Bankruptcy On My Student Loans, Can I File?

Bankruptcy On My Student Loans, Can I File?
Posted on June 22, 2017 by R.A. Boyd – Attorney • 0 Comments
Bankruptcy On My Student Loans, Can I File?
In most cases a student loan is not discharged by filing a bankruptcy. However, if you are disabled or otherwise unable to earn enough to maintain a minimal standard of living if you must repay your loan, a separate lawsuit or advocacy proceeding can be filed with a bankruptcy.

In this special proceeding, the person with the student loan debt must satisfy a 3-part test to discharge student loans through the bankruptcy.

TO SATISFY THE MINIMAL STANDARD REVIEW, a person attempting to discharge a student loan in bankruptcy must prove that he/she cannot maintain a minimal standard of living for his household (spouse & dependents) if forced to repay the loans.

THE PERSISTENCE REVIEW must establish that circumstances exist indicating that the inability to maintain a minimal standard of living if forced to repay the student loans, is likely to persist for a significant portion of the repayment period.

TO MEET THE GOOD FAITH EFFORT REVIEW it must be proven that the person that owes the student loan has made good faith efforts to repay the loans. Good faith is measured by the effort to obtain employment, the ability to maximize income and minimize expenses. Many other factors are explored to determine good faith effort. For instance, the effort to repay and attempts to negotiate a repayment plan will be evaluated.

The cost for you to file an adversary proceeding is in addition to the cost of preparing, and filing your chapter 7 or 13 petition. There are also additional filing fees for an adversary proceeding.

In the end, the best way to determine whether or not bankruptcy is the right choice for you is to speak with an experienced bankruptcy attorney about your specific situation. Attorney Robert A. Boyd of Willoughby, Ohio has more than 25 years of experience and can help you weigh the options and decide if bankruptcy is your best option for debt relief. Contact his office at 440-230-3230 or use the contact us form to schedule an appointment for a free consultation.

For additional information regarding bankruptcy law, check out the Ohio State Bar Association

Credit after Bankruptcy

Many people believe that if you file for bankruptcy you will not have credit available for a long period of time. This simply is not true. The path to credit repair begins as soon as you file your bankruptcy.

During the first year of filing for bankruptcy you will have personal loans, credit cards, and automobile loans available to you. The interest rates may be high, but the credit will be available.

CREDIT “REPAIR” THROUGH BANKRUPTCY may seem strange, but if you think about the economics behind the reasoning, it makes sense. If your credit score is already poor and you owe money to multiple creditors, you are an economic risk to a lender. If you were provided credit, you could file bankruptcy the next day and the creditor would not recover the money owed.

However, if you look for credit the day after you file for bankruptcy, you cannot file another chapter 7 for 8 years. You just cleared your debts. If you are employed, a creditor lending you money would likely get paid. If not, they have 8 years to collect the money owed. A person is often less of a credit risk after filing for bankruptcy than the day before filing.

To determine whether or not a bankruptcy filing is the right choice for you, you would need to speak with an experienced bankruptcy attorney about your specific situation. Will Willoughby Ohio, Attorney Robert A. Boyd will use his more than 25 years of experience to assist you in weighing your options and help you to decide if bankruptcy is your best option for debt relief. Contact his office at 440-230-3230 or use the contact us form to schedule an appointment for a free consultation.

Bankruptcy – Can it Affect my Job or Getting Hired?

When you are going through bankruptcy, the last thing you want to do is add to the stress of wondering how it will impact your job. In most situations, it is safe to say that your bankruptcy will not affect your current job in any real way. That said, it could be an issue later when applying for a job that is not with the government.

Will You Lose Your Job due to Bankruptcy?

There is no private or government employer that can fire you if you are in bankruptcy. An employer also is unable to discriminate against you by demoting you or reducing your salary. If there are other reasons for an employer to do such things, it is important to know that filing for bankruptcy won’t shield you from such consequences.

How Do Employers Learn About Bankruptcy Filings?

Employers often do not find out about Chapter 7 bankruptcy. However, if you have been sued by a creditor, your wages being garnished, bankruptcy will stop any wage garnishing, so your employer will learn of your bankruptcy.

