Federal Student Loans – Repayment Plans for Financial Hardship

Borrowers whose income is low or unstable, or who have low to moderate income with very high student loan debt may be eligible for certain Repayment Plans for Financial Hardship.

These repayment plans include:

• Income Contingent Repayment Plan (ICRP)
• Income Sensitive Repayment Plan (ISRP)
• Income Based Repayment Plan (IBRP)
• Hardship Repayment Plans for Perkins Loans

If you have a Federal Direct Loan, except for PLUS loans, you can choose an income contingent repayment plan. Payments on this type of plan can be as low as $0-5 per month. However, if your payment is lower than the accrued interest each month, the loan principal will continue to increase. After 25 years, the government will cancel the remaining balance on this type of loan, and the IRS will treat the canceled debt as income.

If you have a FFEL loan, you could qualify for an income-sensitive repayment plan. These plans base your payments on your annual income, family size, and total loan amount. Payments must cover at least the accruing interest and the loan must be paid off in ten years.

People with Direct loans and/or FFELs are eligible for income based repayment plans.  You cannot qualify for an IBRP if you are in default. These plans offer more flexible options than ICRP and ISRP plans, and your debt is eliminated after 25 years of payments. Payments can be less than the accruing interest.

 If you have a Perkins loan, your payments must be at least $40 per month. However, the school may extend repayment for another ten years, or allow additional extensions for people with prolonged illnesses or unemployment.

Contact your loan provider for further information about Hardship payment plans. If you would like to speak to an experienced attorney with regard to student loans contact R. Richard Croce, LLC.
Richard Croce - Rich@rrc-llc.com

Forbearance Agreement

When a borrower falls behind on their payments, or is having trouble making their payments, it is important for them to talk to their lender. Communication with a lender is extremely important, because a lender is more likely to work with you to resolve your delinquency if you explain your situation and are honest with them, instead of avoiding contact. A lender may have options such as a forbearance agreement that can be extended to you if you are struggling with your loan payments.

If a borrower goes into default on their mortgage loan, student loan or other type of loan, they may be eligible for a forbearance agreement. A forbearance agreement is typically an arrangement to postpone, reduce, or suspend payments for a specified amount of time. Interest still accrues during the time of forbearance, and is added to the principal balance of the loan at the end of the time of forbearance.

Forbearance agreements were designed for people with temporary financial woes that are inhibiting their ability to make their payments. The idea is to give borrowers time to resolve the problems that are causing them to fall behind on their payments. For example, if you are temporarily out of work, a forbearance agreement will give you time to find another job so that you can resume making your loan payments.
Richard Croce - Rich@rrc-llc.com

Federal Student Loans – Repayment Options

Student Loans are generally not discharged in Bankruptcy, but there are repayment options available. If you have a federal student loan, there are several repayment options available.

These options include:

• Standard Repayment Plan
• Graduated Repayment Plan
• Extended Repayment Plan 

The standard repayment plan is the plan offered by your lender. You will make loan payments for up to ten years. With this plan, your monthly payments are higher than in other plans, but your total number of payments is lower because you are paying less interest.

The graduated repayment plan is where payments start out low and increase throughout the repayment period, typically every two years. This option is a good choice for people who will be working in a profession where their income will increase quickly once they are established in their career.

An extended repayment plan is one that allows you to spread out your repayment over a period of up to 25 years, depending on the amount of your loans. In order to be eligible for the extended repayment plan, you must have an outstanding balance of over $30,000 on your loan. While your monthly payments are lowered on the extended plan, you will end up paying more in the end, due to additional interest payments.

Lenders also offer the ability to combine an extended repayment plan with a graduated repayment plan, allowing you to further lower your payments. However, your overall costs will be further increased, due to all the additional interest.

There are additional repayment options available for those who are having difficulty making their payments.

If you gave a federal Direct loan, except for PLUS loans, you can choose an income contingent repayment plan. Payments on this type of plan can be as low as $0-5 per month. However, if your payment is lower than the accrued interest each month, the loan principal will continue to increase. After 25 years, the government will cancel the remaining balance on this type of loan, and the IRS will treat the canceled debt as income.

If you have a FFEL loan, you could qualify for income-sensitive repayment plan. These plans base your payments on your annual income, family size, and total loan amount. Payments must cover at least the accruing interest and the loan must be paid off in ten years.

People with Direct loans and/or FFELs are eligible for income based repayment plans. You cannot qualify for an IBRP if you are in default. These plans offer more flexible options than ICRP and ISRP plans, and your debt is eliminated after 25 years of payments. Payments can be less than the accruing interest.

If you have a Perkins loan, your payments must be at least $40 per month. However, the school may extend repayment for another ten years, or allow additional extensions for people with prolonged illnesses or unemployment.

Contact your local provider for further information about Hardship payment plans.

If you fall behind your payments, or are having trouble making your payments, it is important for them to talk to your lender. Communication is extremely important, in order to resolve your delinquency and avoid default which will damage your credit options such as a forbearance and alternate repayment agreement which may be available to you if you are struggling with your loan payments. There are options such as a deferment, forbearance, and is added to the principal balance of the loan at the end of the time of forbearance.

Forbearance agreements were designed for people with temporary financial woes that are inhibiting their ability to make their payments. The idea is to give borrowers time to resolve the problems that are causing them to fall behind on their payments. For example, if you are temporarily out of work, a forbearance agreement will give you time to find another job so that you can resume making your loan payments.
Richard Croce - Rich@rrc-llc.com

Myths Concerning Bankruptcy

There are many myths and misconceptions concerning bankruptcy. Here are some of those myths, and the facts to help you understand bankruptcy more clearly.

