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How Does Bankruptcy Affect My Credit?

Many individuals fear that filing a bankruptcy will hurt their credit score and prevent them from getting further credit. While there are many factors involved in a company’s decision to provide financial products to an individual that has filed bankruptcy, it is important to remember that persistence will pay off in the long run and knowing your options is key.

It is important to understand the time frame that is involved when filing either a Chapter 7 or a Chapter 13 bankruptcy and how that will affect your ability to repair your credit. Typically, it takes anywhere from one to three years to repair your credit after a bankruptcy has been filed.

One common misconception is that filing a Chapter 13 bankruptcy will affect your credit less than a Chapter 7 because you are paying off your creditors. In a Chapter 13 bankruptcy, you use your income to pay some or all of what you owe to your creditors over time, from three to five years, depending on the size of your debts and income.  A Chapter 13 bankruptcy affects your credit score the same way that a Chapter 7 does, only the time frame for credit repair is greater because you are in the bankruptcy process for three to five years while you are paying off debt to your creditors.

A Chapter 7 bankruptcy, on the other hand, discharges many of your debts and can be filed within a few months. Therefore, the process is much shorter, and the time it takes to repair your credit is less.

It is important to understand your options and how bankruptcy will affect your credit. Knowing your options is crucial to alleviate your fears and misconceptions about the bankruptcy process. Please contact one of our professional bankruptcy attorneys at Hoglund Law Office to discuss your specific situation and find out whether a Chapter 7 or Chapter 13 bankruptcy is right for you.

Written by Hoglund Law

The attorneys of Hoglund law are licensed in Minnesota, Wisconsin and Ohio. Hoglund, Chwialkowski & Mrozik, PLLC is based in Roseville, Minnesota. In addition to handling cases involving bankruptcy & social security, Hoglund, Chwialkowski & Mrozik, PLLC handles faulty drugs and toxic exposure.

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Boost in Minimum Wage for Some States

Eight States which include Arizona, Colorado, Florida, Montana, Ohio, Oregon, Vermont, and Washington all raised the minimum wage to keep pace with inflation.  The increase in these States ranged between 28 and 37 cents per hour and will take affect January 1.  More than 1.4 million low-income earners will see their wages go up on New Year’s Day.  While the Federal minimum wage is at $7.25 an hour, workers in Washington State will earn a minimum of $9.04 thanks to their recent wage increase.  18 States total, including Washington, D.C., have rates above the federal level.

The wage increase in the aforementioned states will result in an extra $582 to $770 a year for full-time workers.  The non-profit advocacy group, National Employment Law Project contends that the minimum wage increases will act as a mini-boost to the economy.  The expected increase in wages will result in an increase in those wages being spent, which is projected to add $366 million to the nation’s gross domestic product.  The National Employment Law Project also projects that the minimum wage increases also will result in a creation of more than 3,000 full-time jobs.

Paul Sonn, legal co-director at NELP states, “Increasing minimum wage is a key form of local stimulus.”  The increase in wages will put money back into the pockets of low-income families who will then spend that money at the local businesses.  Paul Sonn also believes that the eight states that are raising their minimum wage on January 1 are protecting themselves in case Congress can’t reach an agreement to extend the payroll tax break beyond February.  He believes that the boost in incomes for individuals living in those eight states will more than offset the loss that could come from the inability of Congress to extend the payroll tax break.

 

Source:

Blake Ellis, Minimum wage increases for workers in eight states, https://money.cnn.com/2011/12/23/news/economy/minimum_wage_increases/index.htm?iid=Popular (accessed 12/27/11)

Written by Hoglund Law

The attorneys of Hoglund law are licensed in Minnesota, Wisconsin and Ohio. Hoglund, Chwialkowski & Mrozik, PLLC is based in Roseville, Minnesota. In addition to handling cases involving bankruptcy & social security, Hoglund, Chwialkowski & Mrozik, PLLC handles faulty drugs and toxic exposure.

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Mixed Feelings on the Current Housing Market

Some economic experts and analysts contend that there is little chance for a housing recovery.  That extremely pessimistic outlook is not based on feelings, but upon solid economic data.  The year of 2011 was a sad story for the housing market.  The market saw record low 30-year mortgage rates with few people taking advantage of the rates to buy new homes.  The New Year is likely to bring much of the same.  Doug Duncan, vice president and chief economist at Fannie Mae, contends that there might be a slight uptick in houses sold but the home prices likely will be down.  This means that although more houses will be sold in 2012, the total amount of money spent on purchases is likely to be the same as in 2011.

Despite the fact that the Federal Reserve has pledged to keep rates low through 2013, many content that because of the high unemployment and the historically low home prices, there will be no recovery of the housing market for the foreseeable future.  Last year saw a total of $1.3 trillion in home lending, which is down from $1.7 trillion in 2010 and $3.3 trillion in 2005.  Another disturbing figure is the fact that much of the $1.3 trillion in home lending last year did not result in new home purchases.  Approximately 4 out of 5 mortgage applications were for refinancing current mortgages.  Borrowers were taking advantage of the historically low rates, which averaged less than 4%, not to purchase new houses, but to refinance their current homes.

Not all analysts predict such doom and gloom for the housing market.  Others are optimistic about the future of the market.  Former top economics advisor to the White House and Wells Fargo & Co., Sung Won Sohn states, “Housing has hit the bottom and has begun to heal slowly.”  The events that have taken place over the past few years have “set the stage for a rebound” as Sung contends.  Whether or not we are to see a recovery in the near future most would contend that given the extreme damage that was inflicted on the housing market any form of recovery is likely to be slow.

 

Source:

E. Scott Reckard, Low mortgage rates likely to continue through 2012, experts say, https://www.latimes.com/business/la-fi-mortgage-rates-20120103,0,2240865.story (accessed 12/4/12)

Written by Hoglund Law

The attorneys of Hoglund law are licensed in Minnesota, Wisconsin and Ohio. Hoglund, Chwialkowski & Mrozik, PLLC is based in Roseville, Minnesota. In addition to handling cases involving bankruptcy & social security, Hoglund, Chwialkowski & Mrozik, PLLC handles faulty drugs and toxic exposure.

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Historic Low for Mortgage Rates

In the 40-year history of Freddie Mac’s Primary Mortgage Market Survey, interest rates on a 30-year fixed-rate loan is the lowest it has ever been.  Just in time for the holidays, the mortgage rate on a 30-year mortgage is now 3.94%.  Mortgage rates have been falling over the entire year, and since the beginning of the year, the rate has fallen .9%.  Frank Nothaft, Freddie’s chief economist notes the decrease in rates over the year results in a savings of $1,200 a year for a homeowner with a $200,000 mortgage.

