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arkovich_law-narrowHome sellers and home buyers are likely both waiting for some kind of change in the financing markets right now.

Those homeowners locked in with low rates do not wish to sell, but cannot maintain a standard of living with their current income and increased expenses.  They may not qualify for an equity loan due to tighter credit conditions in the marketplace.  So they believe they are stuck and face mounting credit card debt.

Same with home buyers essentially, although for different reasons.  Mortgage rates above 6%, limited home inventory on the market, and now a limit to the marketability of mortgage bonds will place even more pressure on mortgage rates even if the Fed pauses the interest rates per the Wall Street Journal in its article today “How the Bank Mess Can Hit Home Buyers“.  This will limit home sales for those who are not cash buyers.

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Christie_1One of the early and frequent arguments made by opposing counsel in our private student loan discharge adversaries in bankruptcy is that the student loans were made for an educational benefit and thus are excluded from discharge.  Specifically, Section 523(a)(A)(ii) exempts from discharge “an obligation to repay funds received as an educational benefit, scholarship, or stipend.”  The creditors’ attorneys’ argue that there is ample case law to support that assertion.

The “ample” case law referenced by opposing counsel is an older view replaced by the current view clearly supported now by three circuits.  In other words, appellate law from these three circuits have more precedential value than trial level opinions often cited by defense counsel.  Bottom line, this is the typical initial creditor response that no longer has any merit.  It’s meant to test your knowledge in my opinion.  Many who are bringing these cases for the first time would fold because a student loan certainly appears to have an educational benefit at first blush.

The Second, Fifth and Tenth Circuit have recently affirmed that private student loans are not “obligation[s] to repay funds received as an educational benefit, scholarship, or stipend” – and thus not covered under 523(a)(8)(A)(ii).  See Homaidan v. Sallie Mae, Inc.

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arkovich_law-narrowLet’s say you have negotiated a settlement with a creditor. What should you include to help ensure that your credit is the best it can be?

First, under the Fair Credit Reporting Act (the “FCRA”), a creditor is not required to report anything, but what it does choose to report, must be accurate.

So this leaves the door open to ask for a trade line deletion. This means that the account won’t show up at all – no late pays, no delinquencies, and no language such as “settled for less than owed”. This is the best outcome, particularly if you have other accounts elsewhere with a positive history. Many original creditors won’t agree to this but if you can point to some kind of error on their part, you’ll be more successful in having the trade line deleted.

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arkovich_law-narrowStuck in a timeshare (or nowadays they are called vacation clubs or vacation ownership plans) you can’t get out of?  You can get rid of a timeshare in a bankruptcy.  If the timeshare is a contract agreement for points etc., then the contract can be rejected as an executory contract.  If the timeshare is a secured interest (and many are), then you can provide in a Chapter 13 Plan to revest the title to the timeshare company/lender and they get it back.

For example, the Order Confirming Plan would provide for recording purposes:

Pursuant to 11 U.S.C. Sections 1322(b) (8) & (9), title to said property shall vest in Wyndham Vacation Resorts, Inc.  Wyndham Vacation Resorts may file an unsecured claim for any resulting deficiency that may exist.  Confirmation of this plan shall constitute a deed of reconveyance to this property upon recording with the XX County Recorder.

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arkovich_law-narrowSupposed a foreclosure lawsuit is filed against you.  You file an Answer.  The plaintiff files a motion for summary judgment quickly.  New civil procedure rules require a homeowner to file his or her defense 20 days before a hearing.  Most people are unware of that rule and lose.  Even if they show up at the hearing, if they didn’t file their defenses to the MFSJ 20 days prior, they cannot raise any defenses.  This is even if they had already filed an Answer when they were initially served.  This is only one problem a homeowner could face in a foreclosure proceeding.

“I can’t imagine someone going through it without legal help, because I know how it was for me,” said Philip Jackson, a retired Clearwater police detective who has been involved in a long-running legal fight with St. Petersburg stemming from a foreclosure lawsuit the city brought against him in 2019.

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Christie_1Some of you may have heard that the May 1 deadline to consolidate older FFEL federal student loans to the newer Direct student loans for the one time account adjustment has just been extended until the end of the year.  While that initially seems like great news, why is it NOT a good idea to wait?

The health emergency ends May 11.  Once the Department of Education presents the IDR Waiver in a few days, this will give plenty of ammo for commercially held FFEL loans to sue to cancel what will likely be $200 billion of student debt to avoid forbearance months from counting and other methods of counting payments that don’t exist outside of the IDR Waiver program.  $200 billion reasons to appeal.  The appeal alone may stretch that out to the next administration.

Our advice is to consolidate before mid May to get it done, while it can be done.  Just in case.  $200 billion is a lot of money and there is growing support behind commercially held loans to not just wipe them out.

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arkovich_law-narrowSomething going around one of the listserves I monitor daily is how debt settlement or debt consolidation companies are a sham.

The facts for this one:  (by the way, the client provided a copy of the written agreement to the attorney so the fees and proposed settlement amounts were verified)

The Debtor placed $54,000 with the debt settlement company.  The estimated settlement amount was $27,500 and the debt settlement company charged a fee of $12,500.  The settlement would cost them $40,000 on a $54,000 debt.  Plus this would be a taxable forgiveness, so the Debtor would receive a 1099-C for $27,500.  Why would anyone agree to this nonsense??

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fresh-startYou can bounce back from bankruptcy way more quickly than you think.  For instance, debtors who file bankruptcy can qualify for an FHA loan in as few as two years, or a conventional loan four years after filing.

What about credit scores?  They can and frequently do go up right after filing.

Bankruptcy can help repair credit faster than trying to chip away at debt with predatory interest rates or judgments that last for 20 years.  Most people that we talk with, if they decide to file, they usually wished they’d pulled the trigger and gotten that “fresh start” years before.

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Christie_1The deadline to consolidate FFEL loans to Direct loans under the IDR Waiver program requiring a one time account adjustment has been moved from May 1 to the end of the year.  This takes some pressure off for sure — but it’s still a good thing to do now rather than later.

I have some questions about how qualifying payment counts will be credited now that the IDR Account Adjustment period has been extended:

  1. Under the Account Adjustment rules, if you consolidate loans with different payment histories, the longest history is applied to the entire consolidated balance.
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Christie_1The new DOJ Guidance to discharge federal student loans in bankruptcy creates presumptions that the inability to repay a federal student loan will persist if:

  • The debtor is 65 or older;
  • The debtor has a disability or injury impacting income potential;
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