The type of debt you have plays an important role in what happens if you default on a loan.
Secured Debt is any debt that is backed by some sort of physical property, such as a car loan or a mortgage. The car loan is secured by the car itself and the mortgage is secured by the home.
In the event you fall behind on your payments on a secured debt, your creditor has the right to take back the property (repossess), sell it and apply the proceeds to the debt that you owe. Additionally, you may still have a balance owed even after the sale of the item is applied to the debt.
Dealing with your secured debt in bankruptcy can be done one of two ways. The first way is by filing for Chapter 7 bankruptcy and returning the item so that you no longer have to make payments on it. The other option is to restructure your payments by filing for Chapter 13 bankruptcy and keeping the item. Either way, with any secured debt the creditor gets something in return.
Unsecured Debt is typically a debt you incur to obtain goods and services. It can be medical debt, a student loan, a credit card or a personal loan. Essentially, there is no collateral tied to the debt. With this type of debt the creditor won't be able to repossess the item you purchased but they are able to take legal action or garnish your wages to recover a balance owed.
Filing for bankruptcy can ease the burden of both secured and unsecured debt. Filing for bankruptcy may even help you keep your car, stop wage garnishments, and remove some or all of your debt. Contact Minnesota Bankruptcy Attorney Gregory Wald for more detailed information specific to your situation.
Showing posts with label student loans. Show all posts
Showing posts with label student loans. Show all posts
Wednesday, January 9, 2013
Wednesday, November 7, 2012
Student Loans and Bankruptcy
In today’s society many students are faced with the uncertainty of landing a job right
after graduation--in addition to that, students are weighed down by student loan debt.
There is an option if you find yourself having difficulty paying back your student loan.
Chapter 13, also known as “The Wage Earner’s Plan,” develops a plan for you to pay
back debt over a period of time.
Most Bankruptcy courts rely on a test called “The Brunner Test,” in order to determine whether a student loan is dischargeable in bankruptcy. However, in Minnesota the less restrictive "totality of the circumstances" test is used. The way the courts evaluate the loan’s dischargeability comes down to whether you have shown “an undue hardship.” The “totality of the circumstances” test requires that the debtor not be able to maintain the minimal standard of living if forced to repay the loans. The court can look at all relevant considerations, including:
(1) your past and present financial resources, and those that you can reasonably rely on for the future;
(2) your reasonably necessary living expenses for you and the your dependents; and
(3) “any other relevant facts and circumstances surrounding each particular bankruptcy case
It helps to get a hardship discharge if you have tried to make payments on the student loans. If you or your children have chronic medical problems or mental health problems, this will be taken into consideration.
Once you file for bankruptcy, you are automatically protected against creditors. They can’t collect from you until the courts give them permission to do so.
There is an idea that higher education leads to financial success, however most people will feel the economic strain for years to come.
After filing for Chapter 13 bankruptcy, you will have a plan for repayment. Usually repayment is based on current and future income. A Chapter 13 plan is for 3 to 5 years. For help with a Chapter 13 bankruptcy plan, consult Minnesota Bankruptcy Attorney Gregory J. Wald.
Most Bankruptcy courts rely on a test called “The Brunner Test,” in order to determine whether a student loan is dischargeable in bankruptcy. However, in Minnesota the less restrictive "totality of the circumstances" test is used. The way the courts evaluate the loan’s dischargeability comes down to whether you have shown “an undue hardship.” The “totality of the circumstances” test requires that the debtor not be able to maintain the minimal standard of living if forced to repay the loans. The court can look at all relevant considerations, including:
(1) your past and present financial resources, and those that you can reasonably rely on for the future;
(2) your reasonably necessary living expenses for you and the your dependents; and
(3) “any other relevant facts and circumstances surrounding each particular bankruptcy case
It helps to get a hardship discharge if you have tried to make payments on the student loans. If you or your children have chronic medical problems or mental health problems, this will be taken into consideration.
Once you file for bankruptcy, you are automatically protected against creditors. They can’t collect from you until the courts give them permission to do so.
There is an idea that higher education leads to financial success, however most people will feel the economic strain for years to come.
After filing for Chapter 13 bankruptcy, you will have a plan for repayment. Usually repayment is based on current and future income. A Chapter 13 plan is for 3 to 5 years. For help with a Chapter 13 bankruptcy plan, consult Minnesota Bankruptcy Attorney Gregory J. Wald.
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