Student Loan Crises and Bankruptcy

This is not an article that is designed to tell you that Bankruptcy can solve your student loan problems. Quite to the contrary, Bankruptcy cannot help much with student loans. It can eliminate all your other debt so that you can deal with your student loans when you have shed those other creditors, but beyond that it does not help much. Instead, this is an article that is going to explore the problem and present the solutions to the crises that others have suggested.

Many people are not aware there is a crisis. Many people relate their own experiences to the current situation, but they are not the same. For example, my generation largely went to college without student loans. Parents were able to fund at least the undergraduate degree so that their children did not come out of college in serious debt. Largely, that is impossible for families today. This is not because families are willing to set aside money. It is that largely because the cost of a college education has gone up with meteoric proportions. The cost of a college education increases 20% virtually every five years. As a country, we are approaching the law of diminishing returns. A person training to be a school teacher can never expect to be able to pay back $50,000 in loans. Even in the law profession, young attorneys are entering the market with $150,000 in student loan debt. The salaries of an attorney cannot justify that debt load.

A recent study by the Federal Reserve Bank of New York showed that people in 2003 left college owing about $10,649 on average. In just a few years, that number increased to $20,326. A few years later, that number is likely to be $40,000. There is not another single area of the economy where the costs exceed the education costs. Even the medical economy is not increasing as quickly. Why is this a crisis that needs to be addressed? According to Professor Daniel Austin, a bankruptcy professor at Northeastern University, we have a large part of our population who cannot get rid of these giant loan payments and therefore cannot participate in the rest of the economy. That will impact our housing market and will impact our economy generally. As he explained, they are off the economic grid and we are creating a permanent underclass.

There are many solutions to this problem. One of the obvious is to return the bankruptcy code provisions that allowed people to discharge student loan debt. Under the codes of the past, a person could discharge a student loan as long as they had made good faith efforts to pay for seven years. That kept someone from intentionally running up debt, but also allowed a person an escape valve if the education they received was not as valuable as they once hoped. At the same time, colleges and universities will have to create programs to assist college educated young people to get jobs. Further, the universities will have to find a way to contain costs. Right now, they have no incentive as long as federally backed student loans continue to fund the education machine.

If you are in a position that discharging all but your student loan debt will help you or if you have other debt issues that you need assistance with, come see us. Book an appointment with a skilled bankruptcy attorney. At Bailey & Galyen we would like to help you achieve your financial independence without all of the headache. Call 800-208-3104 or email today.


What Is a Debt Owed for “Willful and Malicious Injury”?

These are so unusual you might not even think of them as debts — claims against you for intentionally hurting someone or his or her property.

Debts that might not be discharged (legally written off) in bankruptcy, including those allegedly incurred by fraud, including recent “luxury” purchases and cash advances. Today’s blog is about another category of debt that might not be able to be discharged. Although a claim “for willful and malicious injury by [you] to another entity or to the property of another entity” (Section 523(a)(6)) may be rare, if you someone is making such an accusation against you it is probably one of the main reasons you are considering filing for bankruptcy. So it’s important to understand how such a claim would be treated.

“Willful and Malicious Injury”

Unlike the part of the Bankruptcy Code about “fraud” debts, which contains 13 clauses and about 250 words, the one about “willful and malicious injury” contains only one short clause, the one quoted above. That’s all Congress said in describing this exception to discharge, so the courts have had to figure out what it means.

In the part of the country covered by the federal Fifth Circuit Court of Appeals, which includes all of Texas, a “willful injury” is one in which the debtor deliberately or intentionally caused the injury, and didn’t just deliberately or intentionally commit an act that led to the injury. A malicious injury is one “without just cause or excuse.” So we are talking about injuries that were committed with an objective substantial certainty that the act would cause harm or with an actual intent to cause harm.

Practically speaking, this includes personal injuries and property damages — on the personal side involving claims for civil damages arising from assault, rape or murder, while on property side claims arising from arson, vandalism, burglary or theft. But virtually any injury to a person or property could be included as long as it is “willful and malicious” as described above.

