SCAM: Con-Artist Possing As Attorneys

I just received the following email from the National Association of Consumer Bankruptcy Attorneys, and I am posting it here in its entirety.





The National Association of Consumer Bankruptcy Attorneys (NACBA) is urging members to remain in communication with present and past clients regarding bankruptcy "con-artists" posing as attorneys.

Over the past few weeks, NACBA has issued a consumer bulletin and been in contact with the courts and media regarding this well orchestrated scam. Warnings have been issued by the Office of the Attorney General in New Hampshire and by Virginia Eastern District bankruptcy clerk William C. Redden. The warning in Virginia has been posted on the websites of both the Eastern and Western District Bankruptcy Courts.
Despite warnings being issued to the general public, incidents continue to be reported and it is likely this fraudulent activity will spread to other states.
Members of the NACBA Legislative Committee will soon approach the Department of Justice to not only request a deeper investigation into how consumer information is being compromised but also recommend steps that can be taken to further protect the identity of those going through the bankruptcy process.
NACBA is requesting all Consumer Bankruptcy Attorneys to warn current and past clients about this scam and to urge these clients not to turn over money to anyone who calls by phone.
Please post the consumer bulletin prepared by NACBA to your law firm website and blog. Also, please send out the warning via email to all current clients.
If any clients report being a target of this scam, please send the basic information to admin@nacba.org. NACBA will compile all info and present to the Department of Justice to further illustrate the need for immediate action.
To see a copy of the consumer bulletin issued by NACBA, please visit: HERE
To see a copy of the consumer bulletin issued by the New Hampshire Attorney General, please visit: HERE
To see a copy of the consumer bulletin issued by the United States Courts, please visit: HERE
To see a copy of the consumer bulletin issued by the Eastern District of Virginia, please visit: HERE

Dealing With Student Loans In Chapter 13

I recently received the following letter (in pertinent part) from the National Association of Consumer Bankruptcy Attorneys (NACBA):

Following an excellent last with in bankruptcy court with an attorney for the Department of Education, I wanted to let others know that, with huge amounts of assistance and advice from John Rao and NACBA, borrowers are likely soon going to be able to enroll in income driven repayment plans while in a Chapter 13 bankruptcy case.

My case will be, and the Department of Education agrees, the first time where a Chapter 13 Debtor has been allowed to enroll in a IBR. Previously, they have simply refused or ignored requests, depriving Chapter 13 debtors of some very valuable options regarding their student loans.

This will be a huge development and one that will open up many other opportunities for student loan debtors, including starting down the road to obtaining cancellation or, even better, Public Loan Forgiveness while in bankruptcy.

It may also lead to being able to have defaults on student loans waived through bankruptcy, rather than rehabilitating or consolidating loans, with the resulting 18.5% penalty. Just imagine marketing Chapter 13 as a way to help get clients back on track with student loans without taking that hit!

Also, currently there are no real options for curing a default under a income driven repayment plan, meaning that once a problem arises, the borrower may have to start again at square one. Chapter 13, however, allows the cure or waiver of ANY default, including under an IBR.

And, as a practical concern, joining income driven repayment of student loans with Chapter 13 bankruptcy, not only helps deal with the borrower's entire financial situation, but it provides a mechanism for paying attorneys' fees for this assistance. (Attorneys' fees in excess of the regular bankruptcy fees!)

There are very real complications with this, from the specific language to be used, to enrolling borrowers in an IBR, to bankruptcy issues such as separate classification, good faith and feasibility.

And while we believe that these options for debtors are available under the Code and in plan confirmation even over objections raised by the government, we have worked to get the consent of the Department of Education, so as to avoid unnecessary litigation for you in the future. We have also started to discuss these issues with both the UST and Chapter 13 Trustees, who are increasing conscious of the fact that the inability to deal with student loans is impacting bankruptcy filings and are sympathetic to this idea.

