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What Debts Are Not Dischargeable in a Texas Bankruptcy?

December 13th, 2019 at 9:46 am

TX bankruptcy attorney, TX chapter 7 lawyerFiling for bankruptcy is often the last resort for many people. If you successfully file for bankruptcy and your debts are discharged, it can affect your current and future finances for years, which is why people do not typically get a bankruptcy unless they absolutely have to. For most forms of bankruptcy, receiving a discharge of your debts is typically the end goal. Most debts can be discharged or forgiven in a bankruptcy, but there are certain types of debts that either cannot be discharged or will not be discharged based on certain circumstances.

Student Loans

When it comes to student loan debt, it is almost never automatically discharged in a bankruptcy. If you are looking to have your student loans forgiven, you must prove to the court that making your student loan payments would cause you undue hardship. To do this, you have to prove that making your student loan payments would not allow you to maintain a minimal standard of living, you will likely be in a tight financial situation for the remainder of your student loan repayment period and you have made a decent number of payments in good faith on your loans.

Taxes

For the most part, federal, state and local taxes are not dischargeable in bankruptcy. However, there are certain situations in which you may be able to have your tax debts forgiven if you file for a Chapter 7 bankruptcy. To do this, you must prove that all of the following five criteria are true:

  • The tax return in question was due at least three years ago;
  • The tax return was filed at least two years ago;
  • The IRS assessed your tax at least 240 days prior to the filing of the bankruptcy;
  • Your tax return was not fraudulent; and
  • You are not guilty of tax evasion.

Domestic Support

Domestic support that you owe to a spouse or child will never be discharged in a bankruptcy. If you have a legal obligation to pay spousal support or child support payment, you will still be held to that obligation after a bankruptcy.

Consult With a San Antonio, TX Bankruptcy Discharge Attorney

Getting a bankruptcy, whether that bankruptcy is a Chapter 7 or Chapter 13, can be a fresh start for most because of the ability to have your debts discharged or forgiven. If you have certain specific types of debt, you may not be able to have those discharged in a bankruptcy. At the Law Offices of Chance M. McGhee, we can help you analyze the types of debt that you are in and determine whether or not you would be able to have those debts discharged if you were to file for bankruptcy. Let our Kerrville, TX bankruptcy discharge lawyers help you make the right decisions for your financial future. Call our office today at 210-342-3400 to schedule a free consultation.

 

Sources:

https://www.thebalance.com/what-is-non-dischargeable-in-a-bankruptcy-case-316130

https://www.investopedia.com/terms/n/nondischargeable_debt.asp

https://www.law.cornell.edu/uscode/text/11/523

How to Discharge a Student Loan in Bankruptcy

April 20th, 2016 at 7:00 am

Writing off a student loan in bankruptcy requires showing “undue hardship.” What is that?

 

Student Loans CAN Sometimes Be Discharged

You may have heard that student loans can never be “discharged”—written off in bankruptcy. Untrue.

Some other kinds of debts can’t ever be discharged, such as child and spousal support. But student loans are more like income taxes. Both can be discharged under certain conditions. (See our blog post of last Friday about discharging income taxes.)

However, income taxes are usually easier to discharge than student loans. Most of the time you just have to file your tax return and wait a certain amount of time. The requirements for discharging a tax debt are quite clear. They are much less clear and more rigorous with student loans.

“Undue Hardship”

The Bankruptcy Code says that a student loan is not discharged unless making you pay it “would impose an undue hardship on [you or your] dependents.” See Section 523(a)(8).

 So, if you can show that paying a student loan causes you “undue hardship,” bankruptcy can forever discharge that debt.

But What Does “Undue Hardship” Mean?

For decades the bankruptcy and federal appeals courts have been trying to figure out how to interpret those two words used by Congress when it wrote this law.  In practical terms how does a court decide whether or not a debt creates a hardship?  

And what more beyond ordinary “hardship” is needed to create an “undue hardship”?

