OK, student loans are generally not dischargeable in a bankruptcy unless the debtor can pass the Brunner Test for undue hardship and bankruptcy judges frequently set up roadblocks to confirming a Chapter 13 plan that includes a student loan.  That’s what makes this decision so interesting and consumer-friendly. 

United Student Aid Funds (USAF) was sent notice by the Chapter 13 Trustee that its proof of claim of $17,832.15 would not be included and instead the payment plan to USAF was limited to $13,250.  USAF was given 30 days to object and they didn’t respond.  Espinosa finished the Chapter 13 plan and was given a discharge.  Then, three years later, USAF intercepts tax refunds due Espinosa and that’s what led to this case.  The following text are excerpts from the Ninth Circuit in Espinosa v. USAF:

“Congress made it quite clear that a creditor need only get ordinary notice of a Chapter 13 plan to be bound by its terms….We reject the idea that a creditor who is in the business of administering student loans has a constitutional right to ignore a properly served notice that clearly specifies that its debt will be dischargeable on successful completion of the plan.”

And now for my favorite part:

“The case is remanded to the bankruptcy court for reinstatement of the order enforcing the discharge injunction and for a determination whether the creditor acted willfully in violating the injunction under the standard we announced in Zilog, Inc. v. Corning (In Re: Zilog, Inc.), 450 F. 3d 996 (9th Cir. 2006).”

Espinosa v. United Student Aid Funds (In re Espinosa), — F. 3d —, 2008 WL 4426634 (9th Cir. October 2008)

This author is not an attorney and this information should not be considered legal advice.  Please consult an attorney for legal advice.

I was just released from my chapter 13 bankruptcy on 6 october. Yesterday I recieved a student loan bill for my wife and they want $4500 which they have been charging and mounting interest up since jan/08. they have sold my debt once to another branch of the Iowa college student aid commission.

Now they are saying if I don’t pay them 100 per month they will send it to collection charge me more fees and interest and take my tax return. Is this legal? And are there any repercusions for them transferi9ng my debt while in bankruptcy?

This det is old I know there is not statue of limitations for student loans but they have to follow the same rules as other creditors right?

John (more…)

Hi Paul,
 
Good day. I have a 20-80 mortgage. My home’s current value is 330,000. My total loan amount is 515T.

I am current on my payment despite my financial situation.

Im currently on disability . I have been on disability since Dec. 07. Because of that, paying my mortgage is a challenge and my resources have been  running dry. 

I called hope now  and they assisted in forwarding my financial worksheet to the bank.

Yesterday, Oct 28, i called Wells Fargo to follow up. I was told that my request for modification was denied. They said I have the option of a short sale or a deed in leiu…

Im not sure if Hope for Homeowners have been applied in the review of my docs. Is it in place now? It seem like it is a hoping against hope thing with the bank. 

Grace (more…)

Hi Paul:

I have 2 properties. 1 primary residence with an option arm, that I have had FSBO and am last resort listing with a realtor friend at no fee to see if we can move it conventionally or lease option. The smaller house I have a mortg & HELOC on I am planning to move into.

These were supposed to be income projects (job) and since everything has tanked, I am resurrecting old skills to get back into traditional job market, but no income now and rapidly depleting HELOC for live on money. I have spoken with the loan co. about the option/ARM house and it seems my options are short sale or deed in lieu, no loan mod without a job.

After reading up on myfico.com, it seems that either of these have the same affect on my credit, but at least with a deed in lieu, I can walk and preserve assets I have left rather than hang on with no income for a potential buyer on short sale. They said they will not pursue a deficiency judgment with a DinL, but a 1099 will be issued for tax on deficient amount. I don’t have funds or stamina to deal with a TILA investigation as a potential solution.

Also, since all my accounts have been paid on time, never late, it seems to make sense to keep current with payments until a deed in lieu is finalized for less impact on credit. Am I missing anything in this thought process? Also, how horrible is credit impact with a 30 year history or perfect credit & what can I do to minimize the affects if I do go through with DinL?