Do It Yourself Bankruptcy: Get A Free Counsultation

Ever thought of doing a bankruptcy yourself. That's right, without the aid of legal counsel. There are both pros and cons to doing such a thing. The pros are obvious, at least 1 is obvious anyway; it is cheaper. That's right, doing a bankruptcy yourself, is cheaper; no attorney fees.

So, what is the downside to doing it yourself. Although you may file a legally sufficient bankruptcy, that is, one the Bankruptcy Clerk will accept, may be the beginning of your problems. I am sticking my neck out when I say this, but there are probably as many things that could go wrong with your bankruptcy are there are people that file on their own. Without being familiar with the Bankruptcy Code, Bankruptcy Rules, case law, and local rules before setting out to do it yourself, it is true your case may go through just fine, but you could have your case dismissed, unnecessarily loose property to creditors, or even end up in litigation.

Am I trying to use a scare tactic? I don't think so.  I couldn't help by think of Lucy when she would do things on her own, without knowing what she was really getting into.  

Even people that hire attorneys that don't do bankruptcy on a regular basis run into surprises from time to time. I am one that believes the saying of an ounce of prevention is worth a pound of cure. That is to say, before deciding to proceed on your own, at least get a consultation from an attorney in your area that actively helps clients with their bankruptcies. Want to save money, well you can usually find in almost any market attorneys that give free consultations. Why some people file bankruptcy without ever getting a free consultation is beyond me. The bankruptcy practice is a highly specialized and complex area of the law.

A recent article in The Florida Bar News is about someone that decided to do a will on their own using forms. While it is true the forms are legally sufficient, without the advise of counsel, after the demise of the will's author, the will ended up in litigation, and ultimately cost much more than simply hiring an attorney to do the will correctly to begin with. Keep in mind that this involves an area of the law that is much simpler than bankruptcy. You can find the article, with a link to the Florida Supreme Court case, at http://tinyurl.com/mgl6av8.

Before filing bankruptcy, check with friends that have filed and find out if they were happy with their attorney. If so, see if you can get a free consultation. You can also check the National Association of Consumer Bankruptcy Attorneys website (www.nacba.org) for a member attorney in your area, and check the for members of local bankruptcy bar associations that may be in your area.

St. Johns County Bankruptcy Attorney

I did a quick search on Google of bankruptcy attorneys in St. Johns County, Florida. This is because I recently opened an office in Green Cove Springs (GCS), Florida. While Ponte Vedra Beach and St. Augustine are in St. Johns County, there is a large population that resides in the county, outside of any city limits.

How would a person in the country pick a bankruptcy attorney. For those unfamiliar with GCS, it is walking distance from St. Johns County.  Both Clay County (where GCS is located) and St. Johns County have few attorneys practicing in the area of bankruptcy. This caused me to peruse the question of how would someone would pick a bankruptcy attorney?

When searching for the best attorney for filing bankruptcy, you should look at more than just price. In fact, price is probably the last thing you should look at. 

Have you ever shopped for a good bottle of wine. Quite often price has nothing to do with the quality of the wine. Of course, I am not talking about the gut buster cheap stuff. But of the moderately priced wines, you need to know your wine to select one that meets your expectations. You could get an overpriced wine that has you walk away with a bad taste in your mouth.

Attorneys are not unlike wine in many ways. I suggest you should look at

1. the attorney's experience,
2. continuing education, and
3. organization affiliations.

The experience has to do with the number of years of practice before sitting judges and familiar with case law within your jurisdiction. The law is always changing in every field of law, and bankruptcy is no exception. This is why continuing education is so important. That is also why membership in local bar associations and national associations is important.  It is easy to search for national organizations that cater to fields of law.  For consumer bankruptcy, it is the National Association of Consumer Bankruptcy Attorneys.

Also look at surrounding counties, or nearby cities. Sometimes a short drive will reward you with an attorney with more experience, more individualized attention, and a better price. This is not just relevant to bankruptcy, but also probate, criminal law, family law, or any other practice of law you can think of. When you get into areas of practice that are highly specialized, like an attorney that specializes in zombi nuclear holocaust law (imagine that might be a specialty somewhere), you might want to look a little further than just your nearby county.