These low rates are resulting in an increase in home sales, which is a good sign for the economy.  This past month saw the greatest new home sales since January.  Senior financial analyst at Bankrate.com, Greg McBride, contends that mortgage rates should remain low for much of 2012.  “For well-qualified buyers, interest rates should be no impediment to home buying in 2012,” said McBride.

Existing homeowners are taking advantage of these historic rates by refinancing their old loans into more affordable ones.  Nearly 80% of all mortgage applications last week came from existing homeowners.  McBride expects that lenders will ease up on borrowing requirements only slightly.  Some lenders are starting to require only a 720 credit score, where previously a 740 credit score was required for the best mortgage rates.  These baby steps will, however, help more people gain access to these historic rates.

 

Source:

Les Christie, Mortgage rates hit another record low, https://money.cnn.com/2011/12/22/real_estate/mortgage_rates/index.htm?iid=HP_LN (accessed 12/22/2011)

Written by Hoglund Law

The attorneys of Hoglund law are licensed in Minnesota, Wisconsin and Ohio. Hoglund, Chwialkowski & Mrozik, PLLC is based in Roseville, Minnesota. In addition to handling cases involving bankruptcy & social security, Hoglund, Chwialkowski & Mrozik, PLLC handles faulty drugs and toxic exposure.

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Dispute over whether Scottie Pippen filed for bankruptcy

Former Chicago Bulls star, Scottie Pippen, most notably known for his time playing alongside Michael Jordan in the Bulls six NBA championships, has filed a multimillion-dollar federal lawsuit Tuesday, December 13, 2011.  The lawsuit claims that several websites and media outlets falsely accused Scottie Pippen of filing for bankruptcy.  CNBC.com was among one of the many news outlets that reported Scottie Pippen’s alleged bankruptcy filing.  CNBC.com had listen Pippen in one of the “15 Athletes Gone Bankrupt.”  The article went on to mention that Pippen had lost $120 million in career earnings, including a $4 million corporate jet.

Scottie Pippen contends that all the reports about his bankruptcy are completely false and still has “substantial net worth, which has not been less than approximately $40 million in the last 10 years.”  The federal lawsuit names Comcast Corp., General Electric Co. and CBS Corp, among others.  The lawsuit contains three claims including negligence, false light and defamation.  The suit seeks approximately $9 million in damages.

 

Source:

Allison Horton, Scottie Pippen files suit against those who said he filed for bankruptcy, https://www.suntimes.com/sports/basketball/bulls/9426888-579/scottie-pippen-files-suit-against-those-who-said-he-filed-for-bankruptcy.html (accessed 12/13/2011)

Written by Hoglund Law

The attorneys of Hoglund law are licensed in Minnesota, Wisconsin and Ohio. Hoglund, Chwialkowski & Mrozik, PLLC is based in Roseville, Minnesota. In addition to handling cases involving bankruptcy & social security, Hoglund, Chwialkowski & Mrozik, PLLC handles faulty drugs and toxic exposure.

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Sometimes Income Taxes Are Dischargeable In a Bankruptcy

As a general rule taxes are nondischargeable in a bankruptcy. However, in some circumstances, income taxes can be discharged in a bankruptcy. In order for income taxes to be eligible for a discharge in a bankruptcy, the taxes must have been filed for at least two years and the taxes must have been due and owing for at least three. For example, 2007 taxes became due and owing in 2008 and they can therefore be discharged after April 15th in 2011 assuming that they were filed on time in 2008. There are some qualifications to this. If certain events have occurred during the three year period, the taxes will not be discharged. For example, an assessment will cause the waiting period to be extended. There are a variety of other tolling events. It is best to get a professional opinion regarding the dischargeability of taxes before assuming that a bankruptcy will wipe out the obligation.

Written by Hoglund Law

The attorneys of Hoglund law are licensed in Minnesota, Wisconsin and Ohio. Hoglund, Chwialkowski & Mrozik, PLLC is based in Roseville, Minnesota. In addition to handling cases involving bankruptcy & social security, Hoglund, Chwialkowski & Mrozik, PLLC handles faulty drugs and toxic exposure.

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Credit card use is making a comeback

Consumer spending over the last three quarters of 2011 has shown a reversion to credit card use over debit card.  Silvio Tavares, senior vice president at First Data, which processes card transactions for 4.1 million merchants, notes that “Consumers have spent the last couple of years de-leveraging and reducing credit card use, but the past month — and since April — they’ve been using their credit cards more and are starting to return to pre-recession buying.”  The first quarter of 2011 saw an 8.2% increase in credit card use, followed by a 9% increase in the second quarter and a 10.6% increase in the third quarter.  On the other hand, debit card use increased by 9.6%, 8.3%, and 5.9% in quarters one, two and three respectively.  On black Friday alone, credit card use jumped 7.4% from the same day a year ago.

A major contributing factor to the rise in credit card use is that the banks are encouraging consumers to switch from debit to credit.  Credit card use is more profitable and cost effective for banks compared to debit/checking accounts.  To get consumers to make the switch, credit card mailings have increase 85% since early 2010, and many of these credit card offers come with new perks such as rewards points, miles, or cash rebates.  The number of credit cards offering such perks has increased over the past two years from 6 out of 10 of the credit card offers in 2009 to 8 out of 10 credit card offers today.

Analysts believe that an increase in credit card offers will continue to intensify as debit cards become less cost-effective for banks.  Banks have started to raise checking account fees and charge debit card usage fees, all of which is part of the attempt to get consumers to switch to credit cards.  Although consumers will not be charged with the same usage fees on their credit cards, Bill Hardekopf, CEO of LowCards.com warns consumers to pay off their balance each month because the interest payments will be much greater than any new debit card fee.

 

Source:

Blake Ellis, Credit card use is on the rise, https://money.cnn.com/2011/12/05/pf/credit_card_use/index.htm?iid=SF_PF_LN (accessed 12/7/11)

Written by Hoglund Law

The attorneys of Hoglund law are licensed in Minnesota, Wisconsin and Ohio. Hoglund, Chwialkowski & Mrozik, PLLC is based in Roseville, Minnesota. In addition to handling cases involving bankruptcy & social security, Hoglund, Chwialkowski & Mrozik, PLLC handles faulty drugs and toxic exposure.

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Student Loans may be the “Good” Kind of Debt

Although most people would like to have zero debt compared to much debt, student loan debt may not be as bad as other kinds.  With low interest rates and flexible payment options, Carolyn Bigda from the Chicago Tribune contends that student loans tend to be more forgiving than other types of debt.  However, the primary focus should not be what debt people should get into, but rather, consider saving before paying off loans.

