Posts Tagged ‘Discharge of Debts’

USA Today recently published an article  explaining that Americans’ student loan debt, which totals approximately $850 billion, now exceeds outstanding credit card debt in the U.S., which totals approximately $828 billion.

Perhaps a more interesting element of this story has to do with the monthly repayment numbers borrowers are expected to pay. The USA Today article suggests that $30,000 of student loans, payable at 6.8% interest over ten years would amount to $350 per month.  At this level of debt, the average person would need to earn at least $42,000 per year.  Unfortunately, as bankruptcy attorneys we commonly see student loan debt in excess of $100,000, with monthly payments over $1,000.

From a bankruptcy perspective, student loan debt is not dischargeable except in cases of “undue hardship.” In the Eastern District of Wisconsin, the court uses a very strict three part test to determine whether student loans may be discharged. As the law stands today, debtors in the Eastern District of Wisconsin have not been successful in arguing for hardship discharge on the grounds that they cannot find a job that pays enough to support their student loan obligations.   

When it comes to creditworthiness, it’s hard to top the consumers of Wisconsin.

Four Wisconsin cities – including Wausau at No. 1 – are among the 10 communities in the nation with the highest average credit scores, a new survey shows.

Wausau residents posted an average credit score of 789 in the survey conducted by the credit-rating agency Experian. Madison was third, at 785; Green Bay sixth, at 780; and La Crosse 10th, at 777.

Milwaukee, with a score of 765, was 33rd of 143 cities included in the survey.

“Wisconsin residents remain among the nation’s most fiscally responsible,” Experian stated Tuesday in announcing the survey results.

Higher credit scores generally give consumers the ability to borrow money at lower interest rates.

Credit scores are based on a consumer’s payment history, debt balances and several other factors. Among those factors are how much of a person’s available credit is used, how long a person has had credit and whether late payments have occurred recently.

Wausau unseated Minneapolis, with the Minnesota city slipping to second in the annual survey with a 787 average credit score.

Rose Oswald Poels, chief executive of the Wisconsin Bankers Association, wasn’t surprised by the survey’s findings.

“The consumers in this state are generally very conservative with their money and smart about credit decisions, and that’s true of the financial institutions that serve those citizens,” Oswald Poels said. “I think it’s just the combination of the types of values and people we have in this state, coupled with the type of financial institutions that we have. We both share similar values in being fiscally conservative, hardworking and smart about credit.”

An executive with Wausau-based Peoples State Bank said he’s noticed before that many of the bank’s customers bring credit scores higher than 700.

“I think people here were raised in a conservative fashion, and they live the way their parents do,” said John Proulx, senior vice president for Peoples State Bank. “I think that probably is a big reason as to why we have the good scores.”

Overall, the survey found that Midwesterners have the highest credit scores while Southerners have more financial struggles.

Experian said that while no one factor determines a consumer’s credit score, the weak economy continues to cause major setbacks, such as foreclosures and unemployment. Those troubles were drivers in the rankings and trends for different regions of the country, the firm said.

Of the cities with top 10 credit scores, only San Francisco had a jobless rate higher than the national rate. Texas had four cities in the bottom 10.

The credit scores in the report were based on the VantageScore scoring system, which has a range from 501 to 990, in designated market areas from January through June of 2011, Experian said. The analysis was based on a statistically relevant sampling of Experian’s consumer credit database, the firm said.

“We have our issues just like any other city does. We have some foreclosures and things like that, but probably not as much as some of the other areas do,” Proulx said. “So some of that doom and gloom has hit Wausau, but it’s maybe not as prevalent in this area.”

Wausau Mayor James Tipple was proud of the ranking for his city, which has a population of 41,800.

“I think the quality of life and the people we attract to the region, and not only the region but the city of Wausau, speaks volumes for the score,” Tipple said.

Bankruptcies ease in U.S., state

July 25, 2011 |(1) Comments

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Bankruptcy filings in Wisconsin and the nation are running behind last year’s pace, but attorneys say it’s too soon to know whether the wave of filings triggered by the economic downturn has crested.

Still, at least in some lawyers’ offices, the number of people coming in to declare themselves insolvent has slowed slightly. And more of those filing for bankruptcy today are people who at one time were higher on the economic scale. That compares with many of those who filed earlier in the recession – people who were living paycheck to paycheck and folded quickly when their income was cut, lawyers said.

“I think those that we’re seeing now are those who were able to survive the downturn – people who were self-employed, people who had higher-paying jobs, were able to tap into retirement accounts and use the credit card but make the minimum payments,” said James Miller, of Miller & Miller in Milwaukee. “There is just not that same mass of people as those who fit into the first category.”

U.S. Bankruptcy Court records show bankruptcy filings fell 8.4% in the first half of 2011 in Wisconsin, to 14,682 from 16,024 in January through June 2010. About 80% were Chapter 7 filings, which wipe out debt on things such as credit cards, medical expenses and utility bills.

The Wisconsin numbers mirror a decrease in consumer bankruptcies nationally. There were 709,303 filings in the United States in the first six months of 2011, an almost 8% decrease from 770,117 during the same span in 2010, according to American Bankruptcy Institute.

“What we’re seeing is still high filings, but off the peak,” said David Leibowitz, founder and managing member of LakeLaw in Milwaukee and Kenosha. “I don’t think we can take a great deal of comfort in it. But I do think that there’s a direct correlation between the economy and unemployment on one hand and the bankruptcy statistics on the other hand.”

Madison bankruptcy attorney Claire Ann Resop of von Briesen & Roper said people who had been making at least midlevel incomes are among those she sees more frequently. Among those on the list: teachers, nurses, sales people, tradesmen, homebuilders and truckers.

“They had higher income and they had more resources to try to keep up for a while,” she said.

Milwaukee attorney Robert Waud said he was “kind of surprised” to hear the number of filings in the state declined.

“It’s pretty steady coming in the door,” he said.

Small-business owners, trades people and land developers are common bankruptcy filers, he said.

Waud, of Todd C. Esser & Associates, isn’t convinced bankruptcy filings have peaked, even if the half-year trend is down from a year ago.

“I think it’s too soon to say,” he said.

Miller said restraints on credit since the start of the recession and financial crisis have cut the likelihood of people charging huge debts that end up in bankruptcy.

“Credit companies aren’t taking as many risks on people, so there are not as many credit-related defaults,” Miller said.

Lawyers said issues that historically have led to bankruptcy remain the big factors – uninsured major medical costs, divorce and job loss.

“The problem still, as far as I’m concerned, is there are not enough people working,” Waud said.

In you own a car that you owe more than it is worth, our lawyers may be able to help lower your car payments.  Our lawyers can use a Chapter 7 bankruptcy redemption to lower your payment.    Many people are forced into bankruptcy because a car loan company has over-financed a vehicle.  A high car payment can make it impossible to afford your car.  We may be able to force your car lender to accept a payoff on your vehicle for only the value of your vehice.

In a Chapter 13 bankruptcy we can “cram down” or reduce what you owe on the car to what the car is worth.  Our experienced lawyers will help you figure out if this is a solution for you.

We can even get your car back and reduce your car payment if your car has already been repossessed.

*Criminal fines or restitution or drunk driving injury claims

*Guaranteed Educational Loans

*Fine or penalty owed to governmental unit

*Damages arising from willful injury to person or property

*Spousal or child support, or ex-spouse attorney fees for obtaining support

*Income taxes less than three years old

*Income taxes over three years and tax return not filed more than two years ago

*Income taxes not assessed at least 240 days

*Payroll taxes and sales taxes