For Chapter 13 bankruptcy, your employer is more likely to know about the case. If you have a job with regular income, your Chapter 13 payments will automatically be withheld from your wages. Your employer will receive an order from the Bankruptcy Judge to withhold these payments.

Effect of Bankruptcy on Job Applicants

There is no local, state or federal government agency that can use your bankruptcy against you when deciding if they want to hire you; however, private employers may do so, especially when it comes to financial-based jobs like bookkeeping. Private employers may conduct a background check, find out about the bankruptcy and decide legally that they do not want to hire you.

Overall, your employment is generally not affected by your bankruptcy filing. Future employment opportunities might be impacted, which makes it important to disclose your filing before the background check is run. You are doing what you had to do, and many places will understand.

Willoughby, Ohio Attorney Robert A. Boyd can help clients weigh all of their options when it comes to bankruptcy. We can explain how filing bankruptcy will affect all of your finances, including your current and future employers, and we can provide you with advice regarding how to proceed that is in your best interest. Call us at 440-230-3230 to schedule a consultation.

How Is a Cosigner Affected if I File Bankruptcy?

If someone guaranteed or cosigned any of your debts, deciding to file bankruptcy could also have an effect on them. Your bankruptcy discharge is only going to stop the process of you being obligated to pay for your debts. It will not affect the responsibility of those guarantors or cosigners on your debt.

If you are filing a Chapter 7 bankruptcy, all actions regarding collection taken against you have to stop. This is due to the automatic stay on the bankruptcy. However, an automatic stay in Chapter 7 bankruptcy does not protect your cosigner or guarantor, so your creditors can still collect the debt from them if you are paying the debt in full.

If you file for a Chapter 13 bankruptcy, your guarantors and cosigners on consumer debts may be protected by automatic stay. This is known as the Chapter 13 co-debtor stay. But if you are only paying a portion of the bill – the creditor may pursue the balance from the guarantor or cosigner.

Protecting Cosigners

You can reaffirm your debt during Chapter 7 and give up the benefits that come with your discharge. This will make you personally responsible for the obligation once more, protecting your cosigner if you continue to make payments and pay off the debt in full. You may also make voluntary payments on behalf of your cosigner during Chapter 7 bankruptcy to ensure that they do not feel the burn of your debt on their backs.

While a Bankruptcy filing may protect you it may not protect people who cosigned for you. Be sure to explore these questions with your Bankruptcy lawyer before you file.

At the law office of Attorney Robert A. Boyd in Willoughby, Ohio, we help clients weigh all of their options when it comes to bankruptcy. We can explain how bankruptcy will affect all of your finances, including your consignors, and provide you with advice regarding how to proceed. Call us at 440-230-3230 to schedule a consultation.

Chapter 13 and Child Support

Chapter 13 bankruptcy filing will not discharge your obligation to pay child support, but it may help you get caught up on your payments. If you are behind on making your payments, you do need to keep in mind that you will still have to pay your child support while you are going through your Chapter 13 bankruptcy. Read on to learn more.

Chapter 13 Bankruptcy Won’t Get Rid of Child Support Debt

Congress decided that child support cannot be discharged in bankruptcy. In Chapter 13, your child support debt is treated as a priority. You must pay any outstanding child support payments, in full, as part of your Chapter 13 bankruptcy payment plan.

Chapter 13 Bankruptcy Will Let You Catch Up

One of the biggest benefits of going through Chapter 13 bankruptcy is that you will be able to organize your debt while paying back some or all of the debt through a payment plan. In many cases, paying child support may actually reduce the amount that you would otherwise be paying to unsecured creditors. Since many debtors would rather help their children than paying credit cards, going through Chapter 13 bankruptcy can help you get caught up on back child support and reduce the amount owed on other debts.

You Have to Make Payments as They Are Due

Chapter 13 Bankruptcy can help you get caught up on past due child support payments. It also means that you will still have to keep making regular payments during child support periods as they become due.

You Have to Be on Current Child Support Payments for a Discharge

Before you can complete a Chapter 13 discharge, you must first show that you are caught up on all of your domestic support payments such as child support. Because of this, if you missed any payments during your case, you will have to pay them off prior to getting your discharge.