On average 65 percent of students who attend a four-year private college and 56 percent of students who attend public universities end up raking in $28,100 and $22,000 in student loan debt respectively.  A recent graduate may be concerned with paying off that debt as soon as possible.  Doing just that may not be the best idea.  Saving more of your income compared to paying off student loans may be the wiser decision depending on a person’s future goals.  For example, if you would like to buy a home, purchase a car, or take a vacation once in awhile, having savings will help pay for these things without increasing total debt.  If there are no savings available to pay for these goals, financing them is the only other option, which ends up leading to greater debt.

While completely neglecting student loan debt is not an attractive option either, there are ways to save money and pay off that debt.  Private loans may be refinanced, and if the interest rates are still burdensome, targeting private loans first may be advisable.  In the case of federal loans, student loans may be consolidated and interest rates could be reduced as much as .5 percent.  Also new rules announced in October would result in a waiver of any remaining balance if after 20 years of repayment a student loan balance still exists.

Depending on ones circumstances and financial situation, it may be wise to consider saving over paying off student loan debt.  College graduates Philip Taylor and his wife, Teresa did just that.  They held off a bit on paying back their student loans, they saved, and were able to purchase a house, pay off their credit card balances, and start funding a retirement account.  When all was said and done, they had enough saving to pay back a huge chunk of their student loans.

 

Source:

Carolyn Bigda, Consider saving before paying off student loans, https://www.chicagotribune.com/business/yourmoney/sc-cons-1117-started-20111118,0,6457015.story (accessed 11/18/2011)

 

Written by Hoglund Law

The attorneys of Hoglund law are licensed in Minnesota, Wisconsin and Ohio. Hoglund, Chwialkowski & Mrozik, PLLC is based in Roseville, Minnesota. In addition to handling cases involving bankruptcy & social security, Hoglund, Chwialkowski & Mrozik, PLLC handles faulty drugs and toxic exposure.

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An Increase in Foreclosure Activity is a Good Thing

An Increase in Foreclosure Activity is a Good Thing

It is certainly a very scary time receiving a notice of default and having to go through the process of foreclosure.  There are few things worse than losing one’s home.  However, an increase in foreclosure rates may be a sign that the housing market is on its way to recovery.  As industry analysts put it, “the sooner the inevitable foreclosures get cleared out, the better.”

The Associated Press reports that in the month of October, more U.S. homes entered into the foreclosure process than in previous months.  The Associated Press also reports that there was a monthly increase in the number of U.S. homes scheduled for auction, repossession, and notice of default.  As a result of this increase in the month of October, homes that likely will be lost to foreclosure have reached a seven-month high.  Although these figures sound like terrible news for those struggling to make payments, industry analysts urge the necessity of the foreclosures in order to bring on the revival of the housing market.

It seems as if this housing crisis has been around for quite some time.  Some have contested that government intervention, which has required tedious filing practices on the part of the lenders, is behind this slowed process.  However, RealtyTrac CEO James Saccacio is optimistic that this will change, he remarks, “We’ll eventually see foreclosure processing go up.”

Insider trading data suggests that some already are beginning to feel the revival of the market.  Trading in the real estate and construction markets have lead some to believe that a rebound is not too far off.

 

Source:

Rebecca Lipman, Foreclosures Rising: Are We Nearing the End of the Housing Crisis?

Written by Hoglund Law

The attorneys of Hoglund law are licensed in Minnesota, Wisconsin and Ohio. Hoglund, Chwialkowski & Mrozik, PLLC is based in Roseville, Minnesota. In addition to handling cases involving bankruptcy & social security, Hoglund, Chwialkowski & Mrozik, PLLC handles faulty drugs and toxic exposure.

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Super Committee fails to reach debt reduction package

Earlier this week, the bipartisan 12-member panel, the so called “super committee,” failed to reach an agreement on the goal of $1.2 trillion in debt reduction.  The final vote originally was set for Wednesday before Thanksgiving, but because the panel did not have a blueprint of a proposed package, the super committee announced on Monday, November 21, 2011, that it was unable to reach a deal.

Automatic budget cuts are scheduled to kick in 2013, and the cuts would slash $1.2 trillion in defense and nondefense spending.  However, programs such as Social Security and programs for low-income people such as Medicaid are exempt from the automatic budget cuts.  Medicare cuts would be limited in the cuts made as well.  Even though the cuts are to kick in 2013, Congress could easily reverse them.

Budget experts have continued to stress the importance of tackling the debt issue in order to get the country back on a sustainable fiscal track.  Some of those experts said, “Congress needed to ‘go big’ on a deal that tackles the big drivers of future debt — entitlements and health care.”  They contend this big deal would have to be some kind of bargain reaching $3 to $4 trillion over ten years.  The super committee’s failed attempt was a shot at $1.2 trillion and was nowhere near the level of debt reduction demanded by experts.

 

 

Source:

Charles Riley, Super committee: What’s next, https://money.cnn.com/2011/11/21/news/economy/super_committee_failure/index.htm?iid=HP_Highlight (accessed 11/23/2011)

 

Written by Hoglund Law

The attorneys of Hoglund law are licensed in Minnesota, Wisconsin and Ohio. Hoglund, Chwialkowski & Mrozik, PLLC is based in Roseville, Minnesota. In addition to handling cases involving bankruptcy & social security, Hoglund, Chwialkowski & Mrozik, PLLC handles faulty drugs and toxic exposure.

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Consumer Spending and U.S. incomes up slightly

The Commerce Department reported Wednesday that consumer expenditures rose by a nominal .1% in October, which is down slightly from a .7% increase in consumer spending that we saw in September.  Meanwhile, U.S. incomes rose a bit, up .4% in October compared to a .1% increase in September.  However, despite these lack luster figures, there is room for optimism in the retail market, which is predicting an increase in spending of 2.8% compared to the 2010 holiday shopping season.

This week’s jobless claims rose by 2,000, to a seasonably adjusted 393,000.  The increase by 2,000 was the trend breaker of three previous consecutive weeks of jobless claims decline.  However, the Labor Department is not alarmed by this shift and does not find it unusual.  The four-week moving average of new jobless claims, which is a more reliable indictor because it handles the issue of unusually volatile weeks, actually is decreasing by 3,250.  Economists generally contend that jobless claims must stay below 400,000 in order to see any real market recovery.  Although, jobless figures are hovering only slightly below that mark, it is still positive to note that those figures are slightly below rather than slightly above the 400,000 mark.

Reports also have shown a decrease in purchases of durable goods.  Durable goods are products that are designed not to wear out quickly and are to be used over time, rather than consumed immediately.  Notable durable goods are products such as cars, jewelry, phones, refrigerators, and furniture.  Nondurable goods are products such as food, fuel, shoes, and paper.  The figure for durable goods is down .7%.  However, this estimate slightly is misleading because a substantial portion of the .7% decrease can be attributed to a large decline in purchases of commercial airplanes, which is down 16.4%.  Several other durable good sectors actually have reported gains, such as a 6.2% rise in orders for motor vehicles and parts.

