Are you having a hard time paying your bills? Is a big part of your problem your student loan debt?

If so, you’re not alone. According to Investopedia.com, 54% of all college attendees assume student debt at an average of over $35,000, and almost 15% carry that debt into adulthood. Even more troubling is the fact that over 10% of student debt is currently at least 90 days past due. If you are one of those who sees no way to paying this debt off, you may be considering bankruptcy. You may also have heard that student debt will not be discharged in bankruptcy. Here’s what you need to know.

Though student debt is traditionally and generally considered a debt that is not dischargeable, there are situations where you can include it in your list of debts and have the court agree that it should be included, but this is the exception rather than the rule. In order for a bankruptcy trustee to include your student loan debt alongside your personal loans, credit card debt, medical bills, and other debt that is making your economic life a challenge, there are certain things that you will need to prove.

The way that discharging debts in bankruptcy works, some debt is what is known as a priority debt that cannot be discharged. Child support is an excellent example of a non-dischargeable debt, where credit card debt is considered a nonpriority, dischargeable debt. Student loans are non-priority, but generally cannot be discharged unless you as the debtor can prove that they are putting you and your dependents through undue hardship. The standard for this varies from court to court but is generally based on several different hardship tests. These tests gauge whether your student debt is leading to your inability to maintain a minimum standard of living for yourself or your family based on your income and expenses; whether the challenges of your economic situation are expected to be persistent; and whether you’ve made a good-faith effort to pay your loan as per the schedule that you committed to. The bankruptcy court will consider these three questions and others and may be willing to discharge your debt if they believe that you are facing undue hardship.

If you need assistance with your own debt situation and paying your student loan debt, then bankruptcy may be the right answer for you. For assistance in assessing your situation, contact us today.

Once you’ve made the decision to move forward with a bankruptcy filing, your next step should be planning for the future. If your bankruptcy was the result of a medical emergency or some other unexpected disaster, that’s one thing – but if your debt arose from misguided money handling, you need to change your way of doing things. You don’t want to mess up that clean slate with the spending habits that led to your financial trouble. The first thing you need to do is build a budget – and stick to it.

If this is the first time you’ve ever thought about having a budget, take heart. It is not a hard thing to do. Here are some simple steps to guide you through the process:

• Identify fixed expenses, variable expenses and irregular expenses. You do this by looking at what you pay out each month and entering each expense into a column headed with one of these three categories. Fixed expenses are things like your mortgage or rent, your car payment, subscriptions and other expenses that are the same each month. Variable expenses are things that change each month, like the amount you spend on food or clothes. And irregular expenses are things that you only spend on occasionally, like insurance payments that only get charged a couple of times each year, or the cost of doctors’ appointments or buying gifts for friends and family.
• Figure out how much you’d like to save each month. You need to start saving money, so don’t ignore this step. Ten percent of your net income is a good starting point.
• Now compare your income with what you’re spending. Do they match? If not then you need to cut your spending. Review your fixed expenses to see how much you can get rid of or reduce. If you are paying for subscriptions, do you need all of them? Can you lower your cable bill by cutting out channels you don’t really need? Are you using your gym membership enough to make the expense worthwhile? Now do the same with your variable expenses. Are you going out drinking with friends twice a week? What if you just went out once, or once every other week. Are you buying coffee at a coffee shop instead of making it at home? Do the same with your irregular expenses. Have you been overly generous with your gift-giving? See if you can cut out enough to be equal to the amount that you’ve set aside for savings. More than that figure would be better.

Once you’ve brought your income and your spending and savings into alignment, write down the amount that you are allowed to spend each month, how much you want to save, and make a plan to stick to it. If you need help with filing for bankruptcy, we can help. Contact us today to set up a time to discuss your situation.

Filing for bankruptcy is frequently depicted as a fresh start – a chance to start over financially. Though the idea of new beginnings and discharged debt may be appealing in the prime of your life, it feels particularly dissonant if you are elderly and unable to generate new income. Many seniors have spent a lifetime making mortgage payments and fear that they will lose their homes outright if they file for bankruptcy, yet don’t know what else to do. Here are some helpful bankruptcy tips for the elderly.

The first thing that seniors need to understand is that bankruptcy may be unnecessary because their income may be protected from creditors. Collectors may make threats, and may even win a judgment in court, but the truth is that many seniors have so little to fear. This is especially true if they don’t have much income and don’t own your own home or have significant assets. Social Security payments cannot be touched by creditors unless your debt is for certain taxes, child support or student loans, and they can’t take more than 25% of other wages.   Those with few assets and little or no equity in their home have no fear of assets being sold, as states protect you from losing basics like clothing, some equity in a car and furniture.

For those seniors who do have assets or who own or have significant equity in their home, there are two types of bankruptcy that are available:

• Chapter 7 allows the discharge of most or all debts but involves turning over nonexempt assets to be sold to pay off creditors. To qualify for Chapter 7, your income needs to be below a certain threshold. This income does not include either Social Security or Social Security Disability payments, both of which are not counted and which are protected from creditors. Seniors may be at risk of losing their homes unless they are protected by a homestead exemption. Each state is different, and it is a good idea to check and see what rules apply where you live.
• Chapter 13 allows you to keep your property and create a payment plan for repaying your debts under revised or extended terms. Any Social Security income that you receive will be factored in to the calculation for your monthly repayment plan. If you want to keep your assets or are not eligible for Chapter 7 because you have too much income, Chapter 13 may be a better option.

Most seniors are concerned that a Chapter 7 bankruptcy filing would jeopardize their savings, but most retirement accounts are protected in bankruptcy to an unlimited amount. The only exception to the rule exempting retirement accounts to an unlimited degree is for traditional and Roth IRAs, which remain exempt until their combined value is over $1.2 million.

If you’re considering bankruptcy, contact our team of experienced and compassionate attorneys to discuss your unique situation.

If you’re struggling to pay your creditors, bankruptcy can offer a real lifeline and a chance for a fresh start. But the decision to file can also carry long-lasting negative consequences, and that means it should not be made lightly.  There is no universal right or wrong answer, so do your homework to ensure that you choose the option that is best for you.  Here’s a brief rundown of what you need to consider:

• There are two types of bankruptcy and choosing the right one is important. While Chapter 7 will discharge almost all of your debts, Chapter 13 simply reorganizes them and gives you more time to meet your obligations. Not everybody qualifies for Chapter 7.
• There are options other than bankruptcy, including credit counseling or taking out a loan from a 401K.
• If you charge up a storm in anticipation of getting your debt discharged in a bankruptcy, you can be accused of bankruptcy fraud. The same is true of moving money from your bank or investment accounts into a relative’s name in order to avoid having to liquidate assets.
• Your retirement savings are protected in bankruptcy, so don’t turn to them as a last resort … you’ll need them in the future.
• Not all of your debts will be liquidated in a bankruptcy. If you owe child support, back taxes or student loans, you’re still going to have to pay them.
• You might be able to keep some of your assets in a bankruptcy, but not all of them. Every state has its own rules about what is exempt or not, and a lot will be determined by whether you file for Chapter 7 or Chapter 13.
• Bankruptcy takes several months to complete. The good news is that as soon as you file, you will get relief from creditors and bill collectors calling.
• Bankruptcy is not a simple process, and it isn’t free either. There are filing fees required, and if you make a mistake you can end up losing assets that you’d prefer to keep. The best way to minimize its impact is to work with an experienced bankruptcy attorney who can guide you through the decisions and protect what is most important to you.

If you’re considering bankruptcy, the Reinherz team is here to help. Don’t hesitate to contact our experienced attorneys today!