Proposed Legislation Would Allow Some Student Loan Debt to be Discharged Through Bankruptcy

Posted on March 31, 2012 by Staff Writer

Under current bankruptcy laws, student loans cannot be discharged through filing for bankruptcy. Federally-funded student loans have long been excluded from discharge, but private student loans were deemed ineligible per a 2005 provision. Some lawmakers are seeking to change bankruptcy laws to allow privately-funded student loans to be relieved through a bankruptcy filing.

On March 20, a subcommittee of the United States Senate heard testimony regarding this issue. Sen. Dick Durbin (D-Ill.) says that private student loan debt shouldn’t be treated differently than other types of private debt in terms of eligibility for discharge through bankruptcy. His legislation, introduced in 2011, would allow for private student loan debt to be able to be discharged through bankruptcy proceedings. He also says that the 2005 bankruptcy law is somewhat of a mystery, as it’s not clearly known who introduced it.

An attorney for the National Consumer Law Center testified that the provision was passed to attempt to prevent abuse by student loan borrowers. Yet the attorney, Deanne Loonin, says that it’s not right to treat student loan debt the same as other exempt debt such as child support and alimony payments.

Opponents of the legislation feel that it’s not fair to discharge student loan debt, since a person’s education can’t be repossessed in the way that, say, a car can. Proponents argue that student loans operate in a much different way than other types of private debt.

If you have concerns about what debt can be discharged in your Arizona bankruptcy, contact a qualified Phoenix bankruptcy lawyer. An Arizona bankruptcy attorney is an invaluable asset to have at your side throughout the entire bankruptcy process.

Receiving Unemployment and Filing for Bankruptcy

Posted on March 16, 2012 by Staff Writer

In 2005, the Bankruptcy Abuse Prevention and Consumer Protection Act established a “means test” as a way to determine which debtors are eligible for filing Chapter 7 bankruptcy. This basic formula is used to calculate if the person filing for bankruptcy has the ability to make minimal monthly payments. If the results of the means test show that the debtor should have money left over each month to pay towards their debts, in most cases they will then only be eligible for a Chapter 13 bankruptcy – instead of the liquidation process of a Chapter 7 bankruptcy.

The United States Bankruptcy Code establishes all rules and regulations related to filing for bankruptcy in Arizona and across the nation. Per this code, money received “under the Social Security Act” isn’t included when calculating a debtor’s “current monthly income” for the means test. However, bankruptcy courts have had differing rulings as to what income is considered to be received “under the Social Security Act” – including whether or not unemployment benefits fall into this category.

In a recent study conducted by the American Bankruptcy Institute, 58% of respondents felt that money received as unemployment benefits should be exempt from inclusion in the debtor’s “current monthly income” when filing for bankruptcy. Thirty-seven percent said that unemployment benefits should count as monthly income, while 2% “did not know or had no opinion.”

Passing the “means test” is critical if you’re filing for Chapter 7 bankruptcy in Arizona. A top Mesa Arizona bankruptcy lawyer can provide invaluable advice and guidance throughout all stages of your Arizona bankruptcy proceedings.

More Law School and College Graduates Filing for Bankruptcy

Posted on March 8, 2012 by Staff Writer

According to a Reuters.com article, it’s becoming increasingly common for recent law school graduates to file for bankruptcy. The article tells the story of Diane Valle, a 26-year-old University of Maryland School of Law graduate who filed for Chapter 7 bankruptcy shortly before graduating from law school, due to her $150,000 in student loans and lack of job prospects. The young woman quickly learned that it was very unlikely that her student loan debt would be discharged through her bankruptcy filing, as student loans are only forgiven in bankruptcies when their continued payment would cause an undue hardship on the debtor – generally a very hard standard to meet.

Overall, the number consumer bankruptcy filings dropped in 2011, but several factors indicate a likelihood that former law students make up a higher percentage of those who are filing for bankruptcy. Access Group, a major lender of law school loans, reported that an unusually high number of students were defaulting on their loans through 2010. The U.S. Department of Education also reported an increase in defaulted college loans, and another study indicated that the number of college graduates who filed for bankruptcy increased by 20% from 2005 to 2010.

It’s clear that bankruptcy can happen to those who would have least expected it. Going through bankruptcy proceedings can be stressful and overwhelming. If you’re considering filing for bankruptcy, contact a knowledgeable, compassionate Tucson bankruptcy lawyer who can answer your questions and guide you through the process.

Filing for Bankruptcy in Arizona

Posted on March 2, 2012 by Staff Writer

Bankruptcy is a legal way of handling debts that have grown to a point where the debtor cannot repay them under normal circumstances. Depending on the type of bankruptcy, the debtor may have all or a portion of their debts discharged (forgiven), or the debts may be reorganized in a way that makes them easier to pay off. Bankruptcy proceedings are handled in federal bankruptcy courts. The District of Arizona has multiple bankruptcy courts, including in Phoenix, Prescott, Flagstaff, Yuma, and Tucson.

The United States Bankruptcy Court for the District of Arizona strongly advises against filing for bankruptcy in Arizona without attorney representation. The Court’s website warns that it’s very difficult to successfully complete a bankruptcy filing without assistance from a qualified Arizona bankruptcy lawyer. The rules and procedures regarding bankruptcy filings in Arizona are governed by the Title 11 of the U.S. Code (the Bankruptcy Code) and the Federal Rules of Bankruptcy Procedure. These bankruptcy laws and regulations are complex, and bankruptcy is a complicated process. If you’re considering filing for bankruptcy in Arizona, contact a qualified Tucson bankruptcy lawyer before attempting to undertake the process on your own.

Filing for bankruptcy provides a fresh start for many Arizona residents who are facing unmanageable debt. If you are struggling with bills that you can’t pay, and constant harassment from debt-collectors, consider whether bankruptcy is right for you. Yet, bankruptcy does have long-term implications, and deciding whether or not to file for bankruptcy isn’t a decision that should be taken lightly. If you’re wondering if bankruptcy is the best choice for your situation, don’t hesitate to contact a Flagstaff bankruptcy lawyer today.

Number of Bankruptcies Drops, Yet Many Still Hesitant to File

Posted on February 29, 2012 by Staff Writer

The American Bankruptcy Institute found that the number of consumer bankruptcies in the U.S. dropped by nearly 12% between November of 2011 and November 2012. Yet based on an article in The Morning Journal, it’s clear that many Americans are still choosing to file for bankruptcy, as preliminary numbers indicate that around there were slightly less than 1.4 million bankruptcy filings in 2011.

University of Arkansas researchers attempted to discern the reason behind the high number of Americans filing for bankruptcy. Their findings allege that many individuals end up making the choice to file for bankruptcy only after a long period of essentially living in denial that filing for bankruptcy is the best choice for their situation. The researchers say that most people vainly plug along trying to pay off debts despite the fact that their financial situation is beyond repair.

In reality, it should be no surprise that Americans let pride get in the way of filing for bankruptcy. But the truth is that the decision to file bankruptcy shouldn’t be a source of shame. For many people (and corporations) bankruptcy proceedings offer a real opportunity to start fresh and begin rebuilding savings accounts and credit scores, instead of making large payments to creditors and living with the stress and hassle of being pursued by debt collectors.

However, the bankruptcy process is complex, and things don’t always go as planned. If you’re considering filing for bankruptcy in Arizona, contact an experienced Phoenix bankruptcy attorney who can ensure that the process proceeds as smoothly and quickly as possible.