If you have some ideas of how to pick a good ... no, Great Attorney, please let me know.

NACBA 2014 Convention in New York City

 

The National Association of Consumer Bankruptcy Attorneys (NACBA) 2014 Annual Convention is being held in New York.  This is the 22nd annual convention for the organization, and they are "pulling out all the stops" for this one, as this is the first year it is being held in New York. 

For a while, they were keeping it quiet as to what hotel it would be held at while they were negotiating for a room block.  Now their web site has made it official; it will be held at the New York City Hilton Midtown from April 10-13, 2014, and the room rates are expected to be $279.00 per night when the room block opens later this winter.  This rate is good for three days before and after the event.  I know this might sound high, but for New York Midtown, this is really a good rate.

I expect the 10th of April (the first day) to be a group activities event day.  So, if you think you might want to participate in the group activity, you might want to show up a day early.  If you are simply there for the CLE, then showing up on the April 10th should be fine.

The Convention, with five plenary sessions, 20 breakout sessions, and roundtable discussions will cover some of today’s hottest bankruptcy topics.

Arrangements for things like pre-convention group activities, speakers, and other event related activities are still being finalized.  As I receive more information about the event, I will try to post it.

Members Only Workshop ~ Hyatt Regency  

New Orleans, LA ~ October 24-26, 2013

Registration Information

• Registration is open to current NACBA Members and their support staff.

• Early Bird discount ends at 5:00 p.m. PST on Friday, September 6th, 2013.

• Support staff may attend without member attorney if employed by member firm.

• Registration of support staff by mail or fax only.

• Registration of multiple firm attendees by mail or fax only.

• Registration fee includes: breakfast, lunch, Friday night Reception, printed materials for one pre-selected Track, and a flash drive containing materials for all Tracks.

• Workshop registrants DO NOT need to purchase a meal ticket. Meals tickets for guests of Workshop attendees are available for $100.

• You may attend any session in any of the three concurrent tracks. When you register, you will be asked to identify the one Track that you plan to attend and for which you will receive written materials. You may attend any session from any Track that you wish, however, and will be able to pre-purchase the written materials for the other two tracks when you register.  If you own an iPad, iPhone or any tablet using the Droid operating system, you will be able to download an app that will allow you to access the materials and take notes during the sessions.

•  For a Brochure and Schedule, Click Here

Student Loan Debt Media Inquiry

I recently received an email from the National Association of Consumer 

Bankruptcy Attorneys (NACBA), of which I am a member, asking for a 

response to their inquiry, as to clients with unmanageable student loan debt. More specifically, they are looking for students who are

1.  Relatively recent graduates;

2.  Unable to find jobs; and

3.  On the brink of bankruptcy because of their student loan debt. 

Their request is in response to a media request from a major national news outlet.

The NACBA is an advocate of student loan reform in the bankruptcy code. Currently, the bankruptcy code does not allow for the discharge of student loans.

If the above description describes you, and you are willing to share your story, please give me a call at 904-652-0060. The media deadline is April 3, 2013.

Student Loans: Greater Than 15% While Americans Live Paycheck-To-Paycheck

I recently did a quick search on the internet to see how close Americans are, in general, to needing to file bankruptcy, and whether or not there have been any changes to the default in student loans. This, a least in part, is a reflection on our economy.

If you are contemplating bankruptcy, read the articles below. Hopefully you will not feel as if you are the only one in such a predicament. Even though I have not verified the facts listed within the articles, I find them interesting.

You need to know this. Welcome to America, where half the nation lives right on the razor’s edge. A stunning new report out of the Corporation for Enterprise Development, finds that 44% of Americans are just one financial shock away from complete ruin. Nearly half the nation doesn’t have enough savings to keep them out of poverty for more than 3 months, should they suffer a job loss, an accident, a sickness, or other financial setback. Another recent study out of the Consumer Federation of American, found that 40% of all American households live paycheck-to-paycheck, with virtually no savings. This is what’s become of the once valued American middle class after thirty years of trickle-down Reaganomics. And it’s the main reason why our economy continues to falter – our nation's working people and consumers don’t have enough money to spend. Let’s roll back the Reagan tax cuts – put in place a new wealth tax on everyone making over a billion dollars and redistribute some of that wealth down to working people, who will actually spend it.

