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.

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.

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.

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.

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

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.

When a loan is cross-collateralized it means that you have made an unsecured creditor into a secured creditor.

How does this happen?

When you purchase a car, it is common for the documents you sign to give the lender a security interest in the car.

The car becomes collateral for the debt.   This type of debt is often referred to as a “collateral mortgage”.

The agreement allows the lender to hold the title to the vehicle until you pay it off. If you don’t pay it off, then the security agreement permits the lender to repossess your vehicle.

Such a provision is understood by pretty much everyone that has ever purchased a vehicle.

However, credit unions, and to a lesser degree, banks will frequently put a provision in the security agreement that allows the lender to secure any other debt that you may have with that financial institution using the vehicle as well. Very few people are aware that such a provision exists when they signed for their vehicle.

If you then go back to the credit union or bank that gave you the vehicle loan and get a credit card, a line of credit, or some other type of loan that would normally be unsecured, the vehicle will act as collateral for the credit card or line of credit.

This occurs because you have already signed an agreement when you took out the car loan agreeing that it secures any other loans that you get with that lender:  You have now created a secured debt on the credit card or other unsecured debt.

How can this type of agreement affect your bankruptcy?

When you file a Chapter 7 you can discharge your unsecured debt.

With your secured car loan you generally have two options: you can surrender the vehicle or you can reaffirm the debt and keep the vehicle.

However, when you file a Chapter 7 and you have a vehicle loan and other loans at the same credit union or bank that are cross collateralized, then it is likely that you will have to pay all of them if you want to keep your vehicle.

One solution to this problem may be to file a Chapter 13 since more options are available regarding vehicle loans in a 13, but like many things in bankruptcy, there are pros and cons that must be weighed.

If blocked in Texas, the unhappy couple can’t head back to Massachusetts for a quick split either. Massachusetts law does have a  residency requirement to obtain a divorce and establishing the amount of time for a residency requirement may not be practical.

So the question becomes, where can you obtain a divorce.

The author of “Same Sex, Different States: When Same-Sex Marriages Cross State Lines,” said that if some State’s attorneys generals are serious about not recognizing same-sex marriages it could cause serious difficulty.  The result could be that somebody who lives in Massachusetts can empty the safe-deposit box, empty the bank account and go to Houston — and say you can’t come after me here, because Texas doesn’t recognize the marriage.

Conceivably, he said, a woman in a same-sex marriage in Massachusetts could abscond to the Lone Star State, where she might then marry a man, since the previous marriage doesn’t exist there.  She wouldn’t even have to tell him that she had a wife in Massachusetts.

People have gotten around barriers to divorce before. In more puritanical days, many states prohibited divorce unless one spouse could prove a transgression like abandonment, sexual escapades or cruelty. Mini-industries grew up in states like Nevada, where establishing residency took only a few weeks. Even just one spouse could break the bond for both.

Over time, however, the Supreme Court whittled away at the power of states like Nevada to put couples asunder, and the rise of no-fault divorce made the trip unnecessary. The quickie Reno divorce faded away.

Today, denying divorce denies justice, said Allen A. Drexel, a family law expert in New York with a large practice among same-sex couples. “The right to obtain a legal divorce is one of the most important, if least celebrated, rights of marriage,” he said. The process of separation can bring out the worst in people, he said, and “the incentives to game-play and to engage in forum-shopping to take advantage of the inconsistent legal treatment exists.”

Whatever  the sexual orientation involved, is the state’s way of compelling fairness for the families of couples who have fallen out of love. It seeks to protect the weaker, poorer spouse, and the children as well.

Some believe that the present inconsistencies in the law might eventually work to move the cause of same-sex marriage forward as more and more people come out, marry and, yes, divorce.

Many home owners have found themselves paying mortgages on homes that are not worth the amount owed and are having a difficult time justifying making payments on property with a negative net value.  The question is why should I continue to invest in a property that has no financial worth to me?  The answer varies depending upon the circumstances.

A so called Strategic Default is merely a decision to stop making mortgage payments and allow the lender to foreclose.  In most cases this will result in a balance due to the lender after the foreclosure which the property owner is legally responsible for under the terms of virtually every mortgage written.  In many cases the property owner is in great debt, has no other significant assets, and wishes to file a bankruptcy which will wipe out the mortgage deficiency along with other debts such as credit cards or medical bills.

In short, a Strategic Default is part of a plan which generally precedes the filing of a bankruptcy.  But beware – not everyone qualifies under the law as it now stands to file a Chapter 7 bankruptcy if your household income is in excess of the amount allowed by law in the State where you live.  The purpose of the bankruptcy reform act of 2005 which created these limits also created a limit on who can file another form of bankruptcy under Chapter 13.  The purpose of a Chapter 13 bankruptcy is to allow people who do not qualify for a Chapter 7 bankruptcy to enter into a plan which permits them to pay a certain percentage of their debt, subject to their ability, over a period of up to 60 months.  Under certain circumstances some debtors pay as little as 5% of their total debt and can do so in 60 monthly installments.  But beware of another possible problem.  There are limits to how much debt you can have and be allowed to file Chapter 13.  If your unsecured debt is much in excess of $360,000.00 you cannot file a Chapter 13.  So there are people who do not qualify for either a Chapter 7 or Chapter 13 which leaves a very unattractive option known as Chapter 11, a very expensive way to go.

The message that I am trying to send is this.  If you wish to surrender a piece of real estate you must understand all of the risks that go along with the surrender.  You must understand that there is usually debt resulting from the surrender of the real estate.  While most people can deal with the debt through one form of bankruptcy or another not everyone can.  Before making the decision to intentionally default on the payment of your mortgage and allow a foreclosure to take place you should invest the time and effort by consulting an experienced bankruptcy attorney.  At Alford & Bertrand, LLC there is never a charge for this initial consultation.