More than 400,000 student loan borrowers may have placed their faith in a government program with an uncertain future.

400,000 were promised student loan forgiveness. Now they are panicking

More than 400,000 student loan borrowers may have placed their faith in a government program with an uncertain future.

The Public Service Loan Forgiveness Program promises to cancel any remaining student debt for those who work for the government or nonprofits if they have been making on-time payments for 10 years. Many teachers, public defenders, Peace Corps workers, and law enforcement officers fit the qualifications.

This October marks the 10th year of the program and the first time anyone will have made enough payments to get their debt wiped away. It’s unclear how much the program will cost the government when its starts to forgive those debts.

The program has been shrouded in some uncertainty for months.

On Wednesday, the Washington Post reported that the Department of Education is planning to propose ending the Public Service Loan Forgiveness Program.

The article was based on budget documents obtained by the Post. A public version of the department’s budget is expected to be released next week. Congress would have to approve the department’s proposed changes for them to take effect.

It’s unclear whether the Trump administration may propose ending the program for future graduates, or end it for those who have already applied and made qualifying payments.

The Department of Education did not respond to CNNMoney’s requests for comment, and “had no immediate comment” for the Washington Post.

“It would be absolutely detrimental to those of us who have planned our lives around this program. It would be the equivalent of pulling the rug out from under us,” said Daniel J. Crooks III, a government attorney who is expecting loan forgiveness from the public service program in six years.

He currently has more than $300,000 in student debt — after making payments for the past four years. He’s moved states to get a better job that still qualifies him for the debt relief.

Education Secretary Betsy DeVos has said little on the issue of student debt. She praised President Trump’s “skinny” blueprint budget released in March for including an additional $1.4 billion in school choice programs.

Trouble with the Public Service Loan Forgiveness program had already given borrowers a reason to worry. A lawsuit filed in December claims four borrowers were misled into believing they qualified for the program. In court documents, attorneys for the Department of Education suggested that borrowers may not be able to rely on prior notices from their loan servicers about whether they qualify.

Many people have told CNNMoney that they are confused about whether they qualify, how to enroll, and that it’s difficult to get answers from the companies servicing their loans.

“It’s one of the more convoluted programs that Congress has designed,” said Rohit Chopra, the former student loan ombudsman at the Consumer Financial Protection Bureau.

The CFPB has received complaints from borrowers who were told they were not enrolled after years of making payments they thought counted towards the 120 needed for debt relief.

You need the right kind of loans, the right kind of job, and need to also be enrolled in an income-driven repayment plan. Signing up for that repayment plan alone requires submitting information about your income each year — a process which can take weeks and temporarily stop the clock on your 10 years of payments.

The program could cost the government more than originally expected, according to the Government Accountability Office. The Obama Administration had proposed capping the amount borrowers could have forgiven at $57,500, but that proposal was never was approved and forgiveness remains unlimited.

The median borrower in the program has more than $60,000 in student debt and almost 30% of them have more than $100,000 in debt, according to a Brookings report.Even if Crooks can remain in the program, he worries that future grads will be discouraged from entering public service jobs if it’s no longer available for them.

“With student debt hanging over them, it might not be be financially possible for recent grads to commit to public service careers,” he said.

Bankruptcy defined, What is a Bankruptcy?

The purpose of a bankruptcy is to protect you from adverse creditor action. With limited exception, the minute your attorney presses the “file case” button on his computer, you and your assets are protected by the bankruptcy law’s automatic stay. Because bankruptcy is a legal proceeding you will have to attend court (usually for a brief hearing only) and everything you include in your bankruptcy petition must be truthful, under penalty of perjury.

The laws that control how bankruptcy work are found in Title II of the United States Code – you can read the provisions of the Bankruptcy Code by clicking on the link.

Bankruptcy Code

The Bankruptcy Code was written by the men and women in the Congress, and was signed into law by the President. Periodically the Code is revised and parts of the bankruptcy laws are changed. The most recent major change to the Bankruptcy Code occurred in 2005, when Congress changed the law to make bankruptcy filing more difficult. Lobbyists working on behalf of banks, credit card issuers and finance companies spent millions of dollars to convince Congress to enact what are known as the BAPCPA amendments. BAPCPA stands for “Bankruptcy Abuse Prevention and Consumer Protection Act,” which is somewhat of an Orwellian name since there is very little in the way of consumer protection in the BAPCPA amendments.

Chapters of the United States Bankruptcy Code

The Bankruptcy Code is divided in to a number of chapters, some of which give their name to specific types of bankruptcy. The “consumer” chapters are Chapter 7 and Chapter 13 – but there are other types of bankruptcies that exist – for example Chapter 11 functions as a business reorganization, Chapter 12 serves as a debt reorganization for family farmers and Chapter 9 operates to allow local governments to reorganize.