Dischargeable in Chapter 13?

Injuries to a person (including death) cannot be discharged in either Chapter 7 bankruptcy under Section 523(a)(6) that we have been discussing, or in Chapter 13 bankruptcy under a relatively new Section 1328(a)(4). However, injuries to property can be discharged in Chapter 13 because Section 1328(a)(4) only excludes personal injuries, while their discharge can still be challenged in Chapter 7 under Section 523(a)(6). So, if you have a significant claim or judgment against you for some sort of property damage, talk to your attorney about Chapter 13 bankruptcy as a possible solution.

If you are considering bankruptcy because of serious accusations against you of personal injury or property damage, or because you are in litigation or have had a judgment entered against you along these lines, you need the counsel and advice of a highly experienced bankruptcy attorney. If you are in the Dallas-Fort Worth metroplex, the Leinart Law Firm is here to serve you. Please schedule a no-obligation, free, confidential consultation with us by calling 1-800-518-3328 or contacting us here.


Do I Really Need an Attorney To File Bankruptcy?

In this age of internet services and self-help legal services, it is a very legitimate question as to whether you need an attorney or not for certain legal proceedings. The answer to this question would seem to be easy. All you have to do with bankruptcy is fill out some forms and appear in court and your debts are gone! While that is an extreme simplification of the process, that sort of does sum up the legal proceeding. So, this article will go step-by-step to figure out if you indeed should represent yourself.

The first question you should ask yourself is what type of bankruptcy do you need to file? If you were not aware there were many types of bankruptcy, you may already have answered the question as to whether you need a lawyer. Also, please note that the question is not what type of bankruptcy you “want” to file, but what type you need to file. If you are attempting to file a Chapter 7, you must first complete the means test. The means test takes a complicated formula that involves your last six months of income and you average daily expenses and then compares them to the IRS standards for what a person or family makes in your zip code. Make certain you take the proper adjustments for each family member and any “heads on beds” residents in your household. Next, you must look at the abuse standard. Even though you have “passed” the means test, do you have any situations that might be a standard of abuse problem? If you are filing a Chapter 13, you need to know how to apply those numbers to determine the unsecured creditor pool you are required to pay. Already feeling a little insecure? You should not feel too bad. The lawyer who works on your case goes through years of formal education to learn to do just what I am describing.

Once you figure out the numbers in the means test, you must balance that number with the case law in the district that you are filing in. Most courts have interpreted those numbers in different ways. Next, you must list any and all property you own. Once done, you must elect what exemption scheme you wish to take. There is the state exemption scheme and the federal exemption scheme. Be careful here. If you chose the incorrect exemptions, or you apply them in a way that is contrary to the case law in your state or district, you could lose everything you own. Once you file the bankruptcy, you often are stuck with the choices you made. You will appear before a bankruptcy trustee. Don’t expect much help from that person. They are there to protect your creditors and make certain they get whatever they may be entitled to. Also, the trustee gets a percentage of the assets to pay their attorney fees. Interestingly, most property lost in a bankruptcy is by unrepresented individuals. Your attorney will likely be able to protect everything you own.

Also, don’t forget about the potential adversary proceedings. Creditors are bullies. You already know that if you are having financial issues. When you try to talk to them and offer reasonable solutions, they respond by insulting you and making you feel like less of a human being. Don’t think that attitude does not follow you into the bankruptcy. If they see you do not have an attorney, they can file a lawsuit in your bankruptcy to challenge your discharge. They can file that when you have an attorney, but then they have to prove the allegations they made about you. If you do not have an attorney, it is hard to defend yourself.

So, you have guessed by now that my recommendation is that you have an attorney. With an attorney, a bankruptcy is a fairly easy legal proceeding. It is a proceeding where you get to keep virtually everything you own. Without one, it can be a nightmare. Don’t opt for the nightmare. If you are in debt, come see us. Book an appointment with a skilled bankruptcy attorney. At Bailey & Galyen we would like to help you achieve your financial independence without all of the headache.


