Law Offices of Michael J. Primus

Personal & Business Bankruptcy Attorney serving San Francisco Bay Area Since 1993

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Good News If You Co-Signed a Student loan

November 20, 2015 by Michael Primus

SunMost people are aware that student loan debt is a huge, and growing, problem in our society.  Nationally student loan debt exceeds credit card debt and is second only to mortgage debt in total dollars owed.  Most student loan borrowers realize there are ways to reduce payments on student loans (e.g. income based repayment) and ways to delay payment (e.g. deferment and forbearance) but very few ways to actually make the student loan debt go away.  With that as a backdrop, I want to discuss a bright spot in the student loan landscape, the co-signer release.

A co-signer is a person that’s responsible for a debt if the primary obligor, usually the student, fails to pay.  Many student loans, both federal and private, will require a co-signer as a condition to obtaining the loan.  Typically the co-signer is a parent or grandparent of the student.  The trouble with co-signing is not new.  In fact, the Bible discourages co-signing in Proverbs 6:1-5.  These verses urge a person who has cosigned to diligently work to resolve the matter.  Sage advice.  A co-signer release terminates the obligation of the co-signer.

Here’s what you need to know about obtaining a co-signer release of federal student loans including loans with Sallie Mae and Navient:

  • Only the borrower can request co-signer release;
  • The borrower must provide proof of graduation or successful completion of a certification program, proof of income, and proof of citizenship or legal residency;
  • The borrower must have made 12 consecutive, on‐time principal and interest payments immediately before applying;
  • The borrower must pass a credit review that demonstrates a satisfactory credit history and the ability to assume full responsibility of the loan(s) individually when the release request is processed;
  • The borrower must not have been reported as 90+ days delinquent in the past 24 months;
  • The borrower must not have existing student loan(s) in default;
  • The borrower must not have student loan(s) in forbearance or a modified repayment program.

The procedure is simple, complete a short form and send it to the lender.  Click below for forms and details for the largest student loan lenders.

Sallie Mae

Navient

Most private student loan lenders have similar programs for co-signer releases.  The Consumer Financial Protection Bureau has information and sample letters to request a private student loan co-signer release.

Once released, the student loan(s) will no longer be owed by the former cosigner but will remain an obligation of the primary borrower.  If you are the former co-signer that means no more worrying that someday the primary borrower will default leaving you on the hook.  The release can also improve your credit because you are no longer responsible for the student loan(s).

At the Law Office of Michael Primus we have helped thousands of clients get out of debt, stop wage garnishments, and start fresh through bankruptcy.  If you live in Contra Costa, Alameda or Solano counties and have debt problems, contact us for a free in-office consultation.  We have offices in Walnut Creek, Antioch, and Hercules.

 

Filed Under: Blog, Student loans

Can Private Student Loans be Discharged in Bankruptcy?

August 19, 2015 by Michael Primus

I am often asked if “private” student loans can be discharged in bankruptcy.  The answer is yes, if the loan(s) meet several criteria.  Bankruptcy code section 523(a)(8) describes which student loans are not forgiven and by implication which are.   Any obligation that meets the legal definition of a student loan will survive bankruptcy unless several conditions are met.  The student loan grunge violet seal isolated on whitethreshold question is whether your debt is a “student loan” and therefore subject to additional discharge limitations.  The law describes a student loan as an obligation to repay funds received as an educational benefit, educational scholarship or educational loan.  Assuming your loan is a student loan it will only be discharged if all the following criteria are met:

1.  No governmental unit involved.  This includes loans made, insured or guaranteed by a governmental unit.  Approximately 90% of student debt falls in this category, including loans made by the Department of Education, Sallie Mae, Nelnet, and Navient.

2.  Not funded in whole or in part by a non-profit.  Some universities are non-profit institutions while others are for profit.  Note: the term non-profit does not mean all the workers are volunteers.

3.  Not a qualified educational loan as defined by Internal Revenue Code.  Internal Revenue Code section 221(d)(1)  references several other statutes but essentially describes the cost of attendance at an institution participating in federal (called Title IV) student loan programs.  Eligible institutions are listed in the U.S. Department of Education’s Participating Schools List.  The list is updated quarterly.  For 2015-2016 there are approximately 750 California institutions listed, from large universities to tiny trade schools.  If your loan qualifies for any type of tax deduction, that is a strong indicator your loan is a qualified educational loan under Internal Revenue Code section 221(d)(1).