Many thanks,

Catherine (more…)

I have spoken with the mortgage company and they will not budge on my ARM interest rate, and want to charge me 1800.00 by Nov 7, another 1800 on Dec 7th and then another 1800 on January 7th. At that time they will review to see if I am eligible for negotiation on my rate. If they deem me eligible, they will lower the rate some and lock it for 5 years, in which I cannot ever default or they will foreclose immediately.

This company was not our original lender, our loan was transferred to them, and they would not return any calls for the last 2-1/2 months when I tried to reach someone to see if we could work something out before I missed a payment. They are also not on the list of lendors for FHA or HUD loans offered to help consumers now. The only other option given to me was to shortsell and move somewhere to rent, if at all possible. My wife, young child and I do not want to lose our home, but this lender will not work with us.

Do you  have any suggestions on how we can keep our home?

Gary (more…)

Paul, my firm purchases distressed mortgages at a discount from various financial institutions. We have a number of borrowers that would qualify for the Hope for Homeowners program and we are willing to reduce the upb on our loans to the appropriate amount so that the borrower can refinance. So far we have not found a lender that offers the program. Any ideas?

Ron (more…)

I have one for you… My Fiance & I had shaky credit so we lived on our property in a camper for two years saving money.  We came across a guy selling used mobile homes.  We wanted to pay cash for a modest home that we could remodel ourselves over time.  He pushed a “fully refurbished” trailer down our throats because it was SUCH a great deal.  He claimed he could find us financing as well. 

We were honest w/all info we gave to him. He said he found an investment group that would “buy” a discounted loan from him.  He said we had to “borrow” more than we needed so the note could be discounted.  The rate was a scary 12%, but I really wanted my son to be able to take showers and get on the bus in front of a real home; and another Winter was coming. 

We sat down in front of a lawyer he hired and signed a “mortgage note” to buy the trailer from him.  (he wanted $37,500 for the trailer, but because we needed funds for ground prep and a well, septic, etc. the note was for $70,000…we had needed only $56,000 for everything.  He was to be the lien holder on our 15 acres in addition to this trailer).  No money changed hands as this was a “table-funded loan” which in itself is not legal in Maine (the investors were from Florida). 

We hired the guys for all the prep work.  Several weeks later, the trailer arrives.  To shorten the story a bit, it started leaking heavily within a few months.  Upon inspection, the roof shingles were found to be worn heavily.  The trailer had been advertised as “redone” but it became apparent that the ceilings were painted over despite the ongoing damage that they never bothered to repair the source of.  We complained, but he would not address the issue. 

I then participated in mediation service through the DA’s office.  He would not participate.  As we then went on to find out through increased research, the guy did not have a license to sell mobile homes; he also did not have a license to arrange financing at all.  I filed complaints to “Consumer Credit” and “Manufactured Housing Licensing & Regulation”.  The guy is now in SO much trouble as they have dealt with him before.  So we hired a lawyer.  The case seemed simple enough to David Leach, Maine’s “Principal Examiner of Consumer Credit”, but he cannot give me legal advice so we hired a lawyer.

After seven months of my prodding, I finally got my lawyer to send a “QWR” to the investors company.  It has now been five months and they have not responded.  I am on the verge of filing a complaint against our lawyer (with the overseers) as he has done nothing to follow up, and has not yet ONCE called me to inform me of anything in an entire year.  It seems he is dragging me down, considering what Mr. Leach has said, “Why are you doing all of your attorneys work?”.  But I know if I do file a complaint, he may withdraw from representation, then we probably lose the money we have given him, and definitely lose the TIME. We are running out of both and our trailer continues to take on damage we simply cannot afford to fix.  My paranoid side says that my lawyer is protecting the lawyer that acted as the sellers settlement agent (they have offices on the same street) because wasn’t he supposed to know if the guy was licensed to offer us the financing to begin with?  Aside from that craziness, is it really that hard for my lawyer to follow through with such a case?

Aimee (more…)

Can you fix my credit in about 24 hour pleaser and how much it going to cost me !!!And went can it be done!!

Joanne (more…)

I’m in forbearance and in an adjustable rate mortgage that will jump again to 10.125 in December?  I would like my interst rate lowered, but can’t refinance.  We can afford our home, but with the jump in interest and my husband being out of work for the past year because of his back we are in fear of losing our home.

Kim (more…)

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