Some Relief For Those Repaying Student Loans

June 29, 2009 · Posted by Alex

From Yahoo news:

“Repaying a student loan could soon be a little less painful.

Starting this week, anyone with a federal student loan can apply for a program, run by the Department of Education, that caps monthly payments based on income, and forgives remaining balances after 25 years. Those choosing to work in public service could have their loans forgiven after just 10 years.

Eligibility for income-based repayment (IBR) is determined by a person’s income and loan size. A calculator at http://www.ibrinfo.org can help borrowers determine their eligibility for the plan, which becomes available Wednesday.

‘It’s a way to borrow for college without going to the poor house,’ said Lauren Asher, president of the Institute for College Access & Success, a California-based nonprofit that runs the Project on Student Debt.

The program stems from the Education Department’s College Cost Reduction and Access Act, signed in 2007, which authorized the creation of a new income-based repayment plan for both Federal Family Education Loan (FFEL) and Direct Loan borrowers on all Stafford and graduate PLUS loans.

Monthly payments would amount to less than 10 percent of income for most of the estimated 1 million people expected to enroll, experts say. Payments would never exceed 15 percent of any income above about $16,000 a year (or 150 percent of the poverty level).

Those who earn less than $16,000 would not have to make any monthly payments.”

Debtors in Orange County often seek out a bankruptcy attorney to discharge student loans, only to find that many do not qualify to have their student loans discharged in a Chapter 7 bankruptcy.

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During Credit Crunch, Bankruptcy Difficult to Avoid

November 17, 2008 · Posted by Alex

Last month saw a 34% growth in bankruptcies filings, as compared to cases filed in October 2007. According to the New York Times, this increase in the number of bankruptcy filings is due in large part to the specific nature of this particular economic crisis. Besides the usual reasons why people look for bankruptcy protection, such as job loss, medical bills, divorce, the central reasons for the increase in Chapter 7 and Chapter 13 bankruptcy filings during this economic crisis have more to do with the abrupt drop of home values, unstable incomes, and the “credit crunch”.

It seems that more people are turning to bankruptcy lawyers during this economic downturn than during the tech bust because of how the mortgage crisis has affected the lending practices of financial institutions. Essentially, where debtors used to be able to avoid bankruptcy by obtaining more credit, and tried to stay afloat for a while longer, the current “credit crunch” has made it nearly impossible for many to obtain new credit cards, refinance their home mortgages, or get a home equitiy line of credit, due to the banks’ pull back on lending. This has, in turn, driven many debtors to file for bankruptcy that would have otherwise avoided it. This does not mean that many people aren’t trying their best to avoid filing, as seen in a key statistical comparison to the filings in 2001.

In recent studies, it was shown that the typical family who filed for bankruptcy in 2007 carried 21% more secured debt and 44% more unsecured debt than people who filed in 2001, even though average income among those filing for bankruptcy remained static over those six years. So although income stayed the same, debt rose, illustrating the attempt by debtors to put off bankruptcy as long as possible while trying to get back on their feet. Studies also show that filings increased mostly in places where real estate values skyrocketed and then crashed, including Irvine, Laguna Beach, and Mission Viejo in Orange County, as well as Corona, Murrieta, and Temecula in Riverside County.

Although filing for bankruptcy and hiring an attorney is not anyone’s idea of a good time, for many Orange County, Riverside County, and San Bernardino County residents it’s the most sensible solution to get their financial sanity back, and the best path toward a well deserved fresh start.

To read the NY Times article, click here

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Consumer bankruptcy filings in 2008 approach 1,000,000

October 29, 2008 · Posted by Alex

It wasn’t supposed to be this way.  When Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act in 2005,  the idea was to reduce the number of personal bankruptcy filings.  This was to be accomplished by making it more difficult to qualify for a Chapter 7 bankruptcy for higher income debtors.  The “means test” was introduced as the requirement that had to be met before a Chapter 7 could be filed.  In actuality, however, most debtors seeking to file bankruptcy do indeed pass the means test, and are therefore not forced to file under Chapter 13 of the Bankruptcy Code.

Although the number of bankruptcy filings fell just after the Bankruptcy Bill of 2005 went into effect, the recent economic crises have driven the numbers up this past year in a big way.  Chapter 7 bankruptcies filed from June 2007 to June 2008 totaled 934,009, an increase of more than 28 percent from the 727,167 petitions filed from the same period during the previous year.

I know you’re hurting, Orange County.  But you’re not alone…

For more information: Personal Bankruptcies on the Rise

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