Really? Bankruptcy Will Do That?

Did you know that the IRS is afraid of the Bankruptcy Court? Yes, that is true. Bankruptcy is the one way you can shut down the single most powerful and aggressive creditor—The United States of America. Many people enter into a bankruptcy consultation with fear about what the IRS or some other powerful creditor may “think” if they file bankruptcy. The truth is, they will think they need to be very, very careful not to anger the Bankruptcy Court. It is sometimes hard for people to accept that the Bankruptcy Judge primarily is there to protect the person or entity filing bankruptcy and to make certain that they get a new start.

Another example of the power of the Court is the General Motors fiasco concerning the recall on the ignition switch. You would think that GMAC would be flooded with lawsuits over the fact that they were slow to get the word out. The problem is that those claims were largely extinguished in the recent bankruptcy filing by the company. Several advocacy groups have requested that GMAC put up a fund of $1 billion dollars and waive their protection from the bankruptcy up to the amount of that fund. It is likely that GMAC will do that, but the amazing thing is that they are currently protected.

Have you had your driver’s license suspended because you got into an accident and your insurance has lapsed? Bankruptcy can get your license back for you. The reason that you get your license suspended after an accident is that you failed to show how you would financially provide for the damage done. When you file bankruptcy, the Bankruptcy Court wipes out the obligation so you no longer are responsible financially. The Driver’s License is reinstated because you have taken care of the financial responsibility.

Have you got a tow truck following you around because you cannot catch up on your car payments? Bankruptcy will stop the creditor from taking your car and putting you in an even worse situation. Bankruptcy puts up a big stop sign that will prevent your creditor from taking action against you! If they somehow get your car before they got notice of the bankruptcy, they get to return it to you in the same shape as it was when they took it.

Have you got a foreclosure pending on your house? Yes, bankruptcy will stop that as well. No, you don’t get a free house, but the bankruptcy will allow you to restructure the amount of the debt that you are behind and pay that back over a five year period. You get to go from desperately about to lose your house to an actual plan to pay it back and retain the biggest investment you have ever had.

Have you got a creditor who is threatening to garnish your bank accounts to collect a debt? Bankruptcy will stop that as well. How about those endless calls to your telephone and to your employer constantly letting everyone know that you are struggling to make ends meet? Yes, that will stop also.

Don’t forget about the fact that you are not able to sleep or that your marriage is suffering from the stress of the debt. It is amazing how much stress will be removed once you formulate a plan for attacking the debt. Most individuals very quickly realize that they are sleeping better and that their marriage is significantly better because they have finally begun to attack that huge elephant in the room that has been the focus of all of their waking and sleeping hours!

If you are faced with too much old debt, bankruptcy can be used to help you also become more lean and efficient. It can help you begin setting money aside for the children’s education and future. If you are in this situation, book an appointment with a skilled bankruptcy attorney. At Bailey & Galyen we would like to help you achieve your new future.


Michigan Bankruptcy Firm files for Bankruptcy?

As strange a headline as it may appear, it is true. A top Michigan Bankruptcy firm, Frego & Associates, has filed for bankruptcy. It may seem unusual, but bankruptcy protection works for everyone. They had become, like many companies, just a little bloated and had more employees than they could support. The good news is that bankruptcy will let them restructure to remain a top law firm in Michigan. They will have just stripped themselves of some debt and overhead. When they emerge from their bankruptcy, they will be a profitable company better able to serve the needs of their many clients.

Even a bankruptcy firm will not try to represent themselves. There is an old saying that someone who represents themselves has a fool for a client. They have retained competent bankruptcy counsel to make certain that they come out leaner and stronger than before they filed.

If you are having difficulty with your cash flow, it is a good idea to seek professional help and see a qualified bankruptcy attorney. Most good bankruptcy attorneys will give you a free consultation at no risk. You then can decide if you need the professional help.

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