A couple examples may help illustrate how these rules are applied.

College Credit Card – While you were a student at a large public university you applied for and received a “student” credit card from a major bank like Bank of America, Citibank or Chase.  The card has the name of the university and the image of the school’s mascot.  You used the card to purchase books and school supplies.  Although the credit card was described as a “student” card it will not be considered a student loan for bankruptcy purposes because its use is not limited to educational purposes.  Use of the university’s name and mascot may promote school spirit but will not make this a student loan for bankruptcy purposes.

Tuition and Housing Loan – You apply through the Department of Education for loans to pay for tuition and housing at a small private university.  You receive the loans and graduate.  Upon graduation you receive statements from Nelnet or Navient.  This is a student loan because it was given strictly for the purpose of education and was made or insured by the government.  These loans will not be discharged in bankruptcy.

Trade School – You enroll and attend a for-profit trade school.  The school lends you the tuition and informs you that you will not be able to deduct the interest from your taxes.  Upon graduation you are billed by the school.  This appears to be a dischargeable debt in bankruptcy.

Suppose your loan does not qualify for discharge for one or more of the reasons discussed here, all is not lost.  The bankruptcy laws allow the judge to discharge a student loan that would otherwise not be forgiven if failing to discharge the loan will create an undue hardship.  A discussion of hardship discharge is beyond the scope of this post but readers are advised hardship discharges are very rare.

Special Rules for Healthcare Loans – Loans made pursuant to the Health Education Assistance Loan Act are subject to different and stricter standards.

Student loan discharge is a complex and evolving area of bankruptcy law and anyone contemplating a bankruptcy should discuss the details of their situation with a lawyer.

At the Law Office of Michael Primus we have helped thousands of clients get out of debt, stop wage garnishments, and start fresh through bankruptcy.  If you live in Contra Costa, Alameda or Solano counties and have debt problems, contact us for a free in-office consultation.  We have offices in Walnut Creek, Antioch, and Hercules.

 

Filed Under: Bankruptcy, Blog, Student loans

Bankruptcy Gets Rid of Payday Loans

July 29, 2015 by Michael Primus

Many people in Walnut Creek, Concord, and Antioch may wonder, what is a payday loan?  Payday lenders offer small, short term loans with little or no credit check or income verification.  They are usually small shops in strip malls.  Typically the loans are for about $300 and are due in 14 days.  Generally, the borrower writes a post-dated check for $300 but gets only $250, and in just two weeks the full $300 is due.  The borrower can pay about $50 to extend the loan for another two weeks or pay the full $300.  If the borrower fails to pay either the $50 or the full $300, then the payday lender deposits the post-dated check.  These loans are easy and convenient but carry interest rates ranging from 100% to 500% on an annualized basis.  How can that be legal?  Payday lenders exploit loopholes in the usury laws so that even a 500% interest rate is legal.  With interest rates like that, it’s no wonder payday lenders are popping up like weeds in the spring!Today - Payday small

Most people who borrow from a payday lender have been turned down for traditional loans and only out of desperation take a payday loan.  Too often, the person takes a second payday loan to pay the first and begins a downward cycle.  Like quicksand, the payday loan cycle is nearly impossible to get out of.  Soon the person – in dire financial straits before the first payday loan – has several loans with payments due every two weeks.  Often the payments are taken directly out of the borrower’s bank account on payday, hence the name.

As the cycle continues, the borrower goes deeper and deeper in debt.  Many borrowers will have up to 5 payday loans, usually from different lenders   Soon some of the post-dated checks begin to bounce, marking the beginning of the end.  As the checks bounce, the borrower incurs bounced check charges, further compounding the problem.  Often on the verge of eviction due to unpaid rent, the borrower asks “How can this craziness end?”  The answer might be bankruptcy.  A bankruptcy is a federal court order that gives people a “fresh start” by forgiving debts including payday loans.

This is a general discussion of the law and should not be relied upon.  Any person considering bankruptcy should consult a lawyer for a detailed discussion of his or her rights and options.