 

Source:

Eric Morath and Tom Barkley, Spending Slowed in October, https://online.wsj.com/article/SB10001424052970204630904577055931450123646.html (accessed 11/23/2011)

Written by Hoglund Law

The attorneys of Hoglund law are licensed in Minnesota, Wisconsin and Ohio. Hoglund, Chwialkowski & Mrozik, PLLC is based in Roseville, Minnesota. In addition to handling cases involving bankruptcy & social security, Hoglund, Chwialkowski & Mrozik, PLLC handles faulty drugs and toxic exposure.

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Credit Cards After Bankruptcy?

Many individuals when filing a bankruptcy want to know if it is possible to simply leave a creditor out of the bankruptcy.  It is not. The law is very clear that all creditors must be included when filing a bankruptcy. It is often possible to essentially remove a secured creditor from a bankruptcy by signing a reaffirmation agreement. However, signing a reaffirmation agreement on a credit card is unwise and typically will not be approved.  All reaffirmation agreements must be approved by the judge in the case. It is extremely unlikely that any judge would approve a reaffirmation agreement for a credit card and very few attorneys would ever recommend reaffirming such a debt.

Once a person has finished a bankruptcy, it is not particularly difficult to get a new credit card.

Written by Hoglund Law

The attorneys of Hoglund law are licensed in Minnesota, Wisconsin and Ohio. Hoglund, Chwialkowski & Mrozik, PLLC is based in Roseville, Minnesota. In addition to handling cases involving bankruptcy & social security, Hoglund, Chwialkowski & Mrozik, PLLC handles faulty drugs and toxic exposure.

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Changes In Circumstances In a 13

When filing a Chapter 13 Bankruptcy, many individuals are very concerned about what will happen if there is a change in their income. A Chapter 13 is a repayment plan that is largely based upon a debtor’s income and expenses. In some cases the payment is based on tax debt or mortgage arrears. The payments vary considerable on a case to case basis.

If a person files a Chapter 13 and there is a significant change in circumstances, it is possible in most cases to go back to the court and ask for a reduction in the payments. It is also possible in some cases to ask that the case be changed from a Chapter 13 into a Chapter 7 liquidation which does not involve repaying the creditors.

When a person enters into a Chapter 13, it is important that they stay in contact with the attorney who represents him or her.  Oftentimes problems can be addressed in the Chapter 13, if the attorney is informed.

Written by Hoglund Law

The attorneys of Hoglund law are licensed in Minnesota, Wisconsin and Ohio. Hoglund, Chwialkowski & Mrozik, PLLC is based in Roseville, Minnesota. In addition to handling cases involving bankruptcy & social security, Hoglund, Chwialkowski & Mrozik, PLLC handles faulty drugs and toxic exposure.

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Is student loan dischargeable in a Chapter 13?

Student loans are typically non-dischargeable in either a Chapter 13 Bankruptcy or in a Chapter 7 Bankruptcy. (In some instances, an individual can have his/her student loans discharged in a bankruptcy if the individual can show the student loans present an undue hardship. The standard for this is very high and very few individuals are able to successfully show this.)

A Chapter 13 is essentially a repayment plan where the individuals pay back their creditors based upon their income. Some people will pay the creditors 1% of what is owed to them and some will pay back 100%. The amount paid back will depend on a person’s individual circumstances. If a person owes student loans in a Chapter 13, the student loans will survive the bankruptcy and essentially be waiting for the debtor at the completion of the Chapter 13.

While the individual is in a bankruptcy, the student loan company will be treated like any other unsecured creditor if it is put into the plan. The student will only get a portion of the Chapter 13 payment if they get anything at all. The debtor will still owe the student loan company whatever has not been paid upon the completion of the bankruptcy.

If a student loan is considered long-term debt, meaning that the individual will be paying on the student loan for longer than the duration of the Chapter 13 plan even if the individual were making full payment to the student loan company, then it is permissible to allow the debtor to continue to pay the student loan company directly while the person is in the Chapter 13. In many cases, this will be a benefit to the debtor because the student loan company will be paid more during the Chapter 13 plan and the debtor will therefore owe them less when the Chapter 13 plan is completed.

Student loans are typically non-dischargeable in either a Chapter 13 Bankruptcy or in a Chapter 7 Bankruptcy. (In some instances, an individual can have his/her student loans discharged in a bankruptcy if the individual can show the student loans present an undue hardship. The standard for this is very high and very few individuals are able to successfully show this.)

A Chapter 13 is essentially a repayment plan where the individuals pay back their creditors based upon their income. Some people will pay the creditors 1% of what is owed to them and some will pay back 100%. The amount paid back will depend on a person’s individual circumstances. If a person owes student loans in a Chapter 13, the student loans will survive the bankruptcy and essentially be waiting for the debtor at the completion of the Chapter 13.

While the individual is in a bankruptcy, the student loan company will be treated like any other unsecured creditor if it is put into the plan. The student will only get a portion of the Chapter 13 payment if they get anything at all. The debtor will still owe the student loan company whatever has not been paid upon the completion of the bankruptcy.

If a student loan is considered long-term debt, meaning that the individual will be paying on the student loan for longer than the duration of the Chapter 13 plan even if the individual were making full payment to the student loan company, then it is permissible to allow the debtor to continue to pay the student loan company directly while the person is in the Chapter 13. In many cases, this will be a benefit to the debtor because the student loan company will be paid more during the Chapter 13 plan and the debtor will therefore owe them less when the Chapter 13 plan is completed.

Written by Hoglund Law

The attorneys of Hoglund law are licensed in Minnesota, Wisconsin and Ohio. Hoglund, Chwialkowski & Mrozik, PLLC is based in Roseville, Minnesota. In addition to handling cases involving bankruptcy & social security, Hoglund, Chwialkowski & Mrozik, PLLC handles faulty drugs and toxic exposure.

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What happens when one signs up for credit counseling?

The typical credit counseling program is a repayment plan to unsecured creditors. Essentially, what a credit counselor does is negotiate a repayment plan with creditors. The plan will usually allow the debtor to pay less in interest to the creditors. Credit counseling will typically not provide for a reduction in the principle amount owed. The typical credit counseling plan lasts for five years. The payment is based upon the amount of debt owed to the creditors and the fees of the credit counseling agency.

There are a number of pitfalls involved in choosing credit counseling as an option to dealing with debt. The first issue involves the payment. Because the principle owed to the creditor is not reduced, the payments are often simply not affordable for many debtors. Also the payments are not flexible, if a person participating in a credit counseling program has a loss in income, the credit counseling payment remains the same. If a person can not make the payment, the person will be removed from the plan.