…

The situation for college students in America continues to deteriorate. A new report published by FICO Labs, finds that the student-loan delinquency rate rose 22% from 2005 to 2007 – with more than 15% of all students being forced into default on their loans. The rapidly increasing price of college tuition, the cutbacks in government assistance for students, and the non-existent job market, are all conspiring together to saddle our next generation of leaders with enormous piles of debt. As the report notes, “in 2005, the average U.S. student loan debt was $17,233. By 2012, it had ballooned to more than $27,253 – an increase of 58 percent in seven years." How are our American workers supposed to compete with the rest of the world, and take risks, when they’re so deep in the hole by the time they graduate? We need to be sending our young people to college for free, like many advanced European nations already do.

Source: Truth-Out.org/news; On the News With Thom Hartmann: New Reports Finds 44 Percent of Americans One Financial Shock Away From Ruin, and More, January 31, 2013.

The bankruptcy code states, in general, student loans can not be discharged.  This means you will continue to owe the debt even after going through bankruptcy.  However, the bankruptcy code also provides for the discharge of a student loan if it is an "undue hardship".  The interpretation of what an undue hardship is varies greatly from court to court around the country.  If you owe a student loan and are contemplating filing bankruptcy, you should seek the advise of a competent bankruptcy attorney in your area.  You may also want to contact an attorney member of the National Association of Consumer Bankruptcy Attorneys (NACBA) to find out where their efforts stand with congress in getting student loans discharged through bankruptcy.

NACBA ALERT: Debt Settlement Schemes

The following was taken from an October 17, 2012 release by the National Association of Consumer Bankruptcy Attorneys entitled:

NACBA:   COSTLY DEBT SETTLEMENT SCHEMES PREY ON THE MOST DEBT-BURDENED CONSUMERS STRUGGLING TO RECOVER FROM ECONOMIC DOWNTURN

What a Half Million Unwary Consumers Don’t Know:  Schemes Only Work for 1 in 10 Who Pay for Them; Consumer Alert:  Debt Settlement Programs Seen as “#1 Threat to America’s Most Indebted Consumers.”

As few as one in 10 unwary consumers who are lured into so-called “debt settlement” schemes actually end up debt free in the promised period of time, making the risky schemes the No. 1 threat facing America’s most deeply indebted Americans, according to a major new consumer alert issued today by the nonprofit National Association of Consumer Bankruptcy Attorneys (NACBA).

Available online at http://www.nacba.org, the NACBA consumer alert notes:  “Already struggling with home foreclosures, harsh bank and credit card fees, and other major financial challenges, America’s most deeply indebted consumers are now falling victim to a major new threat:   so-called ‘debt settlement’ schemes that promise to make clients ’debt free’ in a relatively short period of time.  Unfortunately, most consumers who pursue debt settlement services find themselves facing not relief but even steeper financial losses. Even the industry acknowledges – though not in its ever-present radio and online advertising – that debt settlement schemes fail to work for about two thirds of clients. Federal and state officials put the debt-settlement success rate even lower – at about one in 10 cases – meaning that the vast majority of unwary and uninformed consumers end up with more red ink, not the promised debt-free outcome.”

The private debt-settlement industry remains robust.  More than 500,000 Americans with approximately $15 billion of debt are currently enrolled in debt settlement programs, according to industry estimates.  And there is room for further growth:   One in 8 U.S. households has more than $10,000 in credit card debt.

