RULES FOR STUDENT LOAN MODIFICATIONS AND DEFERMENTS

Attorneys from the Department of Justice presented a program on student loan debt.

The presenters were government attorneys who usually fight discharge of student loans but, they presented lots of information on other ways to deal with repayment.

Contact the ombudsman! was a recurrent theme.

The Federal Student Aid Office can provide help on how to clarify student loan deferment, forbearance, and even discharge.  They can help you identify your loan repayment options, resolve discrepancies over payments made and balances owed on loans,  among other things.

The government actually says that, if you die, you do not have to pay back student loan debt, but, there are some forms that your survivors will have to complte.

“Which loan program am I in?” may well be your first question.

You have to know exactly which program before you can figure out your options.

Higher Education Act, Federal Family Education Loan Program, Federally Insured Student Loan Program, Stafford loansPerkins loans, William D. Ford direct loans, PLUS loans and more.

Strangely, student loan deferment or forbearance are only available for loans which are not in default at the time of application for deferment or forbearance.  So get started while you are still in good standing if you are going to look for help.

Your loan can be rehabilitated, or re-financing or consolidated, if you do default, which brings the loan back out of default status.

So, if at all possible, if you can’t pay your loan, best to figure that out before you fall behind on the payments.

Forbearance is a  modification of the payment terms but is always temporary.

Deferment is a suspension of your obligation, nothing goes away, but your payments stop for a time.

For deferments for government subsidized Stafford loans,  as an example of the differences in how different loan programs are treated:  the government pays the interest that accrues during the time of the deferment.

ONE WAY TO REDUCE YOUR MONTHLY MORTGAGE PAYMENT

About 25% of all home owners in the United States owe more money on their first mortgage than their house is worth.  Some of these people also have equity loans or second mortgages on their homes.  Filing a Chapter 11 or Chapter 13bankruptcy may help the home owner by stripping off the security interest of the 2^nd mortgage holder.

When an equity loan or 2^nd mortgage is stripped under Chapter 11 or Chapter 13 the loan is treated as a general unsecured claim, and at the conclusion of the bankruptcy, when you get discharged the security interest must be removed.   In most cased the percentage of the loan which you have paid through your bankruptcy plan is far less than the 100% that you would be required to pay if it remained a secured loan and can often be as low as 5% of the original amount due on the loan..

To be eligible your first mortgage must be more than the value of your property.  If you are in need of this kind of help to reduce your monthly mortgage payments, and believe that you qualify, call 617-926-8800 for a free consultation.

THE MISTAKE OF NON-LAWYER BANKRUPTCY PREPARATION

THE MISTAKE OF NON-LAWYER BANKRUPTCY PREPARATION

There are no shortages of people who take advantage of others.  Now, the courts are cracking down on a particularly insidious breed: non –Lawyer bankruptcy petition preparers.  These non-lawyers often claim that they will help people file for bankruptcy for a fee – and often claim that they will do a lot more than they are supposed to do, often to the detriment of their clients.

The ranks of the bankruptcy preparers in many places includes people who have criminal records, people who have been bankrupt themselves – even a disbarred lawyers who have felony theft convictions.  Bankruptcy judges say they regularly see petitions coming to them chock-full of errors – sometimes missing entire pages of information.

The preparers often promise their customers that they can prevent utility disconnections or wage garnishments or stop incessant calls from bill collectors. The fact is, they usually can’t and if they make a mistake, their innocent victims can see their petitions thrown out of court

Wisely, judges have begun to take action. Several preparers have been fined recently and a handful held in contempt of court. One of them listed a false Social Security number as his own. The judges referred the cases for possible criminal charges.  A Prosecutor recently stated that: “You’re just always worried about the quick-hit artists who are going to try to do things under the color of law. If people are in desperate straits, they may try to go with the quick fix.”

The actions by the prosecutors and judges are appropriate and should help to rein in the worst actors in bankruptcy preparation.  You can help by seeking assistance only from qualified bankruptcy lawyers.  Your failure to do so could have long term negative results and instead of putting your problems behind you could result in creating new problems, often to your permanent detriment.

IS MORTGAGE MODIFICATION THE ANSWER?

The law firm of Alford & Bertrand, LLC is a member of the National Association of Consumer Bankruptcy Attorneys.  The following is a summary of an article posted by the Association which describes remarkable results in one jurisdiction combining filing a Chapter 13 Bankruptcy with a mortgage modification and has dramatically reduced the number of foreclosures in the Orlando, Florida area.  Other areas are considering similar programs and this kind of program could come our way in the near future.  Please contact an attorney at Alford & Bertrand, LLC to see if we can help save your home and all of the investment and care that you have put into it.

