I’m handling a case now, where a woman has worked for a candy company for 30 years, and she is just not going to be making much more money than she’s making now. There’s no evidence that she will, and the evidence is actually to the contrary. I felt that she’s got a pretty strong case and that’s why we agreed to file it. But I don’t think you have to prove hopelessness, but you do have to prove that it’s just you know doesn’t look like it’s going to get any better.
I have some other clients, whose daughter has a permanent kidney disability, and she’s just never going to be able to work, so we’re going to try to discharge student loans in connection with her. So that’s the second requirement.
The third requirement, that you’ve got to make a good faith effort to have paid them. You’d be surprised, or maybe you wouldn’t be surprised, how many of my clients come to see me, they satisfied the first one, they satisfied the second requirement, but they’ve never made a single payment towards their student loans, years after graduating. They’ve never picked up the phone to call the servicer. They’ve just lived in default for all these years. Katherine: Oh, wow. Ron Drescher: And an otherwise good student loan discharge case can’t go forward because I can’t prove that they’ve made any efforts to repay. Katherine: Ron? Ron Drescher: Yes. Katherine: What about if a person wasn’t in default or maybe it’s the same thing. But if they’re in deferment or forbearance, you mentioned that earlier. So what if they get to number three on what has to be checked off, and they’ve been in deferment? Ron Drescher: You know there is at least one case out there that basically says, as long as you’ve been talking to the servicer responsibly, that shows a good faith effort to repay. Katherine: Okay, okay. I will be surprised with how many people are in default that come to you, who don’t take that step of deferment, at least to protect themselves for a little bit, in my opinion. And I’m not the attorney, I’m the host of the show, so remember that people as you’re listening, listen to Ron. I’m just talking with him.
But I am surprised that people would come to you with the default as opposed to a deferment, so I wanted to ask that question, not to get you off track, but I was curious. Ron Drescher: It’s all right. It does come up with some frequency. Katherine: Okay. Ron Drescher: So those are the three factors that you have to prove in order to discharge student loans in bankruptcy, and it’s tough because the language of the statute says that you can’t discharge student loans unless requiring the clients to repay them would cause an undue hardship. So you have to show that extra level of hardship, and that’s what the courts have fashioned.
Now every year or so, I do a survey of the top student loan discharge cases that are being litigated, to see if there has been kind of any loosening of the standards. And the short answer is in the states and in the jurisdictions where you would expect there might be some loosening, there has been. And in the states and jurisdictions where you think, “Wow, there probably hasn’t been some loosening,” there hasn’t been.
So I’ll leave it up to your listeners to kind of try to decide which those are. But I guess what I would say is the states that are more predominantly urban, you’re going to see more leeway and more flexibility that the courts will apply in deciding whether or not a student loan debt should be discharged. Katherine: Why is that? Ron Drescher: I just think it’s the overall perspective on the nature of debt. I think it’s a broad social political question. Schedule An Appointment Katherine: I was hoping you weren’t going to say that, but I kind of figured that because it sounds like with what you’re talking about here, is some broad strokes, where you are not really sure if a person… Like you’d have to… People, you would have to call Ron, so he can look at your situation individually. Because it doesn’t seem like anybody has any one way, and this is not just with student loans. They don’t have any one way to describe what does this look like, or how can this fit. And maybe it’s because the assumption is the more urban the area, the more impoverished the people are in that area, but education is supposed to help you come out of that.
So this is like… I’m glad you’re researching it. This is crazy. You know, like wow. Ron Drescher: It is crazy that we have these situations. But I want to talk to you about a different strategy that I have employed for some clients, and it’s a Band-Aid. It’s not surgery, it’s a Band-Aid. Katherine: Okay. Ron Drescher: I call it a perpetual chapter 13, and the way it goes, let’s say you have zero chance at discharging your student loan debt, and let’s say it’s a private student loan. Because if it was a federal student loan, they have these great programs where you can consolidate the debt into an income-based repayment, get yourself out of default, and at least limp along with a payment that’s based upon your family size, and your adjusted gross income that appears on your tax returns.
So this typically comes up much more in private student loans, and what we have done is file a chapter 13 for my clients, that will last for five years, and just put off repaying the student loans. Just put it off for five years. And unfortunately five years go by in a hurry. But at least during those five years, my clients are getting some relief. And with the thought of, “Well when I get out of the bankruptcy in five years, I’ll see where I am. I’ll see if the lender is a little bit more flexible at that point, having gone without any payments for five years. And see if it’s a thing that I can do.”