Myth 1: Everyone will know I filed for bankruptcy. The truth is, unless you are running for office, or otherwise famous, it is unlikely that anyone will know you have filed bankruptcy besides your creditors. Bankruptcy is a public legal proceeding, and some local newspapers print the names of people in the community that have filed. But again, unless you are a public figure, it is unlikely to receive much attention.

Myth 2: If I file Chapter 7, all my debts will be wiped out. Truth: There are certain types of debts that cannot be discharged. These include child support, alimony, student loans, criminal restitution, and debts acquired as the result of fraudulent acts.

Myth 3: It is too hard to file for bankruptcy. Truth: It is not difficult to file for bankruptcy. It is even easier if you have the help of a good bankruptcy attorney.

Myth 4: Only deadbeats file bankruptcy. Truthfully, many people file for bankruptcy after a life-altering event such as a divorce, serious illness, or loss of employment. These people have tried to pay their bills, but have fallen further and further behind, and just need help to get a fresh start.

Myth 5: I will never be able to have good credit again. Fortunately, this is not true. Many lenders are willing to give you another chance, even quickly following a bankruptcy.
There are many other misconceptions about bankruptcy. If you have questions and reside or have a business in the State of Connecticut or Massachusetts, it is wise to consult with a Connecticut Bankruptcy Attorney in your area for further information and answers to your concerns.
Richard Croce - Rich@rrc-llc.com

Deficits of The Automatic Stay

In a certain instances, the automatic stay cannot help you. These occasions include the following:

• Certain tax proceedings. The automatic stay cannot prevent the IRS from auditing you, issuing a tax deficiency notice, demanding a tax return, issuing tax assessments and demanding payment of said assessments. However, the automatic stay will stop the IRS from issuing a tax lien or seizing your property or income.
• Support actions. The automatic stay does not stop any lawsuit against you seeking to establish paternity, nor lawsuits seeking to establish, modify, or collect child support or alimony.
• Criminal proceedings that can be broken down into criminal and debt components will be separated and the criminal component cannot be stopped by the automatic stay. 
• Loans from a pension. In spite of the automatic stay, money can be withheld from your income for repayment of loans from certain types of pensions, including most job-related pensions and IRAs.
• Multiple filings. If you already had a bankruptcy case pending during the previous year, then the stay will automatically be terminated after 30 days; unless you, the trustee, the U.S. Trustee, or a creditor asks for the stay to continue. Also, you must then prove that the current case was filed in good faith, and if a creditor has filed a motion to lift the stay during the previous case, the court will assume that you did not act in good faith, and it may prove difficult to receive the automatic stay in your present case. To often individuals and companies disregard the importance of consulting an experienced attorney and make hasty decisions or in many cases don't take any action. If you have property in the State of Connecticut or Massachusetts, be sure to get legal advice from a Connecticut Attorney.

Richard Croce - Rich@rrc-llc.com

What Can the Automatic Stay Accomplish?

The automatic stay can prevent utility disconnections – including water, electricity, gas, and telephone service - for at least 20 days. While prevention of utility disconnections is not typically a good enough reason to file bankruptcy, it can be one factor, especially for people in climates with severely extreme weather, and/or small children or elderly people in their home.

If your home mortgage is in danger of foreclosure, the automatic stay temporarily will stop those proceedings. However, the mortgage lender may be able to proceed with the foreclosure later, depending on what type of bankruptcy you are filing. An attorney can help you determine which type is best, and devise a plan to help you keep your house.

The automatic stay may be able to help you avoid eviction. New bankruptcy laws are making it easier for landlords to proceed with evictions, and if your landlord already has already filed a judgement against you before you file, the automatic stay will not affect the eviction proceedings, and the landlord can continue with the eviction as if you have never filed bankruptcy. Also, if your landlord claims you are damaging or endangering the property, or using controlled substances on the property, the automatic stay will not be in effect.

If you receive public benefits and were overpaid, the agency is typically allowed to collect the overpayment from your forthcoming payments. The automatic stay can prevent this collection.
Many people file for bankruptcy if their wages are garnished. Especially if more than one wage garnishment is imminent. The automatic stay stops garnishments immediately.
Richard Croce - Rich@rrc-llc.com

Automatic Stay

When you file for bankruptcy, the “automatic stay” will put an immediate stop to any lawsuits filed against you, as well as most actions against your property by creditors and collections agencies.

The automatic stay is often a dominant motivation for people to file for bankruptcy; especially in cases where they are at risk of foreclosure, eviction, being found in contempt of court for failure to pay child support, or losing necessary resources including utility services, welfare, unemployment benefits, or their job (due to wage garnishments).

The automatic stay can help with many problems including the following:

• Utility disconnections (including water, electricity, gas, and telephone service)
• Foreclosure proceedings
• Eviction proceedings
• Collection of overpayments of public benefits
• Multiple wage garnishments

There are also limits to what the automatic stay can do for you. The automatic stay cannot help in certain instances, including the following:

• Certain tax proceedings – however, the automatic stay does stop the Internal Revenue Service from issuing a tax lien and from seizing your property and income
• Support actions (child support and/or alimony)
• Criminal proceedings
• Loans from a pension
• Multiple filings

Also, creditors can sometimes sidestep the automatic stay by asking the bankruptcy court to lift the stay if it is not serving its proposed function. For instance, if you file for bankruptcy the day before your house is to be foreclosed, have no equity, and you cannot pay your mortgage debts, the mortgage lender will likely go to the court and ask for authorization to proceed with foreclosure proceedings. The court would likely grant permission. This information can be very overwhelming and it is always advised to seek professional advice from an experience Connecticut Law Firm should you reside or have a business in the State of Connecticut.
Richard Croce - Rich@rrc-llc.com