

The new IDR Plan expected out in July before the payment pause ends will not exactly be a new plan.  Instead of confusing borrowers and making yet another IDR plan, the Department of Education has decided to modify the terms of the existing Repaye plan to try and simply things.  While some of us are a little worried that this process would enable a future administration to change the terms back, we do feel that the steps underway will be a huge improvement for federal student loan borrowers.  Also, it would be difficult for a new administration to back date substantive negative changes so while we don’t expect this to occur, it’s in the back of our minds.

The changes are underway now and a formal 30 day comment period commenced a few days ago.  If the terms do not meaningfully change before implementation this summer or fall, here’s what to expect:

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https://www.tampabankruptcylawyerblog.com/wp-content/uploads/sites/10/2015/07/christie_d._arkovich_p.a_1_small.jpgUnder the new provisions allowing a Debtor to attest to an undue hardship, a consolidation pre-filing would be viewed as evidence of good faith – this is the box that may be checked:

  • engaging meaningfully with a third party they believed would assist them in managing their student loan debt.

Also, there could be problems if a consolidation is later done after filing as this would create a new post-petition debt that the Court may not be able to discharge effectively.  As always, please consult with a bankruptcy and student loan attorney as this can get complicated and you are usually talking about a very large debt and don’t want to make any mistakes.  Here’s the case law for the above assertions:

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social-image-logo-ogWe are seeing forgiveness every week, more likely every day, now, but many are still waiting…

Interestingly, the huge spending bill being discussed by Congress right now does not include anything additional to Federal Student Aid.

What does this mean?  Well, the FSA has to modernize its National Student Loan Database System to make it far more transparent than it currently is, provide a viewable tracking IDR payment mechanism, switch all servicer websites to its own government website, restart payments in August-ish, introduce a new IDR program in July, process the PSLF Waiver, implement and process the IDR Waiver, create and process a Joint Spousal Consolidation application to separate the  loans, possibly cancel 10k or 20k pending the result of the Supreme Court, plus grant the discharges for all Borrower Defense to Repayment applications along with refunds for any monies paid to ED for over 100 schools approved by the Sweet v. Cardano class settlement.  Wow.

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This is not recommended as bedtime reading, but sometimes it does help to go right to the source when trying to figure out what the new rules are and how they may apply to your loans.  The Final Regulations go into effect July 2023 and can be found here:  https://www.federalregister.gov/documents/2022/11/01/2022-23447/institutional-eligibility-under-the-higher-education-act-of-1965-as-amended-student-assistance

 

One big answer for BDTR applicants – the Regulatory Action will:  Provide for a full discharge of all remaining loan balances and a refund of all amounts paid to the Secretary for loans associated with an approved BD claim.

The timing is estimated to be within 12 months.

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Here’s a news clip on this topic that ran yesterday:  https://www.youtube.com/watch?v=77xsEU7rFM0

It’s a good short 2 minute summary of what this means and well worth a listen!  I haven’t seen this in the news much and we really need to get the word out because in my 30 years of practice, I see this as finally working to discharge significant federal student loan debt.

So how are we starting on this to get our student loan and bankruptcy clients discharges in 2023?

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When is it time to ignore calls versus doing something about them?

If you are being harassed or threatened collection actions on old debt, there are many things to consider.  First, a legitimate collector is required to send you something in writing within five days of the initial contact under the FDCPA.  That’s sort of a litmus test.  Receiving nothing in writing is a violation, but it’s also a sign of a debt scammer.

Second, check your credit report via annualcreditreport.com.  If the debt is on there, it’s causing you harm and you should do something about it.  Contact us or another consumer attorney — the first steps would be to dispute the debt.  Often the consumer rules aren’t being followed.  For instance, balances are reflected more than once, or are inaccurate in other ways.  We often file actions under the Fair Credit Reporting Act which may result in the debt being removed once and for all (waiver of debt or trade line deletion), and you may receive damages due to the inaccuracies.  Everything relies on good credit it seems.  Bad credit can harm you in all kinds of ways.  You don’t pay us up front – we only get paid if we are successful in obtaining a recovery.

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Federal student loan paused again till June 30, 2023 or until 60 days after a final disposition of the lawsuits that are currently blocking student debt relief — whichever is sooner.

 

Working on a bankruptcy summary now — lots of new tools to add to our toolbox to help end student loan debt!

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While it took longer than I and many other consumer advocates thought, the house of cards is starting to slip finally.  Many mortgage companies did not fully disclose exactly what would be required once the CARES Act expired and mortgage payments would resume.  I’m sure many homeowners have claims out there but don’t realize it.  These consumer claims are no small thing and can be leveraged for better mortgage terms than what is being offered.  The CFPB is going after Carrington with a big fine — but a private action will result in actual damages for the homeowner.

CFPB Takes Action Against Carrington Mortgage for Cheating Homeowners out of CARES Act Rights

The Consumer Financial Protection Bureau (CFPB) is taking action against Carrington Mortgage Services for deceptive acts or practices under the Consumer Financial Protection Act in connection with mortgage forbearances, according to a CFPB press release. The CFPB found that Carrington failed to implement many protections, provided to borrowers with federally backed mortgage loans who were experiencing financial hardship, during the COVID-19 public health emergency. The CFPB found that Carrington misled certain homeowners who had sought a forbearance under the CARES Act into paying improper late fees, deceived consumers about forbearance and repayment options, and inaccurately reported the forbearance status of borrowers to the big three credit-reporting companies: Equifax, Experian and TransUnion. The CFPB is ordering Carrington to repay any late fees not already refunded, repair its faulty business practices, and pay a $5.25 million penalty that will be deposited into the CFPB’s victims relief fund.

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