I’ve got a few clients in the chapter 13 program. I can’t say that it’s a great program, but if your wages are being garnished for non-dischargeable debt and you need to get some relief, it’s an option. Katherine: Yeah. And as I’m listening to you, time does fly. If you have kids, it goes fast for sure. But just thinking about when we have to make these decisions because we have life happening, and yes, when you went to school, the intent was to improve your situation, not to have to figure out how to discharge it, or how to have enough money to pay it, or will you be paying it until you’re dead. That’s not a thought that we have. That’s not in your plan when you’re writing it down to make life better.
But now that we’re here in this space and you’ve gotten loans, your children have gotten loans, this is education that you need on how to re-look at. I’m saying re-look at, look at again, look at your life again, and say, “Okay now this is what I was trying to do but here’s where we are now, and what can I do?” And Ron, I’m just like, “Wow.” Because it sounds like a hard decision for a person to have to make. Yes, I’m filing chapter 13, it does give me a little bit of a break. But with your guidance it sounds like, “Okay I know the next thing to do.” Because as you were talking I was thinking, “Man, somebody might forget.” But you know we have to be responsible somehow. You can’t do it all for us Ron, but you’re giving us the next steps. Now after you finished with this, the next thing to look at, to re approach will be, are the people flexible now with the terms of what you need to repay.
So life, it takes work, it takes work and you have to pay attention and you have to ask questions. Because I think that this wasn’t even a part of bankruptcy conversation for a while, was it? Having your student loans? Ron Drescher: Well, it’s always been on the outskirts of the bankruptcy conversation. But lately I think people are more desperate, and they’re more willing to take a risk and throw themselves at the mercy of the bankruptcy court. But you know what I want to talk to you about a non-bankruptcy approach to student loans that may work for some of your listeners. Katherine: Okay. Ron Drescher: I mentioned before, income-based repayments for people who don’t have any income. Katherine: Okay. Ron Drescher: Bear in mind that income-based repayment programs have a debt cancellation provision depending on the program, 15 years, 20 years or 25 years. And that seems like forever. That seems like, “Ridiculous, I’ll never make that.” But the truth is, you know what, if you’re 30, and your debt is forgiven when you’re 50, you have a lot of great years after you’re 50. 50 is pretty young. Katherine: Yeah, yeah. Ron Drescher: People don’t think that way when you’re a kid. Katherine: Until they get there. Ron Drescher: But you know what, when you’re 50, you’re still very robust. Katherine: Oh, yeah. Ron Drescher: And you’re very active, and you are really in the prime of life. So with that in mind, if you are not working for whatever reason. Let’s say you’re married and you have children and you decide that one spouse is going to be the earner, and the other spouse is going to stay at home with the children. The spouse that stays at home with the children may have student loans, and that spouse should not go on deferment, should not go on forbearance. That spouse should absolutely 100% go on an income-based repayment. Because let’s say that spouse has zero income for 15 years. You have to file your taxes separately from the working spouse. Katherine: Okay, yeah. Ron Drescher: So you’re going to file your returns that are going to show zero income, and you’re going to send that to the loan servicer, and your income=based repayment is going to be zero dollars. So for 15 years, you’re going to pay zero dollars. That means you only got five years left. If you want to decide now to go back into the workplace, then you keep adjusting it. And then in those five years, you’ll… You only have five years left. Katherine: Are you telling me it’s just 20 years to pay off a student loan? Ron Drescher: Well for some it’s 20. Katherine: Some. Okay. Ron Drescher: If you’re on certain income-based repayment programs, some are 25 years, some are 20 years, and I even think that some are 15 years. I’m not a hundred percent sure of that. But I know that many of the programs that came up during the end of the Bush era and during the Obama era, were 20 year repayment programs on an income-based repayment scheme.
So that’s what’s… That’s a hidden trick, especially for those families, where one of the spouses is going to stay home and come out of the workforce. And get that clock ticking for the 20 years. And if you’re making zero dollars, take the benefit of those programs. Katherine: My mouth is wide open, and our time, we are over time. But I needed to have you share what you were saying, to finish it today, while we were talking. While we’re here, tell people how to get in touch with you outside of This Needs To Be Said. All of this needed to be said today. Ron Drescher: I’m happy to get your… You can visit me on the website. Drescher Law, D-R-E-S-C-H-E-R L-A-W.com. You can find me on Twitter @RonDrescher. And you could always give us a call at (410) 484-9000. Katherine: Thank you, Ron, again as always, for coming on and sharing your knowledge, being patient with me for sure. And until next time, you have a super day. Okay? Ron Drescher: Thanks a lot, you too. Katherine: Thanks. Schedule An Appointment