Over time, judges have come to generally agree that to show that a student loan creates an “undue hardship” you have to meet three requirements:

1. You must currently be unable to maintain even a minimal standard of living for yourself and any dependents if you had to make the required payments on the student loan.

2. Your current inability to maintain that a minimal standard of living must be expected to continue over all or most of the student loan’s repayment period.

3. You must have earlier acted responsibly at making a real effort to pay on the student loan, and/or to try to qualify for any available forbearances, debt consolidations, and administrative payment-reduction programs.

Notice that these three conditions refer to the past, present, and future. You have to meet all three conditions, which is a lot to satisfy.

Your Burden to Prove “Undue Hardship”

In bankruptcy, some kinds of debts are discharged unless the creditor affirmatively and formally raises an objection. If the creditor fails to object and do so before a quick deadline, the debt is legally forever gone.

With student loans, in contrast, the burden is on you to convince the bankruptcy judge that you qualify for “undue hardship.” Generally you must do that during the bankruptcy case. Otherwise that debt survives your bankruptcy.

Timing Issues

The fact that you have to establish that you are currently unable to maintain a minimal standard of living if you had to make your student loan payments raises some timing issues.

If you believe you meet this requirement right now (as well as the other two conditions), you could file a Chapter 7 “straight bankruptcy” case or a Chapter 13 “adjustment of debts” case now, whichever is better for you as to the rest of your debts. Your attorney would then formally ask the bankruptcy court for an “undue hardship” determination to discharge the student loan. A separate legal proceeding would determine whether you qualify. If the student loan creditor objects to your request, there could be court trial focusing on whether you meet the required conditions.

If you don’t believe you qualify yet for “undue hardship” now but expect to in the future, filing a Chapter 13 case now may be the best choice. (For example, you may have a worsening medical condition which you know will cause a reduction in your income in the near future.) You may need relief from your creditors now, including the student loan creditor(s). A Chapter 13 filing would give you that relief. It would likely allow you to avoid making any ongoing student loan payments for the next few years while you focus on other more pressing expenses and special debts. And then you would have the opportunity to try to qualify for “undue hardship” between now and the end of your Chapter 13 case 3 to 5 years later.

In some situations, if you don’t qualify for “undue hardship” during the course of either your Chapter 7 or Chapter 13 case, you may be able to reopen your bankruptcy case later. That way the bankruptcy court could make that determination at a time when you do qualify.

Conclusion

“Undue hardship” is a tough standard to meet. Bankruptcy law does not provide an easy way to get out of student loans. But more and more people in financial distress have student loans as a major part of their problem. More of them are getting older, closer to disability, illness, and retirement.  As the courts continuously deal with the issues, the law will continue to evolve. All are good reasons for you to get solid legal advice about your student loans and about your whole financial situation, to be able to figure out your best way forward.

 

Understanding Wage Garnishment Laws in Texas

January 28th, 2015 at 5:43 pm

wage garnishment in San Antonio, Texas bankruptcy lawyerMost Americans have some form of debt, and many struggle to make payments. Some are fortunate enough to get by with responsible budgeting, consolidation, and other financial strategies. However, unexpected circumstances, such as a suffering an injury or losing a job, can cause a debtor to fall behind. In some cases, creditors will garnish a debtor’s income to pay debt.

Although wage garnishment can severely limit a person’s financial freedoms, certain requirements must be met in order for wage garnishments to be legal. This article will briefly discuss how wage garnishment laws work in Texas.

Texas Laws Regarding Garnished Wages

For citizens of Texas, creditors cannot garnish wages to pay consumer debt, according to NPR. However, debts involving taxes, student loans, alimony, and child support may lead to wage garnishment.

Also, whether or not the debtor was born in Texas may affect the creditor’s ability to garnish wages. There are other complexities to these laws, which is why the guidance of a bankruptcy lawyer may prove invaluable.

What to Do When Wage Garnishment Begins

When wage garnishment begins, it is important that the debtor remains in contact with all relevant parties. These include the creditor, collections agency, and any attorneys involved. Do not avoid phone calls from these parties.