Mortgage modification may remedy foreclosure crisis

A program to save homeowners from foreclosure that has shown startling results in Orlando, Florida.  Started last year as a pilot in federal bankruptcy court, the effort has helped three out of four troubled homeowners avoid foreclosure. It has gotten many of them new mortgage terms that will save them up to $100,000 in interest payments during the life of the loan.

A much smaller number of owners have gotten a reduction of up to $275,000 on their mortgage principal — the total amount owed on the loan — in what some real estate experts see as the ultimate way to remedy the foreclosure crisis.  The effort comes as the federal government is easing rules for another program that lets homeowners refinance mortgage loans at lower interest rates in the hopes of keeping them in their homes.”

The program — started in early 2010 by Chapter 13 trustee Laurie Weatherford includes cases from across the economic spectrum:  One family was $70,000 behind on a $618,000 mortgage after the father lost his construction job and the family faced a health scare.  The lender agreed to a principal reduction of $160,000 — the $70,000 in arrears plus another $90,000 — and a 2 percent interest loan for five years.

Filing for bankruptcy can leave the homeowner in a much better financial position than simply walking away or allowing a bank to seize the property.  Not everyone qualifies, and the program can be complicated, so an attorney is usually needed to help sort through the issues.

Meanwhile, lenders have grown increasingly weary of dealing with the costs and headaches of foreclosing on thousands of homes and reselling them for much less than the value of the mortgage.  Homeowners looking for modifications gripe that they must repeatedly send in the same financial information and wait for months before hearing from lenders.

In the federal court program, troubled homeowners can get an answer one way or the other from the lenders on a modification and get their bankruptcy cases moving.  The difference between the state court program — where the success rate for mortgage modification mediations is only 4 percent — and the federal bankruptcy has been pronounced.

In the federal program, second mortgages also get stripped from the property, leaving people more likely to afford the remaining first mortgage even if they have lower-paying jobs than when they first obtained their loans. Second mortgages were a common way for homeowners to tap equity during the housing boom, and in the process, many overextended themselves.

WHY WON’T YOU FORECLOSE MR. BANKER? YOU ARE COSTING ME MONEY

The last thing most home owners want to witness is a lender foreclosing on their home. But there are times when you actually might want and need a bank to foreclose as quickly as possible -and they don’t- and you are impacted financially but the banks failure to act.
Like millions of Americans you may be a condominium owner who owes more on the condo than it is worth. You have fallen months behind in your mortgage payments, condo fees, and credit card debts. Your wish is to obtain a fresh financial start by filing a Chapter 7 bankruptcy, let the bank foreclose and get a fresh financial start.
Many people in these circumstances take this step and all debts due at the time of filing are discharged, you no longer owe.any them, and you get on with your life. The debts that are wiped out include your credit card debt, other unsecured debt, the condo fee due at the time of filing and the amount of unpaid mortgage due to the fact that the mortgage sells for less at the foreclosure sale than you owe.
So what is the problem? The problem is that in many cases banks are delaying the foreclosure. The bank may have so much property that it has bought back at foreclosure that it does not want more inventory. The bank may not want to incur any financial obligations in the way of insurance and maintenance costs that result from foreclosure. The bank may have issues with the title that make foreclosure impossible under some recent court decisions that require the banks to show that they are the legal holders of the mortgage. As a result the property sits their month of month without being foreclosed upon.
You may wonder if and how this impacts on you if you have filed bankruptcy. Believe me, it can and often does. While you have cleared up your credit card accounts, and the bank cannot look to you for any more money, their is a serious problem lurking. It is the Condo Association monthly fee that can cause you serious problems. By filing bankruptcy you have cleared up all debt in existence AT THE TIME OF FILING. Since you continue to own the condo as a result of the banks failure to foreclose you own the condo fees from the time of the filing on and if the bank does not foreclose for months after your bankruptcy filing you may end up owing months of condo fees.
Let’s say that you have moved out of the condo into a rented apartment. You are probably paying your rent each month but not your condo fee. All of a sudden, many months later you receive notice from the condo association, or their lawyer, that you own the condo fee from the date of foreclosure to the present. You are shocked because you have moved, you are paying rent, and you thought you were done with the condo. Guess again. A bank cannot be forced to foreclose and you can be held legally responsible for the condo fees that come up after your bankruptcy filing until the bank forecloses.
The best advise that we can give you to avoid the double expense of a new rental home and growing condo fees is to maintain occupancy of the condo and live there until such time as the bank forecloses. In that manner you will continue to have a home and will be responsible for the condo fees but you will not have both condo fee and rent. You will have discharged the mortgage so the only expense will be those associated with the condo absent the mortgage payment. If you compare this to the cost of paying for a rental property and incurring a growing debt to the condo association you will most likely find this the most viable way of keeping a roof over your head until the bank actually starts the foreclosure procedure at which time you will have to look for a new home for you and your family.
For any further advise on debt relief and bankruptcy please don’t hesitate to call us at Alford & Bertrand, LLC, Attorneys-at-Law at 617-926-8800 for a free consultation with an expert bankruptcy attorney.

