ELIGIBILITY FOR STUDENT LOAN FORGIVENESS

Borrowers of student loans must meet particular eligibility requirements of the program. You must be a full-time employee at a federal, state, or local government agency or work full-time at a nonprofit organization to qualify. The program is intended to help those who choose a career in public service over a high-paying job right out of college.

As the Federal Student Aid website states, here are some of the career qualification requirements:
  1. Government organizations at any level (federal, state, local, or tribal)
  2. Not-for-profit organizations that are tax-exempt under Section 501(c)(3) of the Internal Revenue Code
  3. Other types of not-for-profit organizations that provide certain types of qualifying public services
In addition, only certain loan types are eligible:
  1. Federal Direct Subsidized Stafford/Direct Loans
  2. Federal Direct Unsubsidized Stafford/Direct Loans
  3. Federal Direct PLUS Loans
  4. Federal Direct Consolidations Loans

You must enroll in a qualifying plan, and after 10 years of on-time payments, the remaining balance of your loans is eligible for forgiveness. Currently, there is no limit on the amount that borrowers can discharge. If you also take advantage of certain qualifying repayment plans, such as income based repayment, you can reduce your monthly payment.  This would also reduce the total amount you end up repaying over the 10-year plan.

This program started in 2007, so no one has actually had a loan forgiven yet. Since the program started, only around 300,000 people with student loans have completed all the steps to have their loans put into the loan forgiveness program and, according to one government report, about 4 million graduates could be eligible.

Since the program requires 10 years of on-time payments to qualify, it is critical to start as soon as possible.

Woman taking notes

Preparing for Bankruptcy

Filing bankruptcy requires that you pull together documentation of your financial circumstance. Your attorney will review your documents to help determine your qualification for bankruptcy. Under Chapter 7 bankruptcy, you are required to provide a completed Bankruptcy Questionnaire listing all of your assets, liabilities (debts), income and expenses. You also will need to provide pay stubs and records of all income earned (or given) in the six months prior to your bankruptcy petition.

If you want to begin your Bankruptcy Questionnaire now, click here to access our form.

A Chapter 7 filing also requires that you prove your income meets the requirements of the Means Test and/or The Totality of Circumstances Test.

You will be asked to disclose evidence of your monthly gross income and details of any expected increases or decreases in income or expenses. You may be asked to provide your income tax returns for the past two years; and you may be required to file any outstanding tax returns before filing for bankruptcy.

In addition you will need to certify that you have completed both credit counseling courses within 180 days before filing your bankruptcy petition. You also will be required to attend a mandatory Meeting of Creditors, after which you will have 45 days to attend a federally-mandated financial management course, either in person or online.

Be sure to provide your attorney and the bankruptcy trustee with your photo identification and any other documentation specifically requested by the Court.

For legal advice on your case and circumstances, be sure to consult a qualified attorney.

 

 

 

Bankruptcy photo and gavel

What Happens to Income Tax Refunds in a Bankruptcy?

Under a Chapter 7 bankruptcy, income tax returns received during the bankruptcy period will become part of the Bankruptcy Estate and, if not exempt, will be under care of the bankruptcy trustee. The trustee is charged with evaluating the estate, liquefying assets and repaying as many creditors as possible with available funds. Your attorney will help determine which of your assets are exempt from liquidation.

If you are due a significant tax return, you may want to speak with a qualified bankruptcy attorney about the best time to file, how much cash you will be able to keep on hand during the bankruptcy period, and how best to protect your assets.

Daley Law is available to answer your questions and offers a free 30-minute consultant. If you have extenuating tax circumstances, Daley Law may refer you to a qualified tax attorney in your area.

Woman's hand holding credit card

Concerned about Credit After Bankruptcy? Know this …

A bankruptcy discharge provides major financial relief that helps debtors gain back their financial footing. Then, with fewer bills looming each month, most debtors are better able to manage monthly expenses. That’s the good news.

The bad news is that lenders and credit card companies, for a while, will not consider you a good financial risk and may only sparingly lend money should you find yourself in a financial hole again. A bankruptcy may stay on your credit record for up to 10 years, and if you accrue massive debt again, you will not be able to file another Chapter 7 bankruptcy petition for 8 years.

More good news …. You can build credit again by using credit responsibly. Once you have filed for bankruptcy, credit card companies have the right to automatically cancel your credit cards—even if you did not include them in your bankruptcy petition and intended to keep using those accounts.

REBUILDING CREDIT HISTORY

Begin to re-build your credit history as soon as possible. It may take at least two or more years before you obtain an above-average credit rating again. You can get a start by finding a bank that will issue you a “Secured Credit Card,” which works kind of like a bank account. You give the bank the amount of money you wish to tie to a credit card, while the bank watches your credit behavior. As you use the card to pay a bill or bills, and pay the bank on time each month, you will begin rebuilding your credit worthiness. When the bank sees that you are managing your monthly payments on time, your bank may even provide you with a small amount of additional bank credit ($100, $250, $350 or $500) above your own investment. If you continue to pay bills in a timely manner, your bank credit will increase — and so will your credit rating.

When choosing a Secured Credit Card, make sure the bank will report your credit behavior to the three credit reporting agencies: Experian, TransWorld, and Equifax. As those credit agencies receive word of your good credit behavior, they will begin to elevate your credit score. When your score goes up, you will have more access to credit.

BECOME CREDIT WISE

Just because you’ve earned more credit doesn’t mean you have to spend it. To manage credit wisely, use your secured card for necessities only, such as monthly utility bills that you would need to pay whether or not you had the credit card.

Avoid using your secured card for luxuries such as dining out or the latest fad in technology. By committing that your credit card spending will be only for true necessities, you will avoid the temptation to spend beyond your means. Over time, your new spending strategy will become a good financial habit, and you will rebuild your credit one step at a time.

Will I lose my property if I file for bankruptcy

Worried About Losing Property in Bankruptcy? Get the Facts

If you are in dire financial straits and holding off filing for bankruptcy because you are worried about protecting your property, here are a few things you should know.

Homestead Exemption
Florida’s homestead exemption offers protection to homeowners. If you have been a legal Florida resident for at least two years, and you have owned your home for at least 3.5 years, you may be fully protected under the Homestead Act from losing your home. If you have owned your property for less than 3.5 years, only a portion of the value of your home may be protected under bankruptcy law.

Other Protected Assets Under Bankruptcy

  • If you have claimed a homestead exemption, you may retain $1,000 in personal property assets after bankruptcy; but if you have not claimed homestead exemption, you may qualify to keep $5,000 worth of assets per person in your household.
  • Most employee Retirement plans are exempt from creditor claims.
  • Individual retirement accounts and most annuities may be exempt. If you file outside of Florida, be aware that a recent Supreme Court decision ruled that bankruptcy may only protect IRA contributions the debtor made personally; inherited income from another person’s IRA may not be protected in other states.
  • Personal property pledged to a secured creditor, such as a motor vehicle, recreational vehicle or boat may be retained, provided payments can be maintained.
  • An unsecured motor vehicle with equity of $1,000 or less is protected. If you have more than $1,000 in equity, you should consult an attorney.
  • Cash value of your life insurance, provider you are both the owner and the insured party.

Other protections under the law cover the bank account of a head-of-household when that account contains only wages; contributions made to college trust funds more than a year before bankruptcy filing; and personal property that was previously pawned.

Need more information before deciding if bankruptcy is right for you? Contact a qualified bankruptcy attorney.

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