Durham, NC bankruptcy attorney Ed Boltz, NACBA Board member and incoming NACBA president, said:   “Based on what bankruptcy attorneys are seeing across the nation, we believe that debt settlement schemes are the number one problem facing America’s most deeply indebted consumers today. Bombarded with slick radio and Web advertising falsely promising a smooth road to being debt free in a short period of time, these companies prey on the most desperate victims of the economic downturn.   These particularly vulnerable consumers usually end up getting sued, stuck with outrageous fees, more deeply in debt, and far worse off in terms of their credit score.” 

Earlier this year, NACBA focused national attention on the “student debt bomb,” which then was identified as the fastest growing consumer debt problem being handled by consumer bankruptcy attorneys.

Richard Thompson, a Rialto, California, retiree and victim of a debt settlement scheme, said:    “I was told they could settle my $89,000 in debts for a total of $39,000 if I made payments of $1,800 for 22 months.  I was contacted about a chance to settle $15,000 debt for $6,000 but my debt-settlement company ignored the offer.   In fact, I paid them a total of $25,200 as they kept on ignoring settlement offers from creditors.  I thought they were taking care of me by bringing my debt down, but all they were doing was taking my money.   I ended up with $25,000 more in debt than I started out with.   Before I retired I worked 25 years as a manager, now I have had to go back to work as a part-time security guard to help make ends meet.”

Bankruptcy attorney Trisha Connors, a NACBA member from Glen Rock, New Jersey who has testified before the New Jersey Law Revision Commission on debt settlement abuses, said:   “Over the last three years, I have worked with 12 different for-profit debt settlement companies and over 25 clients who came to me after their debt settlement program failed to serve them.  The results with each client were the same:  exorbitant fees being paid, settlement (at best) of one small credit card debt, and mounting late fees and penalty interest charges on the unsettled debts.  When clients informed the debt settlement companies of their desire to exit the program, the firms kept all or most of the accumulated savings for debt reduction as ‘fees.’  Every person I dealt with who had been current on their debts prior to contacting a debt settlement program told me that the sales representative told him the only way to be successful in the program is to stop paying credit card bills.”  

Ellen Harnick, senior policy counsel, Center for Responsible Lending, said:   “Debt settlement companies require clients to default on their debts before they will negotiate.  This adds late fees and penalty interest to their debt and frequently results in the client being sued by creditors.  Since only a tiny proportion of debts are actually settled by these companies, clients are typically left worse off than they were when they started.”

In addition to highlighting the stories of three victims of debt settlement schemes, the NACBA consumer alert notes the following:

•    There is now across-the-board agreement on the danger that debt settlement schemes pose to consumers.  The Better Business Bureau has designated debt settlement as an “inherently problematic business.”  Similarly, the New York City Department of Consumer Affairs called debt settlement “the single greatest consumer fraud of the year.” Across the country, the U.S. Government Accountability Office (GAO),  the Federal Trade Commission, 41 state attorneys general,  consumer and legal services entities, and consumer bankruptcy attorneys have all uncovered substantial evidence of abuses by a wide range of debt settlement companies.

•    Debt settlement schemes encourage consumers to default on their debts.  Because creditors frequently will not negotiate reduced balances with consumers who are still current on their bills, debt settlement companies often instruct their clients to stop making monthly payments, explaining that they will negotiate a settlement with funds the client has paid in lieu of their monthly debt repayments.  Once the client defaults, he or she faces fines, penalties, higher interest rates, and are subjected to increasingly aggressive debt-collection efforts including litigation and wage garnishment. Consequently, consumers often find themselves worse off than when the process of debt settlement began:  They are deeper in debt, with their credit scores severely harmed. 

•    “Self help” may be the best answer for smaller debt burdens.   If you have just a single debt that you are having trouble paying (such as a single credit card debt) and you have cash on hand that can be used to settle the debt, you may be able to negotiate favorable settlement terms with the creditor yourself.  Creditors typically require anywhere from 25 to 70 percent on the dollar to settle a debt so you will need that much cash for a successful offer.  Be sure to get an explicit written document from the creditor spelling out the terms of the debt settlement and relieving you of any future liability.  Also be prepared to pay income taxes on any of the forgiven debt.

