Bankruptcy & Your Education: Not All School Debt Is Created Equal

March 29, 2016

In a recent decision from the Second Circuit, the Bankruptcy Court for the Eastern District of New York ruled that law school grads can discharge debt incurred while preparing for the bar exam.

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The case of in re Lesley Campbell involves a Pace University School of Law graduate, Lesley Campbell, who sought to discharge the unpaid portion of a $15,000 loan she took out from Citibank to study for the bar in 2009. After borrowing the money, Ms. Campbell failed the bar exam. This forced Ms. Campbell to take a secretarial job at a hotel-management company with an annual salary of $49,000. She made several payments under the terms of the loan, but was unable to fully satisfy the underlying debt. She filed for bankruptcy in 2014.

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IRS Debt Collection

March 8, 2016

A recently signed infrastructure spending Bill contains some drastic changes to how the IRS collects past due tax debts.  The Bill is known as the “FAST Act.” In certain circumstances, this new law actually requires the IRS to hire private collection companies to collect taxes in difficult cases.  This means that the law now requires, rather than permits, the IRS to use private collectors to collect these debts.  It is also important to know the differences between legitimate collection efforts on behalf of the IRS, and the various fraudulent scam phone calls made by parties pretending to be the IRS.

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The following is some helpful information regarding this new tax collection law:

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IRS Phone Scam

March 1, 2016

The IRS continues to warn people to guard against scam phone calls from thieves attempting to steal your money or identity.  You should be aware that there is are criminals who will make phone calls in order to pose as the IRS to trick victims out of their money or personal information.

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These callers may demand money or may say you have a refund due and try to trick you into sharing private information. These con artists can sound convincing when they call. They may know a lot about you, and they usually alter the caller ID to make it look like the IRS is calling. They use fake names and bogus IRS identification badge numbers. If you don’t answer, they often leave an “urgent” callback request.

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Chapter 13 Plan Payments

February 18, 2016

Chapter 13 bankruptcy can be a useful tool to prevent foreclosure, prevent repossession, terminate garnishments, eliminate tax debts, catch up late payments in a mortgage, or to simply regain control of your personal financial situation.  It may make it possible to reduce the interest you are paying on your vehicle, reduce your monthly car payment, or even to reduce the total amount of your loan.  In certain circumstances, the ability to stop penalties, fees, and high interest charges may be enough reason to consider a Chapter 13 bankruptcy.

Chapter 13 Plan Payments

In a Chapter 13 case, we assist you in developing a household budget, and after subtracting the monthly budgeted expenses from the total household income, the remainder is considered disposable monthly income.  All disposable monthly income must be paid to the Trustee.  The Trustee will use this money to pay debts in order of the priority by the bankruptcy code and the Chapter 13 Plan.  These payments will last somewhere between 36 and 60 months, and once the Plan is successfully completed most remaining debts are discharged.

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Protecting Your Life Insurance Through Bankruptcy

February 15, 2016

When filing a bankruptcy proceeding you are allowed to protect a certain amount of personal property. Bankruptcy attorneys refer to protected personal property as “allowed exemptions.”  One of the categories of personal property is life insurance.  Life insurance comes in many forms.  However, for purposes of bankruptcy we typically categorize life insurance into term life insurance or whole life insurance.

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Term life insurance has no cash value.  It simply provides cash payment upon death. What this means is the policy or the insurance contract has no cash value while you are living. The term life insurance policy should be disclosed on your bankruptcy schedules, however, to the extent that it has no cash value a trustee has no ability to liquidate the asset.  In other words, you may continue to pay the term life insurance policy and the beneficiaries are allowed to keep any of the proceeds despite your bankruptcy.

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Rebuilding Credit

January 25, 2016

When it comes to credit repair, there is no secret formula to make all your previous debts disappear, and suddenly show a nice, clean credit report.  That being said, there are some important considerations in how to improve your credit score, and some significant pitfalls to avoid.          

First, pay your bills on time.  Whether you have gone through a bankruptcy, or are just trying to improve your credit score, one of the biggest things you can do to increase your credit score is to keep the accounts that are reporting to the credit bureaus current.  Deficiencies will quickly damage your credit score, and need to be avoided.  If you have a mortgage, car payment, or other open credit accounts, paying those on time will help rebuild your credit after an economic struggle.

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Debtor Education Requirement

January 22, 2016

Once the Meeting of Creditors is completed, there is normally not much else you will need to do.  You do have to complete the second part of the credit counseling, referred to as debtor education, click here.  This requirement can be done online for $10.00 or over the phone $15.00.  You may have already paid Greenpath when you did your pre-filing credit counseling. 

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The 341 Meeting of Creditors

January 21, 2016

About a month after your bankruptcy case is filed, you will have to attend the Meeting of Creditors.  This may sound intimidating, but, creditors rarely attend.  Generally, it will be you, your attorney, the Trustee, and other people who are also filing for bankruptcy.  It is held in a conference room, and is a relatively casual environment. While you do not have to dress up for this meeting, we recommend that you dress appropriately for a work day.

You must to arrive about 15 minutes early for your Meeting of Creditors.  Most of the Trustees have a supplemental form they want filled out prior to the meeting, so you will want to have time to go over  and prepare it for the Trustee.  Your attorney will generally arrive early in case you have questions. 

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Garnishments

Wage garnishments and bank account garnishments are a common reason people look to bankruptcy for relief.  Once a bankruptcy is filed, a garnishment must immediately stop.  If you had a wage garnishment, bank account garnishment, or levy during the 90 days prior to the filing of a bankruptcy that allowed any one creditor to receive more than $600, it may be possible to have that money returned to you depending on your available bankruptcy exemptions.  

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