The post Attorney Ron Drescher Talks With Katherine On “This Needs To Be Said” About Bankruptcy And Student Loans. appeared first on Baltimore Bankruptcy Lawyer.

A contingent claim is a liability that is not certain to occur and, actually, could occur only when a specific event happens. For example, a classic case of a contingent liability is when you have someone’s personal guarantee of a promissory note. If the main borrower for that note doesn’t default under the note, then the obligation for that guarantee will never come into play. In other words, the obligation is contingent or dependent upon the occurrence of a default under the promissory note. If the event doesn’t occur, a default in this example, then there is no contingent claim.

An interesting kind of contingent claim happens when when you go to the casino. The very minute you place a bet on roulette red or black, the casino owes you a contingent claim based upon whether or not the ball lands on the red or the black or the green zero or double zero square. If the ball happens to land on the square where you placed your bet, the claim matures and is due. If the ball lands on a different square, the casino owes you nothing for that particular bet. It is an interesting situation that during that interim period, the casino has a contingent obligation to you depending upon what happens when the ball drops.

For more information, read How Do I Determine Whether My Baltimore Bankruptcy Claim Has a Contingent Claim?

If you have a question about whether or not your claims are liquidated, disputed or contingent, please pick up the phone and call me at 410-484-9000.

The post Does Your Baltimore Bankruptcy Have a Contingent Claim? appeared first on Baltimore Bankruptcy Lawyer.

The hardest part about bankruptcy is filling out the forms correctly. Listing your assets and assigning reasonable values; claiming the appropriate exemptions; accurately detailing your income and expenses; and navigating the means test are only a few of the complex issues that debtors must resolve in their bankruptcy cases. The good news is that debtors don’t need to justify their bankruptcy filing; if the schedules are accurate and complete, and if the debtor cooperates with the trustee, then the relief will be awarded and the debts will be discharged.

Creditors and other parties in interest have 60 days after the debtor meets with the trustee to object to the bankruptcy discharge. If there are no objections (and this is a strict deadline) the bankruptcy court will promptly enter the debtor’s discharge. There will be no inquiry as to whether the debtor is current or not on their bills.

The more important question is not whether a client qualifies for bankruptcy – because they almost always will – but whether they should file, or instead struggle with paying their bills. This is a harder question and addresses such different factors as debt load, asset liquidity, employment status, existence of liens, and many other elements of a person’s financial life. Of course, with so many qualified bankruptcy lawyers offering free consultations that provide meaningful information, there is no reason to delay contacting a Maryland bankruptcy lawyer to find out all of your legal options. You may save yourself hundreds of thousands of dollars.

The post Can I File a Maryland Bankruptcy if I’m Current on my Bills? appeared first on Baltimore Bankruptcy Lawyer.

When my clients ask, “Why is the trustee looking so closely at my bankruptcy case?” I tell them about trustee appointments.  Chapter 7 trustees are private attorneys appointed to a panel by the Department of Justice.  Trustees are paid only $65.00 per case according to statute and that is the full payment for approximately 95 percent of their cases.  By looking closely at bankruptcy schedules, in about 5 percent of their cases, trustees are able to identify assets.

• The trustee tries to locate assets which can be liquidated to pay your creditors.
• When trustees succeed in finding assets to pay creditors, they get paid more than the $65.00.
• Trustees can then hire their own law firm and be paid $300.00 to $500.00 an hour.  Besides the hourly billing rate, the trustee also receives a percentage of the amount distributed to creditors.

Trustees cannot afford to take much time to determine whether they’re likely to identify assets for your creditors.  If the trustee decides there are not likely to be worthwhile assets, they’re going to close the case, file a “No Distribution” report and conclude that the bankruptcy is a no-asset case.  That’s a great outcome for a Chapter 7 debtor.

The bankruptcy trustee is going to keep the case open and analyze whether or not there actually are assets.  If the trustee determines there are assets to pay creditors, the trustee will have a payday worth far more than the $65.00 that they’ll normally get from a case.  For more information, read Why Do Maryland Trustees Scrutinize Bankruptcy Cases So Closely?

If you have a question about whether or not the trustee is going to take a close look at your case, please pick up the phone and call me at 410-484-9000.  I’d love to hear from you.

The post Why Is Trustee Scrutinizing Your Maryland Bankruptcy Case? appeared first on Baltimore Bankruptcy Lawyer.