•    Nonprofit credit counseling agencies can help, but must be vetted carefully.  If, like most people, you owe multiple creditors and do not have the cash on hand to settle those debts, you may want to consult a non-profit credit counseling agency to see if there is a way for you to get out of debt.  But make sure to check it out first: Just because an organization says it’s a “nonprofit” there is no guarantee that its services are free, affordable or even legitimate.  Some credit counseling organizations charge high fees (which may not be obvious initially) or urge consumers to make “voluntary” contributions that may lead to more debt. The federal government maintains a list of government-approved credit counseling organizations, by state, at www.usdoj.gov/ust.  If a credit counseling organization says it is “government approved,” check them out first.

•    Bankruptcy will be an option for some consumers.  Bankruptcy is a legal proceeding that offers a fresh start for people who face financial difficulty and can’t repay their debts.  If you are facing foreclosure, repossession of your car, wage garnishment, utility shut-off or other debt collection activity, bankruptcy may be the only option available for stopping those actions.  There are two primary types of personal bankruptcy:  Chapter 7 and Chapter 13.  Chapter 13 allows people with a stable income to keep property, such as a house or car, which they may otherwise lose through foreclosure or repossession.  In a Chapter 13 proceeding, the bankruptcy court approves a repayment plan that allows you to pay your debts during a three to five year period.  After you have made all the payments under the plan, you receive a discharge of all or most remaining debts.  For tax purposes, a person filing for bankruptcy is considered insolvent and the forgiven debt is not considered income.  Chapter 7 also eliminates most debts without tax consequences, and without any loss of property in over 90 percent of cases.  To learn more about bankruptcy and whether it makes sense for you, go tohttp://www.nacba.org/Home/AttorneyFinderV2.aspx.

NACBA urges consumers to steer clear of any companies that:

•    Make promises that unsecured debts can be paid off for pennies on the dollar. There is no guarantee that any creditor will accept partial payment of a legitimate debt. Your best bet is to contact the creditor directly as soon as you have problems making payments.

•    Require substantial monthly service fees and demand payment of a percentage of what they’ve supposedly saved you. Most debt settlement companies charge hefty fees for their services, including a fee to establish the account with the debt negotiator, a monthly service fee, and a final fee-- a percentage of the money you’ve allegedly saved.

•    Tell you to stop making payments or to stop communicating with your creditors. If you stop making payments on a credit card or other debts, expect late fees and interest to be added to the amount you owe each month. If you exceed your credit limit, expect additional fees and charges to be added. Your credit score will also suffer as a result of not making payments. 

•    Suggest that there is only a small likelihood that you will be sued by creditors.  In fact, this is a likely outcome.  Signing up with a debt settlement company makes it more likely that creditors will accelerate collection efforts against you.  Creditors have the right to sue you to recover the money you owe. And sometimes when creditors win a lawsuit, they have the right to garnish your wages or put a lien on your home. 

•    State that they can remove accurate negative information from your credit report. No company or person can remove negative information from your credit report that is accurate and timely.   

Boltz emphasized:  “Many different kinds of services claim to help people with debt problems.  The truth is that no single solution works in all cases.  Bankruptcy is an option that makes sense for some consumers, but it’s not for everyone.  For example, the National Association of Consumer Bankruptcy Attorneys and its individual consumer bankruptcy attorney members do not encourage every person who looks at bankruptcy to enter into it.   What makes sense for each consumer will depend on their individual circumstances.  We encourage everyone to get the facts and do what makes the most sense in their situation.”

National Association of Consumer Bankruptcy Attorneys 2012 Fall Workshop

The National Association of Consumer Bankruptcy Attorneys 2012 Fall Workshop (for members only) is scheduled to be held November 1 through November 3 at the Ritz-Carlton on Amelia Island in Florida. This is just north of Jacksonville, Florida, and close to the historical town of Fernandina.

As in previous years, there will be a new member orientation on Thursday, November 1, at 7:00 p.m. followed by a with a beach party starting at 8:00 p.m. For those that remember the workshop held in Puerto Rico, this will be even better. After all, this is being held at the Ritz-Carlton.