At the Law Office of Michael Primus, we have helped hundreds of clients get out of debt, stop wage garnishments, and start fresh through bankruptcy.  If you live in Contra Costa County and have debt problems, contact us for a free in-office consultation.  We have offices in Walnut Creek, Antioch and Hercules.

 

Filed Under: Bankruptcy, Blog

If You Have More Credit Card Debt Than Savings You’re Not Alone

July 16, 2015 by Michael Primus

Credit Card, Currency, Teenager.
Credit Card or Savings

I need to do it, you need to do it.  Most of us realized long ago that saving money is easier said than done.  In this strong economy, it seems like saving would be easier, yet between daily temptations and a myriad of unexpected expenses it just never seems to happen.  In fact, saving for the future is a combination of economics and psychology.  A recent study by Bankrate.com confirmed that 32% of people age 30 to 49 have more credit card debt than savings.  Other age groups are only slightly better off.    So, if you’re one of those people with more credit card debt than savings, what can you do?

Make a Plan – According to a survey done by AmericaSaves.org, people with a plan are far more successful savers then those without.  You don’t need to hire an accountant but you do need to take an honest assessment of how you spend your money.  Studies show that only 55% of people are saving enough for retirement, so any long term plan needs to provide for retirement.

Reduce Expenses – Invariably you have been told to “cut back” by many well-intentioned people.  There are many little things that can help.  Perhaps you can spend an afternoon at a public park or library instead of a movie theater.  Maybe try camping as an inexpensive vacation idea.  Make coffee at home instead of going to Starbucks.  Simple ideas can be a part of the solution.

Get a Better Job – Of course this would be wonderful.  Unfortunately many people have limited options.  Do you have children in school and need a job close to home with some flexibility?  Are you a senior citizen who fears age discrimination in the job market?  The fact is, finding a better job may not be realistic.

Move Out of the Bay Area – Study after study show the Bay Area is one of the most expensive places to live.  In fact, some studies conclude the cost of living in the Bay Area is the highest in the country.  If you’re retired or planning to retire soon, moving can make sense – a fixed income will go much farther somewhere else.  However, if you’re not ready to retire you may find the lower wages  keep the monthly budget tight.

Likely you’ve spent sleepless nights considering your options but still each month live paycheck to paycheck.  Maybe it’s time to take a hard look at things.  Did you know you have a right to bankruptcy?  The word scares most people.  The truth is, the never-ending cycle of living paycheck to paycheck is more daunting than bankruptcy.  Imagine what it would be like if your credit card debt vanished.  Picture yourself making a plan, being successful at saving.  How would it feel to finally be able to save the way you need to?  None of us are getting any younger so now is the time.

At the Law Office of Michael Primus we have helped thousands of clients get out of debt, stop wage garnishments, and start fresh through bankruptcy.  If you live in Contra Costa, Alameda or Solano counties and have debt problems, contact us for a free in-office consultation.  We have offices in Walnut Creek, Antioch, and Hercules.

Filed Under: Bankruptcy, Blog

Can I Find a Place to Rent After Bankruptcy?

June 29, 2015 by Michael Primus

Couple Standing By For Rent Sign Outside HomeWhether you rent or own, most people filing bankruptcy do not want to move.  In most bankruptcy cases  people keep paying their rent or house payment and are not expected to move.  Even so, one of the scariest things for people filing bankruptcy is the worry that in the future they will not be able to find a landlord to rent to them because of their credit.  The law gives a landlord discretion to accept or decline a potential tenant for almost any reason.  That said, most landlords have three goals in selecting a tenant:

1.  Must be able to pay the rent – Many landlords use a credit score as a gauge of a person’s ability to pay the rent but a credit score is not the only method.  Rental history and documented income can overcome a bad credit report with many landlords.

2.  Must take care of the property – Landlords want their property to be taken care of.  Landlords will quickly and quietly assess a person based on their appearance.  A person that cares for their personal appearance may be assumed to care for the place they live with the same attention to detail.  This sounds superficial, and it is, but landlords often make decisions with limited information.

3.  Must stay for some period of time – Landlords like people with established jobs, established families, and roots in the community.  People who, the landlord hopes, will move in and stay for years.  Landlords do not like vacancy.  In fact, this is the reason many landlords ask tenants to sign a 12-month lease prior to moving in.