I want you to understand the difference between a bankruptcy dismissal and a bankruptcy discharge.  When you’ve filed for bankruptcy, whether in Maryland, Pennsylvania or elsewhere, discharge is the desired outcome of your filing.

A bankruptcy discharge occurs when you have done everything you’re supposed to do.   The court enters a discharge once:

• you have confirmed a bankruptcy plan,

• you have made all of the payments under a plan, or

• when nobody objects to your bankruptcy in a Chapter 7 case,

Once your discharge has been entered, your creditors

1. can’t sue you,

2. can’t get judgments, and

3. cannot enforce their rights against your post-bankruptcy earnings.  I like to call this the “pot of gold at the end of the bankruptcy rainbow.”

Once you have filed a bankruptcy case, the court has jurisdiction over you and your property.  If the court decides that it no longer has jurisdiction, your case is dismissed.

Dismissal occurring after discharge can end up being a favorable development for you.

If dismissal occurs before discharge, you don’t qualify for a discharge.  Dismissal occurring before discharge usually is not a favorable development for you. For more information, read How Does a Maryland Bankruptcy Dismissal Differ from a Discharge?

If you have questions about a bankruptcy being dismissed or discharged, please pick up the phone and call me at telephone number 410-484-9000.  I’d love to hear from you.

The post The Difference between a Maryland Bankruptcy Dismissal and Discharge appeared first on Baltimore Bankruptcy Lawyer.

This is free advice that, if taken, may change the course of lives, families and even generations.

Was this just a puff piece? I didn’t think so then and I don’t think so now, especially with the explosive growth in the equities markets since that blog’s publication in July, 2012. The real truth is that if a family has $100,000 in a protected retirement account when the parents are, say, 45 years old, that money can grow tax free until withdrawals become forced at the age of 70. So if the money grows at 4%, the value in 25 years will be $266,583.63. If the money grows at 7% the value will be $542,743.26. (Source? Future Value Calculator).

Let’s get back to the 45 year old parents with $100,000 in an IRA. They may have income interruption, bills to pay, a struggling business. Do they invade the IRA or consider bankruptcy? If they invade the IRA and spend the $100,000, they will incur a 10% penalty (usually withheld upon an early withdrawal) and then the rest of the $100,000 goes immediately into taxable income, probably forcing the client into a higher tax bracket. If the taxes aren’t paid then and there, the unpaid tax liability (and the interest on the taxes) will become nondischargeable, compelling the client into a likely installment plan with the IRS over several years.

When this happens the balance sheet of the family will become very ugly.

Can they recover in 25 years? Perhaps. If not, then the family will  be left not only without the $542,000 they may have had, but also without the extra money the IRS will grab in the years to come after the decision was made to invade the retirement account. This money could have been added to the IRA or 401(k) and further increased the family’s net worth, significantly affecting the course of the lives of the family for a very long time.

For more information, read Extreme Caution: Invading Your IRA or 401(k) to Relieve Money Problems Might Ruin You. 

The post Should I Use My IRA or 401(k) to Pay My Maryland Bills? appeared first on Baltimore Bankruptcy Lawyer.

The client is told she’ll have to pay something to the trustee in bankruptcy, and her heart sinks. But it doesn’t have to be that bad.

Every Chapter 7 client wants a “no asset” case, when a debtor’s equity in his assets is less than allowed exemptions. But sometimes the client’s commissions are just too high, or the car is paid off, or the tax refund is too generous, and there’s no room left in the allowed exemptions.

When this happens, the client should know that the trustee has his own tough choice: try to sell the assets on the open market, or strike a deal with the debtor? For most trustees who fear that their estate may only be worth a few thousand dollars, the ease of selling the assets back to the debtor far outweights the burden, cost and uncertainty of trying to get top dollar for the assets on the open market.

These days, with so many clients still reeling from the real estate boom and bust of the last decade, the debt may have mushroomed to hundreds of thousands or even millions of dollars from homes or investment properties gone bad. Even clients who are eligible for Chapter 13 may choose instead to swallow hard and write a check to the trustee in order to put the mess behind them once and for all.

Clients should take some comfort understanding that the debtor is usually the best buyer for bankrupt assets, and for a Chapter 7 trustee even a bargain sale beats exposing the assets to the open market.

For more information, read Over Exemptions? Pay Cash to the Trustee and Sleep Better.

The post Over Exemptions? Let the Trustee be your Friend appeared first on Baltimore Bankruptcy Lawyer.

Sonja Morgan’s movie project Fast Flash to Bang Time failed and she was forced to settle a lawsuit for $7 million.  You’ll recall that Sonja is one of the stars of the reality show, Real Housewives of New York, RHONY.

