Category Archives: Student Loans

How did you find us?


 

It’s always interesting to learn how clients find us. Frequently, clients find us through referrals, other times, through the Internet. With a little help from Google, I have some interesting insights into what keywords people are using to find us. Here are some popular questions you are asking (along with additional information.)
 

Do I have to be behind on payments to file for bankruptcy?

Nope. You can be totally current, 6 months behind, current on some bills, behind on others. Whether you are behind has no bearing on if you can file for bankruptcy. (Full answer here: Part 1 and Part 2.)
 

Is there a minimum debt to file for bankruptcy?

Nope. There is no minimum debt requirement, but as a practical matter, if you have very little debt it probably doesn’t make sense to file. The filing fee for Chapter 7 is $299 plus attorney fees so if you have only a couple of thousand dollars in debt, you’re probably better off paying it. (Read the long answer here.)
 

What is credit counseling - bankruptcy?

Every single person that files for bankruptcy must complete a credit counseling class. Before you start to panic or have flashbacks to your high school algebra class, relax. Credit counseling can be done online, over the phone or in person and takes less than 1 hour. I had one client complete it in 33 minutes. If you complete it in less time, let me know.
 

Transfer assets to my husband before bankruptcy?

This is a big no-no. First, certain transfers prior to bankruptcy must be disclosed on your bankruptcy petition. In addition, Trustees regularly do assets checks to screen for fraudulent transfers. Second, because California is a community property state, all of your spouses’ property counts as your property. Fraudulent transfers can result in unwinding of the transfer, denial of discharge or even criminal charges. So, please don’t exercise self-help and consult with an attorney first.
 

Can bankruptcy save my home?/ Can bankruptcy stop foreclosure?

It depends. Many clients falsely think that the “automatic stay” will permanently stop all foreclosures. Not true. In Chapter 7, the automatic stay is a temporary stop of foreclosure buying you maximum of 3 - 4 months. In Chapter 13, it may be possible to save your home by a) rolling in the missed mortgage payments into your Chapter 13 Plan, b) applying for a loan modification, c) stripping a second mortgage that is completely unsecured, or using a combination of the above strategies.
 

Bankruptcy do’s and don’ts

Here is our short list of bankruptcy do’s and don’ts.
 

Getting rid of student loans through bankruptcy

Unfortunately, student loans are non-dischargeable. In rare circumstances it is dischargeable provided you can demonstrate an “undue” hardship. This is an extremely difficult standard to meet and rarely granted. Chapter 13 can offer a breathing room and offer a temporary solution (for 5 years) but it’s not a permanent solution. (Read more about student loans and bankruptcy here.)
 

Price of a cup of coffee in San Francisco

Not bankruptcy related but it’s interesting to me that so many people found our website while searching for coffee! I love coffee but I limit myself to one (sometimes two… or three) cups a day. I used to put a lot of sugar and fatty cream into it but after I quit Starbucks, I started drinking it black.
 

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Senate Hears Testimony on For-Profit College Rules

I’ve been meeting with more and more recent college grads who are unemployed or underemployed. They are unable to repay their student loan debts. It’s unfortunate that you can get yourself out of just about every other kind of debt except student loans. So, maybe we should add student loans after “Death and taxes” as a certainty in life.

This month, the Senate heard testimony on for-profit colleges and its abusive lending practices. I would not hold my breath for the Senate to take any meaningful action on the predatory lending practices by lending institutions, but at least it’s one small step in the right direction.

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A Case Against Borrowed Education

I am a huge fan of education and there is little doubt that on average, people with college education earn more than high school graduates. However, I am not a fan of student loans. Especially those that require parents to either borrow the money or co-sign.

When I was 17, starting college, I don’t think I gave much consideration about how much I would earn with a certain degree or what it would take to repay student loans. It was just about getting to live on my own, away from home and well, you know, enjoying college.

Personally, I believe there is a complete lack of education about money in general, and debt in particular - especially for college students. No one ever sits down with the college freshman and explains the fact that you will need to earn a minimum of $x dollars per year to repay $x of student loans. Nor is there a discussion about how much you’ll most likely earn with your degree.

For example, if you borrow $150,000 at 8% (not an unusual interest rate for private loans), repaid over 25 years, the monthly minimum is $1160. That amount is post-tax earnings, meaning you will need to earn just about double at $2,320 per month.

To think about it another way, let’s assume you get a job earning $50,000 per year. After various taxes, insurance, etc. at 40%, let’s assume you net $30,000. Of the net amount, you’ve already committed 46% to student loans, leaving only $16,000 to paying for food, gas, housing, entertainment, etc. Unless you’re living with your parents (which defeats the whole purpose of going away to college), $16,00 won’t be enough to live on.

I am seeing more and more recent college graduates who are in this exact predicament with very few options. Worse yet, there are many parents who co-signed for their children’s college education who are struggling to pay not only their own bills but racing against the clock to save enough for their retirement and having to repay their children’s student loans.

As the saying goes “buyer beware.”

Photo credit: http://www.flickr.com/photos/canvy/

Another Step Towards Getting Rid of Student Loans Through Bankruptcy

The House Judiciary Subcommittee on Commercial and Administrative Law took the first steps in reversing language in the 2005 bankruptcy law related to private student loan debt by approving on a 6-3 party line vote H.R. 5043, the Private Student Loan Bankruptcy Fairness Act. Under the bill, privately issued student loans will once again be dischargeable in bankruptcy. To view a text of the legislation, go to http://thomas.loc.gov and insert the bill number.

The bill now goes before the full Judiciary Committee. I’m cautiously optimistic about this bill but it’s certainly good news for those with overwhelming student loans.

Photo credit: bookgrl

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Bill to allow discharge of student loans

Written by San Francisco Bankruptcy Lawyer, Jeena Cho

There may be some relief coming to those with overwhelming private student loan. Rep. Steve Cohen, D-Tenn., recently held a hearing on legislation (H.R. 5043) he authored that would allow for the discharge of privately issued student loans. He said interest rates and fees on private student loans can be 15% or more. Such interest rate can exceed that of credit cards. Many student loan companies prey on students too young to understand the consequences of taking out huge student loans. They are often misled to believe it would not be a problem to repay such loans because everyone with a degree can make 6 figure income.

This would be welcomed news should it pass (but I’m not getting my hopes up yet).

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