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Minneapolis Bankruptcy Law Blog

Experts warning consumers about student loan scams

Consumer advocacy groups, as well as both state and federal officials have been sounding the alarm about the services offered by unlicensed debt settlement companies for years. These efforts have been driven in large part by the seemingly endless string of horror stories outlining how deeply indebted people have handed over their hard-earned money only to learn that the promises of debt resolution were hollow.

While the domain of unscrupulous debt settlement companies has largely been confined to the area of credit card debt and mortgage debt, recent reports indicate that they are now setting their sights on student loan debt.

This is perhaps not unsurprising given that figures show more than 40 million people here in the United States are carrying over $1 trillion of student loan debt, with many of them struggling to find suitable employment.

How exactly are these unlicensed debt settlement companies victimizing those with student loan debt?

Study finds Minnesota has some of the highest student debt levels

Almost everyone will agree that one of the most important things that young people can do to make themselves attractive to employers is secure a college degree. At the same time, however, almost everyone will agree that actually securing a degree will likely prove to be a very costly proposition due to skyrocketing tuition costs.

Indeed, statistics show that while the average level of student loan debt stood at $18,650 in 2004, it jumped to almost $30,000 in 2012.

Despite this stark economic reality, however, young people appear to be as committed as ever to doing whatever it takes to graduate, as the number of students taking out loans to finance their education jumped to 71 percent by 2012.

Experts advise when to keep your credit card in your wallet

There is no denying that merchants have made it much easier to use credit cards over the last few decades. Now, consumers can pay for everything from groceries and gas to movie tickets and even home repair services with just a swipe.

Even though this convenience is undoubtedly appealing and regular credit card use can serve to build credit history, it's nevertheless important for consumers to exercise some restraint when reaching for their plastic, as debt -- and interest -- can accumulate significantly faster than they might think.

Indeed, financial experts have indicated that there are certain scenarios in which consumers perhaps want to avoid using their credit cards altogether in order to save themselves potential money problems further down the road.

Bill calls for bankruptcy courts to be more open to student loans

The unfortunate reality for many young people is that it is extremely difficult to discharge student loan debt -- both federal and private -- via the bankruptcy courts.

That's because those looking to have their educational debt eliminated via Chapter 7 or Chapter 13 must be able to prove to the bankruptcy court that repaying their student loans would result in "undue hardship" for them or their dependents.

In general, the bankruptcy courts use a three-part test to determine whether this undue hardship is present in a particular case.

  • Evidence has been presented showing that you would not be able to maintain a minimal standard of living if forced to repay the student loans.
  • Evidence has been presented demonstrating that the financial hardship will likely endure for the majority of the repayment timeframe for the student loans.
  • Evidence has been presented indicating that you have at least made a good-faith effort to repay the student loans.

Don't let your credit card cause the summertime blues

After months of hiding indoors from falling snow and subzero temps, people are finally free to go out now that summer is in full swing here in Minnesota. While people are understandably anxious to make up for lost time by hitting the lake, heading to the golf course or driving to the family cabin, experts are warning not to let this rediscovered laid back-attitude extend to finances -- especially credit cards.

First and foremost, experts urge people to resist the urge to max out their credit card to cover the cost of a luxurious vacation package, new convertible or any other major expense over the next few months, as doing so can have major repercussions for their credit score.

SCOTUS bankruptcy case only provides some answers

Back in November, our blog discussed how the Supreme Court of the United States introduced a significant change in the bankruptcy law landscape due to its decision in Stern v. Marshall, the case most people recognize as involving the inheritance battle between the late Anna Nicole Smith and the heirs of her deceased oil tycoon husband.

Here, the court questioned the ability of bankruptcy judges to hear and issue binding rulings in certain matters before ultimately stripping them of the authority to decide so-called "non-core" matters, meaning those not related to dividing the assets of debtors among creditors.

In other words, SCOTUS essentially reaffirmed the authority of Article III judges (i.e., federal district court judges, appellate judges, etc.) to handle these non-core matters.

Whatever legal scholars thought of the decision, there was universal agreement that it created a degree of uncertainty within the U.S. bankruptcy court system concerning the ability of bankruptcy judges to hear and issue binding rulings in certain matters.

Don't discount just how much Chapter 7, Chapter 13 can help

For those experiencing serious financial problems, even the most mundane occurrences can generate anxiety, frustration and perhaps even a sense of hopelessness. For instance, a trip to the mailbox may result in more bills and letters from creditors to add to the growing pile, while a ringing phone could be from hostile debt collectors who just won't stop calling.

The good news in all of this is that life doesn't have to be this difficult, and that you do have viable options for helping resolve your debt and gaining a fresh financial start.

For instance, you may want to give serious consideration to the idea of filing for either Chapter 7 or Chapter 13 bankruptcy.

While you might be tempted to immediately reject either of these options, it's extremely important to take the time to learn more about each process and how they might be able to help you before making any final decisions.

Survey shows how consumers really feel about credit card debt

Back in March, the National Foundation for Credit Counseling surveyed over 2,100 people to determine just how embarrassed they are about issues like their credit score or credit card balance. Specifically, the survey participants were asked whether they were most embarrassed by their age, weight, bank balance, credit score, credit card debt or none of the above.

In a somewhat shocking turn of events, the survey results showed that as many as 37 percent of the survey participants were most embarrassed by their credit card debt, while 30 percent were most embarrassed by their credit score.

To put things in perspective, weight was number three on the list with a mere 12 percent of survey participants.

CFPB report shows not all debt is created equal

Statistics from the Centers for Disease Control and Prevention reveal that as many as one out of every three Americans have trouble paying their medical debt. This makes sense when you consider the very nature of medical debt: it's often incurred as a result of unpredictable events, it's often very high, and it's often difficult to resolve with long lapses between providers and insurers resulting in accounts being sent to collection agencies.

All of this can understandably prove to be nightmarish to the patient/consumer who must not only deal with the underlying medical incident, but also the financial fallout several months later. Indeed, this financial fallout may include a damaged credit score if the bill was sent to collections.

Interestingly enough, the Consumer Financial Protection Bureau recently expressed its belief that the credit reporting industry is perhaps placing too much an emphasis on medical debt and failing to account for its otherwise unique nature.

Minnesota-based farm supply co-op files for Chapter 11

It is important to understand and appreciate that individuals are not the only ones who can seek bankruptcy protection when they encounter significant financial difficulties. Indeed, fiscally troubled small businesses, large companies and national organizations can all seek protection from creditors via the Chapter 11 bankruptcy process.

Chapter 11 is best described as a type of bankruptcy in which an organization either 1) proposes a reorganization plan outlining how they plan to pay off their creditors over the course of time, or 2) outlines its plans for liquidation.

In the former type of Chapter 11, the presiding bankruptcy court permits a business to secure what is known as debtor-in-possession financing from a lender that enables it to reorganize and stabilize its operations, thereby putting itself in a better position to repay outstanding debts over time.

Among other protections, the lender that extends this financing is typically given a senior lien position, meaning that it will always be repaid in full even in the event the reorganization fails and liquidation of the business proves necessary.

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Huffman, Usem, Crawford & Greenberg, P.A., is just 10 minutes from the Hennepin County Courthouse in Minneapolis, Minnesota, and represents clients throughout the United States, Canada and Minnesota, including the cities of St. Paul, Golden Valley, Plymouth, St. Louis Park, Hopkins, Minnetonka, Wayzata, Edina, Brooklyn Park, Brooklyn Center, Anoka and Maple Grove, as well as Hennepin County, Ramsey County, Anoka County and Scott County.

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