In her November 2010 Chapter 11 petition, Sonja listed $19.8 million in debt and $13.5 million in assets.

Sonja is competing for the “World’s Greatest Debtor” in the March Madness Bankruptcy Brackets.  See Sonja Morgan with the other Real Housewives of Bankruptcy.   Read more about Sonja’s case in this earlier blog, Sonja Morgan of RHONY Loses Control of Her Chapter 11 Bankruptcy Case.

The post The Real Housewives of Bankruptcy: Sonja Morgan appeared first on Baltimore Bankruptcy Lawyer.

In his letter, after apparently conducting no investigation into Khawam’s background, Petraeus told the court Khawam “dotes on her son and goes to great lengths — and great expense — to spend quality time with him.” The judge, however, delivered a shocking and scathing dressdown of Khawam after a litany of hearings and psychological evaluations:

“Ms. Khawam appears to lack any appreciation or respect for the importance of honesty and integrity in her interactions with her family, employers, and others with whom she comes in contact. The court fully expects that Ms. Khawam’s pattern of misrepresentations about virtually everything, including the most important aspects of her life, will continue indefinitely.”

Khawam’s legal problems have now followed her into the bankruptcy court, where she filed in April, 2012. On the bankruptcy filing, Khawam lists $3.2 million in unpaid debt, plus $53,000 she owes the Internal Revenue Service.

Earlier this year, Khawam’s former employer, Tampa Bay lawyer Barry Cohen, claimed that she ‘fraudulently omitted Rolex watches, sable mink furs and a diamond ring’ from her list of assets in the April bankruptcy.

The financial ruins left by Kelley and Khawam in their attempts to rise to the top of Tampa’s military society are well chronicled in this article from the Tampa Bay Times. Kelley has apparently run up $70,000 in credit card debts and was sued for foreclosure of the million dollar Tampa home she owns with her surgeon husband. In Khawam’s bankruptcy she listed debts to a lawyer in Rhode Island of $300,000, a man in St. Petersburg of $600,000 and Scott and her twin sister Jill Kelley of $800,000.

The salacious details of Kelley and Khawam should not overshadow the truth that David Petraeus, as the head of the CIA, showed a stunning lack of judgment in conducting an illicit affair and then publicly standing behind a woman condemned in court of a “pattern of misrepresentations about virtually everything,” including accusations that she attempted to cheat her creditors by omitting substantial assets from her bankruptcy schedules.

The post More Bad Judgment: Petraeus Supports Unstable Mom Accused of Bankruptcy Fraud appeared first on Baltimore Bankruptcy Lawyer.

Bankruptcy and integrity play key roles in several campaigns across the country. This year, more races than ever implicate bankruptcy, debt and morality, raising the question whether voters are willing to overlook a candidate’s financial struggles when they cast their votes on November 6.

In Massachusetts, well known bankruptcy personality Elizabeth Warren is in a tight race for the U.S. Senate against incumbent Scott Brown. Although Warren is a nationally known figure, she continues to battle integrity issues connected to her former claims of Cherokee ancestry, as I discuss in my blog Elizabeth Warren and the Transparent Debtor.

In Connecticut, both sides of the Senate race have pointed fingers at the other candidate’s financial mishaps. Chris Murphy missed mortgage payments and the bank filed a foreclosure complaint against him in the mid-2000’s. He later cured the defaults. Linda and Vince McMahon have been shamed into repaying hundreds of thousands of dollars in debts that were discharged in their 1970’s bankruptcy. The McMahons have since made millions in their WWE wrestling empire. Read more in Foreclosure Finger Pointing Colors Connecticut Senate Race.

In Tennessee, a candidate with a wretched bankruptcy record is pushing forward in his quest for the 44th District House seat. Steven Glaser has filed Chapter 13 bankruptcy four times since 1996 and is on the wrong end of at least 15 tax liens for unpaid personal income, unemployment and business taxes between 1988 and August of this year. The taxes total more than $158,000. Find out if he can win in Serial Bankruptcy Candidate Steve Glaser Owes The IRS $158,000.

If we are to believe the lessons of history, these candidates should not be discouraged by their battles to keep their heads above water. More than one great American has risen above deep financial trouble to claim a place in our national legacy. Click here to find out which national treasure is bolstered by the deeds, not the debts, of two iconic Americans.

Do you think that filing bankruptcy should disqualify a candidate? I’d like to hear your opinion. Please leave a comment below.

The post Is Filing Bankruptcy A Political Dead End? appeared first on Baltimore Bankruptcy Lawyer.