Although it may seem embarrassing or uncomfortable for an employer to learn about your debt, employees cannot lose their jobs due to wage garnishment—provided this is the first time it has happened.

Filing for bankruptcy may be a smart option if you face wage garnishment. A bankruptcy attorney can assess the facts of your case to determine if this is the right decision.

If you wish to learn how bankruptcy might help you financial situation, contact an experienced San Antonio bankruptcy lawyer. The Law Offices of Chance M. McGhee may be able to help. For more than 20 years, Mr. McGhee has helped clients return to financial stability, and he may be able to do the same for you. To schedule a free consultation, call us at 210-342-3400.

 

Texas Ranks as a Best State for Student Debt Among the $1.12 Trillion Owed Nationwide

November 4th, 2014 at 12:59 pm

According to a recent study by WalletHub, the state of Texas ranks as number nine in the list for the “best” student loan debt. WalletHub analyzed all 50 states (including the District of Columbia) using 7 key metrics, including average student debt, unemployment rates, and students with past-due loan balances.

Though nine out of 51 may be good news for the Lone Star State, the rest of the country is not doing as well. As of June 2014, the Federal Reserve Bank of New York, total outstanding student loan debt stood at $1.12 trillion, an increase of $7 billion from 2013.

According to the WalletHub study, though the risk of joblessness declines with the more schooling you have, location also has a large effect on college debt levels. This means that if you live in a city or state where the economy is booming, you are more likely to pay off your student debt on time, without penalties.

While Texas continues on the up and up, other states in the bottom, including Massachusetts (30), Washington D.C. (41), and Rhode Island (51), continue to suffer.

In May 2014, Massachusetts Sen. Elizabeth Warren proposed a bill to allow students to refinance their loans at a lower interest rate called the “Bank on Students Emergency Loan Refinancing Act.” The Democratic senator and her party argued that the $1 trillion in student loan debt is harming the U.S. economic growth and that something must be done to alleviate it. Unfortunately, in September, Republicans opposing the bill struck it down. The Act would have allowed more than 25 million students to refinance their loans to today’s lower interest rates of less than four percent.

For now, it does not seem like student loan debt in any state will be alleviated anytime soon. With the political battle constantly stalling bills able to assist student loan debtors, the educated middle class will only continue to suffer.

If you or your college-aged son or daughter is suffering from crippling student loan debt in Texas, contact an experienced San Antonio bankruptcy lawyer. Attorney Chance M. McGhee can help you determine which bankruptcy option may be best for your individual situation. Call 203-342-3400 for a free consultation.

The Link Between College and Credit Card Use

February 28th, 2014 at 12:15 pm

college, credit card card, debt, bankruptcy For many families, education is one of the biggest investments that parents will make for their children’s future. Even when some steps are taken to plan for this costly life goal, some expenses can creep up, leading parents and students to rely on credit cards to help. When credit card debt grows out of control, sometimes bankruptcy is the only option to get a fresh start.

According to Sallie Mae, between 3 and 5 percent of parents used credit cards to help pay for educational expenses for the years 2009-2013. In 2013, the average college student spent about $3,156 on their own credit cards, too. Whether it’s tuition, books, transportation, or other expenses, this credit card usage can add up.

When parents are already strapped for cash, they might get stuck only being able to make the minimum payment on their own credit cards. For students, often new to the credit card game and often with a very limited income, credit cards can add on to a massive amount of debt on graduation when coupled with student loans.

With some families, relying on that credit card for extras or emergencies is the only way to make it through an expensive venture like college. If there’s not a plan in place for repayment or if a family member loses his or her job, however, debt can spiral out of control fast.Relying more and more on credit cards can put both parents and students in a difficult financial situation, making it difficult to climb out and get a fresh start.

If your family has been affected by an increasing reliance on credit cards while one or more students was working towards a college degree, you might feel trapped by more debt than you can handle. Contact a Texas bankruptcy attorney today if you need to start over.

Call today for a FREE Consultation

210-342-3400

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