The real workshops, together with the Plenary Session, will be held Friday from 8:00 a.m. (breakfast at 7:00 am) till 5:30 p.m. with a reception following. On Saturday, from 8:00 a.m. (breakfast at 7:00 am) till 5:00 p.m.

To get the early bird rate, registration must be received by 5:00 p.m. On September 28, 2012.

To view a copy of the brochure, go to http://nacba.org/Portals/0/Documents/Amelia%20Island/Amelia%20Island%20Brochure%20pages%207.pdf and a copy of the registration form can be found at http://nacba.org/Portals/0/Documents/Amelia%20Island/4Pages%20from%20Amelia%20Island%20Brochure-registration-form.pdf

President of NACBA, Billy Brewer, on Fox Business' Tom Sullivan Regarding Student Loan Bankruptcy Discharge

The following is a letter disseminated to the membership of NACBA from Ike Shulma, the Chair of the NACBA Legislative Committee, regarding ongoing efforts towards allowing for the discharge of student loans.

As you may know, NACBA held a major news event drawing attention to the emerging student loan “Debt Bomb” during our annual Capitol Hill Meeting in February. The centerpiece of the news event was the NACBA survey of our members, which revealed that 4 out 5 NACBA attorneys reported a major jump in student loan debtors seeking bankruptcy assistance.

This important issue has, as you have probably seen, generated an enormous amount of media coverage in the time since we held the news event.

This week, NACBA President Billy Brewer was interviewed on Fox Business’ Tom Sullivan show. If you’d like to tune in, we have been told that the segment will air this weekend during the Tom Sullivan Show at the following times:

Saturday, April 7:  7 and 10pm (eastern)
Sunday, April 8:  8am and 8pm (eastern)

This effort to draw attention to the effect that significant student loan debt has on those seeking bankruptcy protection is just one of many legislative efforts that NACBA is taking the lead on. We welcome your participation in our legislative and advocacy efforts. If you would like more information and to be involved, feel free to contact NACBA’s Field Director, Angie Thies-Huber or Field Coordinator, Zach Manifold.
NACBA has undertaken this campaign to change the bankruptcy laws with respect to student loans at the suggestion of our legislative team in Washington, DC.  Legislative Director Maureen Thompson reported to NACBA’s Legislative Committee and Board that she had heard from a good number of NACBA members about the need to seek these changes.  Maureen and her colleagues at The Hastings Group took the primary responsibility for researching and writing the report and media materials and for the media promotion of the event.  The Hastings Group, whose role recently was expanded to include media outreach, reports that we likely will have more than 500 media hits from this event.

And, while the media coverage is important, it is only a means to an end.  Our goal is to create an opinion environment that will help convince lawmakers in Washington that changes to the bankruptcy code with respect to student loans is necessary and desirable.  The good news is that in response to the media coverage, the Senate Judiciary Committee recently held a hearing on the topic, during which NACBA’s report and survey were prominently featured.  Senator Durbin (D, IL) cited NACBA and its work in a speech on the Senate floor on this topic.  We know this will take time and the release of the report and survey is only the first step in what will be a broader campaign.  But, with the active involvement of NACBA members in the campaign, I have no doubt we will be successful.

Finally, we wanted to share with you some of the over 300 stories published about the student loan debt bomb issue:

Senior citizens continue to bear burden of student loans (Washington Post)

Explosion in student loan debt reaching crisis proportions, but largely flying under radar (AP)

Bankruptcy lawyers: Student debt is looming economic bomb (USA Today)

Student Debt Could Be Next ‘Bomb,’ U.S. Bankruptcy Lawyers Say (Bloomberg)

Student debt pushing more people toward bankruptcy, lawyers say (LA Times)

We appreciate all the support for these efforts that we are getting from our members!