How will bankruptcy effect my credit?

When first meeting with a potential bankruptcy client an inevitable question is “How will bankruptcy effect my credit?”  Before giving a general answer I explain that no one answer fits all with regard to this question.  Is your credit rating great at the time?  Have you been paying all of your bills in a timely fashion but because of recent developments know that you will not be able to in the future?  This is one scenario.  Perhaps your credit rating is as low as a credit rating can be because you have not been employed for a long period of time and have not paid a bill in a year.  That is another scenario.  Where you fit in this arc of probabilities will play a role in your reestablishing of credit.  If your credit score is already as low as it can be, well you cannot kill something that is already dead, but with bankruptcy you have the real possibility of bringing it back to life.  If you have a great credit score you have to realize that there will be an initial negative impact but with careful planning you can redeem your credit within a reasonable period of time.

Consider your situation from the eyes of prospective creditors.  After you have file bankruptcy you have little, if any, unsecured debt.  You cannot file another Chapter 7 bankruptcy for eight years, and if you have a job or other income no one but new creditors have a claim to it.  Ironically, by many, you are now perceived to be a good credit risk and in most cases will find yourself with the ability to obtain new lines of credit much faster than you would anticipate.  If you have no job or income it will impact on this rosy picture.

For most debtors there is some information and some suggestions that apply to all.  Remember that while filing bankruptcy stays on your record for ten years the older it gets the less weight it has on your credit score.  Most people can get secured credit cards after filing bankruptcy and used and paid wisely this will be of great help in improving your credit score.  If you had credit cards when filing but did not have to list them and did not lose them because they had no debt on them they can serve the same purpose as secured credit cards.  What ever kind of card that you obtain after filing do not use it to the maximum limit.   Let your record show that you do have credit available, and make every payment on time.  These steps will go a long way towards reestablishing your credit score.

In general, if you have the necessary income, obtaining car loans, and even home mortgages, are less of a problem because these loans are secured by collateral that the creditor can repossess in the event of default.  If you obtain either of these kinds of secured loans pay them on time, each and every month, and establish a track record to use for credit reference purposes.

So I tell my clients that by thoughtful and conservative behavior there is, in fact, credit life after bankruptcy and you will not have to go through life without credit, credit cards, cars or homes.  In the alternative in many cases the failure to rid yourself of debt that you cannot and do not pay creates more of a hazard to your credit future that getting a fresh financial start through bankruptcy.

Attorney Harvey Alford

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DIVORCE AND TAXES

Most people have a mental punch list of concerns when facing the prospect of going through a divorce.  If there are children, custody, visitation and child support may be the top priorities.  Depending upon each individual situation alimony and division or marital assets may also be of concern.  One will also have to consider responsibility for health insurance for both the parties to the divorce and minor children if any.  It is not until you meet with your lawyer that you realize that there are also tax considerations that come into play when negotiating and entering into a divorce settlement agreement.

If there are minor children, unless the parties have shared legal and physical custody of the children, there will almost always be a requirement that the noncustodial parent pay child support to the custodial parent.  The income received by the custodial parent is not taxable and the amount paid by the noncustodial parent may not be claimed as a deduction for tax purposes.  Alimony, on the other hand, is taxable income to the recipient and is may be deducted by the party making the payment.  So in circumstances involving divorces between parties with significant income the breakdown between child support and alimony may play a major role in how much money is left with the parties from their income after taxes and how much is paid to the Internal Revenue Service.  Obviously, to the extent that tax obligations can be legally reduced by the parties there is more money left for the parties to use for their own benefit and the benefit of the children, if any.  If the alimony is paid in the form of a lump sum settlement the party receiving the settlement is obligated to pay taxes on the settlement which can be quite substantial depending upon the amount.

The other tax issue that must be kept in mind has to do with potential capital gains if the marital home is transferred to one of the parties as part of the divorce settlement.  The capital gain is the profit made at the time of the sale of the property.  The profit is the excess of the sale price over the purchase price less any capital expenses incurred in the upkeep of the house during the period of ownership.  There are some exclusions from state capital gains taxes in Massachusetts but this tax expense should always be kept in mind when entering into a divorce/separation agreement.  The party receiving the home may, at some time in the future, have a large tax obligation on the capital gain received.  If that gain has not been taken into consideration in the over all agreement the total burden falls upon the party receiving the marital home.