If you’re looking for a place to rent within two years of filing bankruptcy, you should expect a few questions about your situation.  Some landlords may ask for a co-signer.  Ultimately most people find perseverance pays and they are able to find a place to rent.  Remember, landlords need you as much as you need them.  So if your credit is not good, you should plan to show a good rental history (hopefully it’s good) and documented income.  Dress well and be on time when meeting a prospective landlord.  Be ready to discuss any connections to the community and your willingness to sign a lease for a period of time.

At the Law Office of Michael Primus we have helped thousands of clients get out of debt, stop wage garnishments, and start fresh through bankruptcy.  If you live in Contra Costa, Alameda or Solano counties and have debt problems, contact us for a free in-office consultation.  We have offices in Walnut Creek, Antioch and Hercules.

Filed Under: Blog, Credit

New Law Helps People With Old Debts

June 18, 2015 by Michael Primus

Red Vector New Tag, Label Isolated on WhiteThese days many people in Contra Costa County and the greater Bay Area are stuck with unpaid debts from the recession of 2007 to 2010.  Often people trying to get their finances back on track get a copy of their credit reports and see delinquent debts still showing after many years.  Naturally, they wonder what they need to do to get past all this?  The answer requires an understanding of the important distinction between legal liability and credit reporting.  Generally, things can remain on a credit report long after the debt becomes legally unenforceable as discussed below.

Statute of Limitations

These laws exists in every state and limit when a lawsuit can be filed.  In California, Code of Civil Procedure section 337 requires any lawsuit for breach of a written contract – like a credit card, medical bill, payday loan – be filed within 4 years of when the last payment was made on the account.  This means if no payments are made on an account for 4 years, the creditor loses its right to obtain a court judgment.  The trouble is that unless you go to court and assert the statute of limitations, the court may enter a judgment against you.

New Rule Protects Consumers From Late Claims by Debt Buyers

Delinquent debts are often sold from one company to another.  In fact, there is an entire industry dedicated to buying and selling debts.  These companies are called “Debt Buyers,” and are now subject to new laws in California.  California Civil Code section 1788.56 prohibits a “debt buyer” from filing suit to collect on a debt when the statute of limitations has expired.  The definition of debt buyer is broadly worded.  The difference is that consumers will not be summoned to court by debt buyers to defend claims after the statute of limitations has expired.  Similarly, the courts will not be burdened with useless lawsuits.  The new law provides for damages and attorney fees if a debt buyer intentionally violates the law.

Credit Reporting is Different

A credit report is designed to be an accurate chronology of what happened with a person’s finances, good and bad.  Most items will appear for 7 years.  This means the car you paid off 5 years ago will still show as good credit, it also means the bill you got behind on or failed to pay 5 years ago will show as bad.  The result is that credit reports can list unenforceable debts.  People often assume if they pay a delinquent bill it will no longer show as bad on their credit report which is not the case.  The only way to avoid having things show as bad credit is to pay on time, paying late is not the same.

What About a Judgment?

Perhaps you’ve been sued and the creditor obtained a judgment?  In most cases it’s too late to assert the statute of limitations or any other defense.  If you have a judgment against you it gives the creditor the right to garnish wages, levy your bank account, put a lien on your house or business or all of these.   The bankruptcy laws are the laws society provides to allow a person to have most debts forgiven.  Bankruptcy can wipe out credit cards, medical bills, and collection agency bills.  After bankruptcy the calls, letters, and lawsuits all stop.  Bankruptcy does not forgive student loans, alimony, child support or crime.  Bankruptcy is a viable, long term solution for many people struggling with debts.

At the Law Office of Michael Primus we have helped thousands of clients get out of debt, stop wage garnishments, and start fresh through bankruptcy.  If you live in Contra Costa, Alameda or Solano counties and have debt problems, contact us for a free in-office consultation.  We have offices in Walnut Creek, Antioch and Hercules.

Filed Under: Bankruptcy, Blog

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Determining if bankruptcy is right for you requires specific guidance from an attorney because each situation is different.
The information here is general in nature and is not a substitute for an in office consultation with a lawyer.