Options to Consider if You Can’t Meet Your Chapter 13 Bankruptcy Payment Plans

If you fall behind on your Chapter 13 bankruptcy payments, the Chapter 13 bankruptcy trustee will ask the Bankruptcy Judge to dismiss your case. You will still have other options to re-instate your case.

Make Good on Your Payments

Many debtors for Chapter 13 bankruptcy miss payment plans due to a temporary financial emergency. After the emergency passes, you may be able to get caught up if there is enough time left in your plan. If you are facing dismissal, you can often explain your circumstances to the Bankruptcy Judge and get additional time to catch up on the payments.

Change Your Chapter 13 Bankruptcy Payments

If your financial emergency is not temporary (if you lose your job), you may be able to modify your payment arrangements. In order to change your payments, you have to propose a new amount to pay and give the court documents that support your claims that your circumstances have changed.

Ask for a Hardship Discharge

If you are not able to carry on with your Chapter 13 bankruptcy arrangement, you might be able to request what is called a hardship discharge. This means that you may be granted a discharge even if you have not completed all of the payments. The court looks at your financial situation and finds out what is in the best interest of everyone involved before giving such a discharge. However, it does not get rid of your priority debts like taxes, alimony, and child support.

Converting to Chapter 7

Much like a hardship discharge, if you are not able to afford a Chapter 13 bankruptcy, converting to Chapter 7 is another route to discharging your debts but you will then be assigned another trustee (from the Chapter 7 panel). Chapter 7 will not allow you to make monthly payments to catch up on back child support or house payments. When you convert, you will be given a new trustee for the bankruptcy since your new circumstances do not offer you a Chapter 13. Converting to a Chapter 7 will not get rid of your priority debts similarly to a hardship discharge will not, either.

Inheritances with Chapter 13 Bankruptcy

If you are receiving an inheritance while you are going through Chapter 13 bankruptcy, you may have to pay more or amend your payment plan to increase what you are paying to other unsecured creditors. Timing is critical in that if your inheritance occurs within 180 days of your filing, all of it becomes an asset of the estate and would be available to pay the claims of creditors.

Can You Eliminate Student Loans with Bankruptcy?

When a person enrolls in college, on of the unfortunate facts that must be accepted is that, except in certain circumstances, student debt is likely something you will have to deal with after college. A significant percentage of students leave their universities or other institutions with high amounts of debt that must be paid for. Ironic as it may be, many people turn to education as a way to secure a better financial future for those they love, but they end up with debt that must first be paid over a number of years in order to accomplish a better financial standing.

When it is time to start making student loan payments, students will often find that they lack the resources to pay for these loans while also the expenses to live their daily lives. One of the ways that a graduate student might consider getting rid of their debt is through bankruptcy, but unfortunately, student loans are one of the few debts that bankruptcy may not be able to discharge. There are a few very limited exceptions to the rule that might help.

Undue Hardship

Student loans are often not impacted by bankruptcy. This rule does have an exception that is known as “undue hardship.” Undue hardship is just a term that means you simply do not have the necessary resources to pay back the debt you owe for your education while also maintaining a standard of living that keeps you afloat. In order to see if a person is qualified for undue hardship, there is something called the Brunner Test that must first be passed.

The Brunner Test consists of three criteria that an individual has to be able to meet in order to be considered for the undue hardship exception. The criteria for the Brunner Test are as follows:

  1. The person in debt must not be able to maintain a minimum standard of living while they are paying their loans in the situation they are currently in.
  2. The person in debt must show that their financial situation is not likely to change in the near future.
  3. The person in debt has shown that they have made every effort and done their best to pay the debt they owe up until the point of filing bankruptcy.

If the court thinks you are under undue hardship, they can remove the loans and leave you free from paying them. If you can qualify for undue hardship, you may consider filing for bankruptcy; however, any decision you make regarding this issue is going to impact your future. Bankruptcy of any kind will remain on your credit for a decade and may make certain loans or purchases harder down the road.

Even so. if you determine that you can show you are under undue hardship and might file for bankruptcy, you should have a qualified legal professional assist you with the process as it requires filing more than an ordinary Chapter 7 petition. An “adversary proceeding”, or 2 lawsuits within the bankrupt, must be filed to determine if the student can be discharged. The cost of such a filing will be in addition to any standard Chapter 7 filing. The professional can use their know-how to get you through the complicated process and steps on your way to the best possible outcome.