Another issue which frequently reeks havoc with credit counseling plans is that if all creditors do not agree to the plan, then those who do not agree are not bound to the plan and are free to continue to attempt to collect on the debt owed to them. For example, if one creditor holds out and is not being paid through the plan, that creditor could sue the debtor and then garnish the debtor’s wages which may make it impossible for the debtor to continue on with the credit counseling plan. It is not uncommon for a creditor to refuse to participate in a credit counseling plan especially if the creditor already has obtained a judgment against the debtor or if the debt has already been turned over to a collection agency.

Written by Hoglund Law

The attorneys of Hoglund law are licensed in Minnesota, Wisconsin and Ohio. Hoglund, Chwialkowski & Mrozik, PLLC is based in Roseville, Minnesota. In addition to handling cases involving bankruptcy & social security, Hoglund, Chwialkowski & Mrozik, PLLC handles faulty drugs and toxic exposure.

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The United State’s 18 Largest Banks are In Trouble Again

The Federal Housing Finance Agency is bringing suit against the United State’s 18 largest banks.  This suit stems from the banks sale of $200 billion in toxic mortgage-backed securities to Fannie Mae and Freddie Mac.  The FHFA claims that the banks overstated the value of the mortgaged homes and the number of the homes that were owner-occupied.  Defendants in this case include notable financial giants such as: Bank of America, J.P. Morgan Chase, and Goldman Sachs.

The media has been reporting that the suit is valued upwards of $200 billion; however, the FHFA contests this figure and suggests that the suit seeks only the actual loss in value of the securities, which would result in a more modest figure of $40 billion.  Despite this discrepancy in value, this suit is among many other legal burdens that these banks face.  Attorney generals from all 50 states have sought in total $20 billion in redress resulting from the alleged foreclosure-related abuses.

Legal experts weighing in on this case note that Fannie and Freddie’s actual losses may not be sourced from the banks misstatements but rather from a change in market conditions.  One expert went on to say that if the banks successfully can argue that the losses were due not from misrepresentations but from the burst of the housing bubble, they should have a good chance at winning the case.

 

Source:

Roger Parloff, Uncle Sam’s new crusade against banks, https://finance.fortune.cnn.com/2011/11/08/fannie-freddie-lawsuit-banks/?iid=HP_River (accessed November 8, 2011).

Written by Hoglund Law

The attorneys of Hoglund law are licensed in Minnesota, Wisconsin and Ohio. Hoglund, Chwialkowski & Mrozik, PLLC is based in Roseville, Minnesota. In addition to handling cases involving bankruptcy & social security, Hoglund, Chwialkowski & Mrozik, PLLC handles faulty drugs and toxic exposure.

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Think Twice Before Choosing a College Major

The weak economy and high unemployment rate is a great burden, and people are searching for answers.  During this weak economy, many are choosing to go back to school, ride out the market, and add a few more degrees to their resume.  However, despite having a higher level of education, the joblessness rate for people with a college degree or higher is at 4.4%.

Whether you are deciding to move into a new line of work or just bolster your resume, there are certain majors that will put you in the fast lane for a job right after graduation.  The Wall Street Journal found that six fields of study have an unemployment rate of zero percent.  Actuarial Science, Astronomy and Astrophysics, Educational Administration and Supervision, Geological and Geophysical Engineering, Pharmacology, and School Student Counseling all boast a 100 percent employment rate.  Other notable majors that pride themselves in low unemployment rates are Agricultural Economics, Teacher Education, and Nursing.

Majors that hold high unemployment rates include: Clinical Psychology, United States History, and Library Science.  The aforementioned majors have an unemployment rate of 15% or greater.

The study also examined median earnings and popularity of majors.  Business Management and Administration topped the popularity list, while Petroleum Engineering came in first in the median earnings category with $127,000.

 

 

Sources:

Liz Goodwin, The 10 college majors with the lowest unemployment rates, https://news.yahoo.com/blogs/lookout/10-college-majors-lowest-unemployment-rates-163049193.html (accessed 11/9/2011)

 

The Wall Street Journal, From College Major to Career, https://graphicsweb.wsj.com/documents/NILF1111/#term= (accessed 11/9/2011)

Written by Hoglund Law

The attorneys of Hoglund law are licensed in Minnesota, Wisconsin and Ohio. Hoglund, Chwialkowski & Mrozik, PLLC is based in Roseville, Minnesota. In addition to handling cases involving bankruptcy & social security, Hoglund, Chwialkowski & Mrozik, PLLC handles faulty drugs and toxic exposure.

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Younger Generations Worse Off Than Older Generations

Over the history of the United States there has been a general trend of increased wealth with each passing generation.  However, analysis by the Pew Research Center points to the exact opposite.  The older generations have been able to amass more wealth over time relative to the younger generations.  Despite the obvious ability to collect more wealth by living longer, households in 1984 headed by people 35 years and younger had a median net worth of $7,859 greater than households headed by people 35 years and younger in 2009.  Today, the wealth gap between households headed by people age 65 and older and households headed by people age 35 and younger has never been wider.  In 1984 the 65 year old age group had a median net worth 10 times greater than the 35 year old age group. Today the 65 year old age group holds a median net worth 47 times greater than the 35 year old age group.

Besides a weak economy, there are several other likely culprits to this increasing net worth gap.  For instance, today’s individuals are starting their independent lives later and putting home ownership off longer.  The increased cost of attending college also has aided in this change; younger generations are attending college in greater numbers compared to the older generations.

The Pew Research Center attributes the largest factor in the increased wealth gap to the housing market.  The report said, “While rising home equity helped drive wealth gains for the older generation over the long-term, younger people had less time to ride out the housing market’s volatility — especially its most recent boom and bust.”  Whatever the reason for the increased net worth gap, one thing is certain, the younger generation is not better off financially than their parents and grandparents.

 

Source:

Annalyn Censky, Older Americans are 47 times richer than young, https://money.cnn.com/2011/11/07/news/economy/wealth_gap_age/index.htm?iid=HP_River (accessed November 8, 2011)

Written by Hoglund Law

The attorneys of Hoglund law are licensed in Minnesota, Wisconsin and Ohio. Hoglund, Chwialkowski & Mrozik, PLLC is based in Roseville, Minnesota. In addition to handling cases involving bankruptcy & social security, Hoglund, Chwialkowski & Mrozik, PLLC handles faulty drugs and toxic exposure.

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Foreclosure Sales Down, but Will Likely Increase Later in 2011

During the second quarter of 2011, almost one third of all home sales were foreclosures. According to RealtyTrac Inc., foreclosure sales made up 31% of home sales during April through June 2011. A foreclosure sale occurs when a home is purchased after the owner receives a notice of default or when a home is repossessed. The second quarter foreclosure sales represent a decrease from the foreclosures during the first quarter of this year. However, the figure is six times the percentage of foreclosures that is considered healthy for the housing market. Overall, 265,087 homes that were in foreclosure were sold during the second quarter.