Ike Shulman
Chair, NACBA Legislative Committee

NACBA and Student Loan Discharge in Bankruptcy

Student loan discharge has come to the forefront of the National Association of Consumer Bankruptcy Attorneys (NACBA) agenda, and has caught the attention of some in congress, especially Senator Dick Durbin (D) from Illinois. Of the outstanding student loans, most notable are the private loans, as they do not have the same payback options as government based loans have.

Outstanding student debt has reached an estimated $867 Billion in the forth quarter of 2011, which is greater than the total US credit card debt. Senator Durbin introduced a bill in May to eliminate a 2005 nondischargability provision from the bankruptcy code.

In my office, I had a client that was tricked into entering into a student loan to become a airline pilot. The loan was granted to him after he informed the lender of a medical condition which he was concerned by prevent him from being able be a pilot. He was assured it would not be a problem, and the loan was granted. As it turned out, after a couple of years of schooling, he was informed he would not be able to become a pilot because of his medical condition. An adversarial hearing ensued, and the discharge of the student loan was denied. At the time of hearing, he was able to find employment as an apartment complex handyman.

Why was the loan made to begin with. The answer to that question is not known, however, at some for-profit schools, as much as 90 percent of their revenue comes from government loans and grants.

NACBA's work on students loans is indirectly reflected in a Bloomberg article, Durbin Urges Private Student Loans Be Discharged in Bankruptcy, by Janet Lorin, (March 20, 2012).

The Principal Paydown Plan Hits a Snag

Please find following, a letter from Billy Brewer, the President of the National Association of Consumer Bankruptcy Attorneys concerning the Principal Paydown Plan.  Despite the efforts of many, the Federal Housing Finance Agency does not favor the plan.  Hopefully with the help of those favoring the plan, it will move forward, but just not as fast as what we had hoped for.

Thanks to the good work of so many members, NACBA’s Principal Paydown Plan to help underwater homeowners in chapter 13 bankruptcy avoid foreclosure, has been endorsed by a substantial number of Members of Congress who in turn have pushed for action by the Federal Housing Finance Agency (FHFA) to implement the plan.  In a series of private meetings and in letters to FHFA, Senators and Members of Congress have asked the FHFA to use its authority over Fannie Mae and Freddie Mac to require them to agree to the Principal Paydown Plan when proposed by a homeowner trying to save a home in chapter 13 bankruptcy.

Despite FHFA Director DeMarco’s initial positive comments about the Principal Paydown Plan, which he said struck him as “being responsible,” and a “credible way to address the crisis while recognizing various interests mortgaged properties,” he recently wrote to Congress informing them that the agency would not be implementing the Principal Paydown Plan.  FHFA concluded that few GSE borrowers have filed for chapter 13 bankruptcy and are underwater and therefore the proposal would not be all that helpful.  They did, however, commit to doing what they can to help eligible borrowers in bankruptcy get the HAMP modifications they qualify for.

While the FHFA response is disappointing and inadequate, and we believe wrong, we are gratified that the many Members of Congress who have pushed for this solution continue to be engaged and are looking for ways to get the Principal Paydown Plan implemented despite the FHFA’s position.  These Members of Congress recognize, as so many of us do, that the foreclosure crisis is not going away anytime soon and so long as it continues, the nation will not enjoy the kind of recovery that is needed to stabilize the economy and get people back to work.

We hope you will join the Board of Directors and Legislative Committee in continuing to get the word out about the Principal Paydown Plan and to seek support for it.  Our allies on and off Capitol Hill are committed to keeping up the push.  We take some comfort in knowing that NACBA was among the first to sound the bell more than five years ago about the impending foreclosure crisis and to propose a widely embraced solution that would have helped minimize the damage that has been done to the economy.  We were right then in proposing legislation to permit modification of mortgages in bankruptcy, an idea that again is gaining currency among policymakers, economists and others.  The Principal Paydown Plan was designed to achieve the same desired result without engaging the same level of opposition to changes to the bankruptcy code.  

We look forward to continuing to work with you to build support for the Principal Paydown Plan.  Please contact either of us if you have questions or comments.

Billy Brewer
President