Credit Card Debt Relief Through Bankruptcy

With a credit card, you are given a great deal of responsibility in regard to your financial future. You may feel freer to make purchases right away, but a responsible credit card owner knows that credit card debt is something that looms overhead if a card is used improperly. Contrary to what may feel, credit card debt is not an inevitability. It is certainly a possibility, but there are many thing you can do in order to limit the negative effects that could come out of owning a credit card.

Those who own credit cards should be mindful to only charge what they know they can afford to pay back. When owning a credit card, it is important to understand when it is the appropriate time to take out a small loan instead of using their card. If the credit card user needs to charge a large amount of money but does not currently have it in their accounts to cover it, the debt should be paid off the instant that funds become available. These debts are not always necessarily bad, but it can quickly become very negative. This is especially true when repayment is not make promptly, and the longer that it goes on the worse it can get.

Owing a large amount of money on credit card debt is going to be negatively affecting your credit score, which can affect a person’s ability to get good credit in the future. Without good credit, it becomes increasingly harder for the debtor to take out loans or make other large financial decisions down the line. Those who own a credit card need to be careful to try to keep the debt that they accrue at no more than 35 percent of their credit limit, just to be on the safe side. If spending does eventually get out of control and the debt becomes unmanageable, having a repayment plan, arranging a settlement or working with a credit card company is a great way to manage this debt and stop it from getting worse.

There are some instances when a person might have to deal with debt that is unmanageable. In this case, bankruptcy might be able to help give some relief for your debts. A lawyer is someone you need to talk to right away if you are considering filing bankruptcy for your credit card debt; they are going to be skilled in the matter of getting you through the bankruptcy process, which can be complex and intricate. This process often includes confusing paperwork, gathering all of the necessary documentation of your finances for a hearing and applying a “means test” to determine if you make too much money to walk away from your debt.

Bankruptcy and Divorce

There are a number of ways that bankruptcy and divorce swing hand in hand for a lot of couples. Many studies have shown again and again that arguments over money and finances are one of the biggest factors when it comes to divorce. At the same time, when a couple is handling together a debt that seems far too high to manage and arguments occur more often than not because of it, bankruptcy is something that could be considered.

If you are considering both filing for bankruptcy and ending your marriage, there may be a lot of questions that arise. One of the main ones might be which one you should file for first. The answer regarding this is not straightforward and simple, much like any legal undertaking. It is dependent largely upon your unique circumstances, the divorce laws in your state, the available exemptions from bankruptcy and a number of other factors.

For a lot of couples, divorce and bankruptcy usually go hand in hand. It can go one of two ways: a divorce may end up first leading to a bankruptcy. If not, then the need for bankruptcy, along with the stress, tension, disagreements and anxiety that this stirs up, may lead instead to a divorce. In many ways, people often liken it to the question about the chicken and the egg. Some are able to make it through divorce, especially if it is a highly contested litigation, making it impossible to escape debt. Usually, the contributing factors of this sort of thing include the stress of establishing two households, paying off marital debts, making alimony or child support payments, trying to make a mortgage payment on a home without two incomes, tax consequences and more. Bankruptcy ends up being one of the only ways for a newly divorced or actively divorcing couple to get rid of their debt and escape the harassment that comes from creditors.

Usually, it is realized that bankruptcy is one of the best options that can be taken when divorcing without even considering the other sorts of financial stressors that might come out of the actual divorce on its own. Usually, these things stem from unemployment, preventing foreclosure, dealing with a failed business or anything else.

If divorce is not the main reason for filing bankruptcy, then the pros and cons of which filing to undertake first should be considered as both are quite complicated. For some people, going through a divorce before filing bankruptcy may be the best. For others, going through a joint bankruptcy filing before the divorce helps to maximize the kind and the amount of bankruptcy exemptions available to get the best possible discharges of marital debts, so they do not have to deal with them in the future.

With the help of an attorney, you are ultimately going to be the only one who can determine what is best for your unique situation. When you are thinking about both bankruptcy and divorce, it is crucial that you have a lawyer to help you move through the process of both. They can help assure you that you are taking the correct steps and help you to take them with confidence.