The percentage of foreclosure sales would have been larger without a federal and state investigation into the foreclosure process. An investigation has been launched because of defective foreclosure paperwork kept by banks and mortgage servicers. The investigation has caused foreclosures to be delayed and foreclosures will likely increase when the investigation is complete.

Nevada had the highest foreclosure percentage, with foreclosures making up 65% of all home sales. Arizona and California followed, with foreclosures accounting for 57% and 51% of home sales. Michigan, Colorado, Florida, Illinois, and Oregon also had foreclosure sales that made up at least one third of home sales.

 

 

Source:

Associated Press, Foreclosures Likely to Surge Again This Year, https://realestate.aol.com/blog/2011/08/25/foreclosures-likely-to-surge-again-this-year/ (accessed August 25, 2011).

Written by Hoglund Law

The attorneys of Hoglund law are licensed in Minnesota, Wisconsin and Ohio. Hoglund, Chwialkowski & Mrozik, PLLC is based in Roseville, Minnesota. In addition to handling cases involving bankruptcy & social security, Hoglund, Chwialkowski & Mrozik, PLLC handles faulty drugs and toxic exposure.

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Parents Less Willing to go into Debt to Pay for College

Fewer American parents are willing to go into debt to finance their children’s education. According to a report prepared by Sallie Mae, 51% of parents “strongly agreed that they would stretch financially to send their children to college.” This represents a 13% decrease from the 64% of parents who felt the same last year. Approximately 51% of parents also said they would go into debt to pay for their children’s tuition, down from 59% last year. Since Sallie Mae began the survey in 2007, this is the first time those figures have fallen.

The survey could indicate that parents are beginning to change how they feel about sending their children to college. For many years American parents have had the ambition to send their children to college, not matter the cost. One reason for the change could be that the cost of college has greatly increased. The average cost for attending a private university has increased 70% in the last ten years, and the average cost for attending a public university has increased fourfold since 1991.

The change in attitudes can also be attributed to the poor economy and the impact the downturn has had on families. Many parents have lost jobs, housing prices have fallen, and investments have suffered losses. There has also been an increase in students who graduate in fewer semesters and students who live at home while attending college.

 

 

Source:

Annamaria Andriotis, Sorry, Junior: Parents Pull Back on College Spending, https://www.smartmoney.com/spend/family-money/sorry-junior-parents-pull-back-on-college-spending-1314559509454/?link=SM_hp_borrow (accessed September 6, 2011).

Written by Hoglund Law

The attorneys of Hoglund law are licensed in Minnesota, Wisconsin and Ohio. Hoglund, Chwialkowski & Mrozik, PLLC is based in Roseville, Minnesota. In addition to handling cases involving bankruptcy & social security, Hoglund, Chwialkowski & Mrozik, PLLC handles faulty drugs and toxic exposure.

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Late Mortgage Payments Increase

According to the Mortgage Bankers Association, the number of borrowers who were late on their mortgage payments rose to 12.87% in the second quarter of 2011. Prior to the second quarter of this year, the number of homeowners who were delinquent on their mortgage payments had been decreasing for over a year.

The 12.87% refers to mortgages that were at least 30 days overdue or in the foreclosure process. The second quarter figure represents a decrease from the 14.4% in the second quarter of 2010, but a slight increase from the 12.84% at the end of the first quarter of this year. The figure corresponds to 6.3 million homeowners who are behind on their mortgages.

The actual foreclosure rate is near its lowest in four years. However, this is largely due to government assistance programs and an investigation into foreclosure documents that has caused lenders to delay foreclosing. The increase in late mortgage payments illustrates how the rise in unemployment can affect the struggling housing market.

 

 

Source:

Maggie Shader, Delinquent Mortgage Payments on the Rise (accessed August 25, 2011).

Written by Hoglund Law

The attorneys of Hoglund law are licensed in Minnesota, Wisconsin and Ohio. Hoglund, Chwialkowski & Mrozik, PLLC is based in Roseville, Minnesota. In addition to handling cases involving bankruptcy & social security, Hoglund, Chwialkowski & Mrozik, PLLC handles faulty drugs and toxic exposure.

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Pitfalls Of Debt Negotiation

When a person is in financial trouble, one way of dealing with creditors is negotiating a settlement where the debtor pays a lump sum to the creditor. Typically a debtor will offer a small percentage of what is owed to the creditor and the creditor will then accept the settlement and forgive the debtor for any remaining balance.

There are a few drawbacks to this approach. The first is that debt negation can have tax consequences that the debtor is unaware of. The amount of the forgiven debt is often considered taxable income. For example, if a debtor settles a $10,000 debt for $4,000, then the debtor may have to pay taxes on the remaining $6,000 balance. Typically the debtor will receive a 1099 from the creditor at the end of the year. And the forgiven debt will be treated as income by the Internal Revenue Service.

The next most obvious drawback is that the debtor must actually have a lump sum of money available to pay the creditor. Most people in financial trouble do not have these funds available. To obtain these funds, many debtors will cash out retirement accounts. This will cause the debtor even worse tax issues. If the money is in, for example, a in a tax protected account, the debtor will have to pay taxes on the funds when they are removed from the account and then will again be taxed on the difference between the settled amount and the debt which was owed. In addition, the debtor will also have depleted his/her retirement account which can raise issues for the debtor when retirement rolls around.  Not only will the debtor have less money in the account, but he/she will miss out on the interest which would have accumulated from the removed funds.

Another way that debtors acquire the funds to settle the debt is saving up. The problem with this is that creditors will typically only grant settlement to delinquent borrowers. That means that the debtor would need to stop making payments in order to get the settlement. However when one stops making payments on a credit card for example, the credit card will likely raise the interest rate to nearly 30% and then tack on countless fees and late charges. A balance of $500 can quickly grow to twice its original size. When the debt is finally settled, the debtor might be paying half of the debt, but the whole of the debt will be more than the person owed to begin with.

Not making the payments can also result in the creditor pursuing legal action against the debtor. The creditor can sue the debtor and obtain a judgment against them and then start garnishing the debtor’s wages or levying their bank accounts making it all the more impossible for the debtor to ever come up with enough funds to settle the debt. A person who has hired a debt negotiation company is still vulnerable to these collection efforts.

Another issue which debtors often run into is that they do not obtain the proper paperwork from the creditor to prove that the debt has been settled and the debtors later find themselves dealing with a collection agency attempting to collect on the debt which was already settled. Creditors will often sell bad debt in bulk to collection agencies for pennies on the dollar. The collection agency then attempts to collect on the debt. If they are unable to get any funds, they in turn sell it to a new collection agency and then that collection agency attempts to collect on the debt. If the debtor who settled the original debt does not have the proper documents to prove that the debt was settled, the debtor will have a difficult time dealing with the subsequent collection agencies.

Another problem with debt negotiation is debt negotiation companies themselves. These companies often have a debtor pay them a monthly payment which they then hold in escrow awaiting enough funds to effectively negotiate a settlement. Many of these companies will assign most of the initial payments to their fees.

Some of these companies fail to disclose that they cannot protect an individual from collection activity while the individual is attempting to save money for a settlement. Many debtors are caught by surprise when their wages are garnished because they believed they were offered some type of protection by the debt negotiation company.

In some circumstances, debt negation can be a real benefit to a debtor. However, the pitfalls are many and need to be heeded and weighed before choosing this route to deal with financial difficulties.

Written by Hoglund Law

The attorneys of Hoglund law are licensed in Minnesota, Wisconsin and Ohio. Hoglund, Chwialkowski & Mrozik, PLLC is based in Roseville, Minnesota. In addition to handling cases involving bankruptcy & social security, Hoglund, Chwialkowski & Mrozik, PLLC handles faulty drugs and toxic exposure.

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Americans Are Reducing Credit Card Debt

According to TransUnion, a credit bureau, consumer credit card debt in the U.S. has decreased to $4,699 per borrower. This represents a 5% decrease since the second quarter of 2010, and is near a 10 year low. The decrease is considered positive news for the struggling economy. Additionally, the number of borrowers who were at least 90 days late with their credit card payments decreased 0.6% over the same period. This represents a 17 year low.

The decrease in credit card debt can be attributed to both lenders and borrowers. Lenders have decreased debt by writing off debt that has become uncollectible, closing bad accounts, and reducing credit offered to risky borrowers. Consumers have also been responsible for decreasing credit card debt by making their payments. From the first quarter of 2009 to the first quarter of 2010, Americans made $72 billion more in payments on their credit cards than purchases. That is comparable to $86.6 billion in write offs by lenders.

DailyFinance.com offers five tips to get out of credit card debt. First, track your income and spending. It is important to make a budget for 30 or 60 days to find money you can use to pay off your debt. Second, keep track of the details. Use online calculators to find out how much an extra few hundred dollars in payment will make. If you come in under budget for the month use the extra money to pay off debt. Third, contact your lenders to see if they will reduce your interest rate. Fourth, start with the highest interest rate card and pay off your debt in order of interest rate. Finally, when you get out of debt put the money used to make payments in a savings account. You should save enough money to cover three months of expenses, so an emergency does not put you back into debt.

 

 

Source:

Laura Rowley, U.S. Consumers Pay Down Their Credit Card Debts, https://www.dailyfinance.com/2011/08/17/u-s-credit-card-debt-declines/ (accessed August 24, 2011).

Written by Hoglund Law

The attorneys of Hoglund law are licensed in Minnesota, Wisconsin and Ohio. Hoglund, Chwialkowski & Mrozik, PLLC is based in Roseville, Minnesota. In addition to handling cases involving bankruptcy & social security, Hoglund, Chwialkowski & Mrozik, PLLC handles faulty drugs and toxic exposure.

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Consumer Bankruptcies Decrease in July

Consumer Bankruptcies Decrease in July

According to the American Bankruptcy Institute, consumer bankruptcy filings in July were down 18% from July 2010. Nationally, 113,470 consumer bankruptcies were filed in July of this year. In July 2010, 137,698 consumer bankruptcies were filed. The decrease in July continues the downward trend in bankruptcy filings in 2011. The number of filings in July represents the seventh straight month in which bankruptcy filings were lower than 2010 filings.  July consumer bankruptcy filings were also down 5% from the number filed in June of this year.

Samuel J. Gerdano, the Executive Director of the American Bankruptcy Institute, has said that “the continued decline in consumer bankruptcies in tandem with a sluggish economy is a reflection of the deleveraging of household debts and tightening of consumer credit over the past year.” Total consumer bankruptcy filings for 2011 are expected to be lower than the number filed in 2010.

 

Source:

July Consumer Bankruptcy Filings Fall 18 Percent From Last Year, https://www.abiworld.org/AM/Template.cfm?Section=Home&CONTENTID=64221&TEMPLATE=/CM/ContentDisplay.cfm (accessed August 9, 2011).

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The attorneys of Hoglund law are licensed in Minnesota, Wisconsin and Ohio. Hoglund, Chwialkowski & Mrozik, PLLC is based in Roseville, Minnesota. In addition to handling cases involving bankruptcy & social security, Hoglund, Chwialkowski & Mrozik, PLLC handles faulty drugs and toxic exposure.

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Burt Reynolds Facing Foreclosure

Burt Reynolds Facing Foreclosure

Merrill Lynch Credit Corporation has sued Burt Reynolds over his Florida home. According to the lawsuit, the 75-year-old actor is behind $1.2 million on the mortgage for his home in Hobe Sound, Florida. Reynolds has not made a payment on the home since September 2010. BankAtlantic holds a second mortgage of $750,000 on the home and was also named in the lawsuit. Reynolds’ Florida home is 12,500 square feet and is valued at $2.4 million. The actor attempted to sell the home in 2009, listing the property at $8.9 million. However, a poor housing market and high asking price made it difficult to sell the home.

The foreclosure suit is not the first time Reynolds has faced financial difficulty. In the 1990s, Reynolds filed for Chapter 11 bankruptcy after a divorce and poor career and investment choices. Reynolds also owns a home in Little Rock, Arkansas. He is currently filming a made for TV movie.

 

Source:

Tim Kenneally, Burt Reynolds Slapped with Foreclosure Lawsuit over Florida Home, https://movies.msn.com/movies/article.aspx?news=664577&GT1=28101 (accessed August 18, 2011).

Written by Hoglund Law

The attorneys of Hoglund law are licensed in Minnesota, Wisconsin and Ohio. Hoglund, Chwialkowski & Mrozik, PLLC is based in Roseville, Minnesota. In addition to handling cases involving bankruptcy & social security, Hoglund, Chwialkowski & Mrozik, PLLC handles faulty drugs and toxic exposure.

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Consequences Of Not Paying Credit Card Bills

Consequences Of Not Paying Credit Card Bills

  • Cardholders can contact the credit card company first if they know they will be late making payments. Companies are more likely to work out a payment plan if contacted by the cardholder. Additionally, cardholders should not ignore calls from creditors. It is a good idea to explain the situation and negotiate a payment plan.
  • 60 days delinquent: Credit card companies will pass the account to a collections department. Collection will become more aggressive and the lender will report the delinquency to a credit reporting company, if they have not already done so. Cardholder will likely have to pay a penalty, but may still be able to negotiate a payment plan.
  • 90 days delinquent: Credit card company will likely close the account and become even more aggressive in pursuing collection. Late fees and interest will accumulate. Cardholder can agree to a payment plan to restore the account.
  • Charge-off status: Credit card company will write the debt off as uncollectible, report status to credit reporting company, and may sell the account to a debt collector. Cardholder can negotiate a payment plan or settlement. If possible, it may be more beneficial to negotiate with original creditor. The settlement should be in writing and settle the account in full.
  • Court: The credit card company or debt collector can sue to collect the debt. If they win, a judgment could allow them to garnish wages or seize assets to cover the debt. Cardholders should appear in court if sued, otherwise the creditor will win by default.

 

 

Source:

Janna Herron, What If You Stop Paying Your Credit Cards?, https://today.msnbc.msn.com/id/43690720/ns/today-money/ (accessed July 31, 2011).

Written by Hoglund Law

The attorneys of Hoglund law are licensed in Minnesota, Wisconsin and Ohio. Hoglund, Chwialkowski & Mrozik, PLLC is based in Roseville, Minnesota. In addition to handling cases involving bankruptcy & social security, Hoglund, Chwialkowski & Mrozik, PLLC handles faulty drugs and toxic exposure.

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Payday Loans Dangerous For Borrowers

Payday loans are short-term loans offered by lenders as an advance on the borrower’s paycheck. Payday loan lenders are located in stores and online. Generally, it is a good idea to take out a payday loan only if it can be paid back immediately. Payday loans are one of the most expensive types of credit. The loans carry high interest rates, and interest adds up quickly if payment is not made on time. It is not uncommon for borrowers of payday loans to pay 700 or 800% interest. Payday loans are usually easy to get. The money usually is transferred in a few hours, and borrowers only need a paystub to prove they are employed. In most circumstances, payday loans are dischargeable in bankruptcy.

Payday loans often are targeted to people who cannot afford them. Additionally, most lenders do not sufficiently disclose the interest rates and other costs. Borrowers who apply for online payday loans have to be careful to avoid enrolling in additional programs. Online applications often include opportunities to sign up for unrelated programs, such as travel, phone, or Internet plans. A borrower can easily become enrolled in these programs and will be charged every month. Regulation of payday loans varies from state to state. The predatory behavior by lenders has caused many to question the existence of payday loans.

 

 

Source:

Sheryl Nance-Nash, How Online Payday Loans Can Get You in Trouble, https://www.dailyfinance.com/2011/08/10/how-online-payday-loans-can-get-you-in-trouble/ (accessed August 14, 2011).

Written by Hoglund Law

The attorneys of Hoglund law are licensed in Minnesota, Wisconsin and Ohio. Hoglund, Chwialkowski & Mrozik, PLLC is based in Roseville, Minnesota. In addition to handling cases involving bankruptcy & social security, Hoglund, Chwialkowski & Mrozik, PLLC handles faulty drugs and toxic exposure.

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Taxes On Credit Cards

Don’t charge taxes on a credit card before filing

When preparing to file a bankruptcy, there are a number of things which an individual should not do. One of these is to use a credit card or loan to pay taxes.

If one pays for owed taxes by charging them on a credit card or taking out a loan, the credit card company or creditor will be able to object to the discharge of that debt. There is a rule in bankruptcy that allows a creditor to object to the discharge of a debt that was incurred because a debtor used that creditor’s loan to pay taxes if the taxes were charged or paid within the last year.

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The attorneys of Hoglund law are licensed in Minnesota, Wisconsin and Ohio. Hoglund, Chwialkowski & Mrozik, PLLC is based in Roseville, Minnesota. In addition to handling cases involving bankruptcy & social security, Hoglund, Chwialkowski & Mrozik, PLLC handles faulty drugs and toxic exposure.

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Bankruptcy Will Not Discharge Student Loan Debt; in most circumstances.

Recent college graduates are facing a tough job market in the United States. Unemployment for young people in this country is at 14.5%. Many students graduate with a significant amount of student loans. This leaves many graduates struggling to make ends meet.

Approximately two-thirds of students graduate with student loan debt, and the average debt amount is $24,000. However, around 7,000 students have over $100,000 is student loan debt. Since 2008, over 500,000 students have defaulted on their student loan debt.

Filing for bankruptcy may not completely solve the problem of student loan debt. Student Loans cannot be easily discharged in bankruptcy. It is necessary to initiate a trial within the bankruptcy case called an adversary proceeding to have the judge issue a specific order stating the student loans are discharged. Such a trial can be expensive, with no guarantee that the judge will discharge the student loans at the end of the trial. Success in dealing with student loans outside of a bankruptcy case can vary. The type of student loan can make a difference. Federal loans typically offer more flexible repayment terms than private ones. Private loan terms are often non-negotiable, have variable interest rates and offer no protection for consumers. Many students do not know the difference between federal and private student loans when they sign up for the money.

Written by Hoglund Law

The attorneys of Hoglund law are licensed in Minnesota, Wisconsin and Ohio. Hoglund, Chwialkowski & Mrozik, PLLC is based in Roseville, Minnesota. In addition to handling cases involving bankruptcy & social security, Hoglund, Chwialkowski & Mrozik, PLLC handles faulty drugs and toxic exposure.

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How to Understand Debt and Avoid Problems

Despite all the negative headlines, debt is not always bad. Good debt can allow people to do what they otherwise could not, including, going to college, or buying a house or car. Bad debt is used to make purchases that are not necessary and purchases the borrower cannot afford. One way to determine if something is good debt or bad debt is the interest rate. Generally, good debt is more affordable and can be tax deductible. There is an additional type of debt in-between good and bad debt, which can be referred to as “convenience debt.” This debt represents the monthly credit card balance that builds up because it is easier to pay for purchases with a credit card. Convenience debt should be paid off on time each month to avoid interest charges.
It is important to remember that the fastest way to get out of debt is to pay off the most expensive debt first. Therefore, if you are behind on more than one credit card, you should put the most money toward paying off the most expensive card and pay the minimum balance on the others. Another important step is to take care of your credit report and credit score. To maintain a high credit score you should pay bills on time, pay down credit card debt to below 10% of the card’s limit, do not apply for new credit cards or close credit card accounts, and maintain a history of paying phone and utility bills on time.
If debt becomes overwhelming or something occurs that will make repayment more difficult, inform creditors of what has happened. Many companies will be willing to work with you by lowering interest rates or fees, extending the term of the debt, or reducing the amount of debt.

Source:
Jean Chatzky, How To Avoid Debt Problems Before They Start, https://today.msnbc.msn.com/id/31507914/ns/today-money/ (accessed August 1, 2011).

Written by Hoglund Law

The attorneys of Hoglund law are licensed in Minnesota, Wisconsin and Ohio. Hoglund, Chwialkowski & Mrozik, PLLC is based in Roseville, Minnesota. In addition to handling cases involving bankruptcy & social security, Hoglund, Chwialkowski & Mrozik, PLLC handles faulty drugs and toxic exposure.

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