You should think carefully about the decision to file for bankruptcy. Once your case is opened and a case number assigned, your credit report will show that you have sought protection from the bankruptcy court. Even if your case later gets dismissed – either voluntarily or by court action – your credit report will show that you have filed a bankruptcy.

Experienced consumer bankruptcy lawyers can help you decide if bankruptcy makes sense for you, how to best prepare for your filing and what type of bankruptcy to file. David Galler of GallerLaw has represented consumer bankruptcy debtors for over 30 years and they invite you to call or email today with your bankruptcy questions.

Clients seek Chapter 7 , 13 and Chapter 20 bankruptcy relief

FIRST client is 45 and single. His gross income last year was $98K, which is good. It reached $98K because of bonus. Without bonus, his gross income is $72K. This year started out for him with nothing to expect by way of bonus. So his last four months gross income was $6K a month, net of $4,500. His rent is $1500. He lives by himself but claims his 70-year old dad as his dependent. For a household of 2, his gross income is $10K of $72K is $10K over the median income.. This fact complicates the means test analysis because a presumption of abuse may arise if there are insufficient IRS allowable deductions. So, this is what I call a borderline Chapter 7 case. It can be filed as a Chapter 7 case assuming client has enough allowable deductions so that the presumption of abuse does not arise, but if the trustee objects to the reasonableness of deductions taken, then a conversion to Chapter 13 is required. Of course, client prefers a Chapter 7 discharge where he pays nothing to creditors. On the other hand, Chapter 13 would require a partial payment of debt at least.
Client has $60K of credit card and payday loans. Of that amount, $50K is credit card debt and $10K is payday loans. These are both high-interest debt but payday loan interests are sky-high. Once you start using payday loans, you know you’re in a deep hole that you cannot get out of. So it’s really time to get rid of these debts. It’s time to get a fresh start in life without accumulated debt. This is a no brainer. Client pays $2000 a month for minimum monthly interest payments on his unsecured debt from his net income of $4,500. That’s almost half his net income every month! No one should be under the yoke of so much debt. Wise up and get rid of these debts now and be productive again. Even Walt Disney filed for Chapter 7 twice before Mickey and Disneyland became successful. Now his business is multibillion and worldwide. Shanghai Disney just opened and its so successful that they are expanding the park. There’s Hong Kong Disney and one in Japan too. Before all of this success, Mr. Disney had to file for bankruptcy twice. His second fresh start from Chapter 7 led to business success beyond imagination! Milton Hershey also filed for Chapter 7 once before Hershey chocolate products became successful. Now, his business is probably the biggest chocolate business in the world. I’m sure you must have brought your family to Disneyland and you must have bought Hershey chocolate products for yourself and children at some time in your life. These businesses were borne from successful fresh starts after Chapter 7 bankruptcy!
President Trump’s businesses filed for bankruptcy 4 times during the nineties. He nuked his business debts with reorganization under bankruptcy law. Argentina filed for sovereign bankruptcy in 2000. It could not pay back even the interest on its loans and bondholders were left holding the bag. Greece is has been under bankruptcy reorganization for the last 3 years. I was in Athens last year and I could feel the depression of the people there. The city has no vitality because it has too much debt; same thing happening to debtors with too much debt. They have no vitality because their income goes mostly to debt service. They are debt slaves who practically work for nothing because they have lost the ability to save money and cannot be productive. If you are a debt slaves, get rid of your debt ball and chain now with a Chapter 7 discharge. Who knows, you might become the next Walt Disney, Milton Hershey or Donald Trump. Pick your choice of who you want to be. You can become the next billionaire or the next president of the USA with your fresh start.
Second client is 58. His is going through a divorce. Wife filed for divorce after 10 years of marriage, and now asks for alimony or spousal support. Your spouse is not as dumb as you think. Or, you may not be as smart as you think. In this case, client makes about $100K a year in his profession, while his younger wife makes $20K a year. This means that wife can and surely will ask for $1600 spousal support. Now, where did all the love go to? It all went to alimony. So think twice and thrice before you make the big jump. If you do make the jump, make sure your clock yourself and if you are the higher income spouse, if you think you made a mistake, better end the marriage before you reach your 10 year mark. Otherwise, you will be on the hook for alimony.
Client had a previous Chapter 7 discharge in 2012. He now owes $50K of credit card debt. I guess he used these cards to pay for travelling the globe with his younger wife. Wife is 10 years younger. Whatever the reasons are, his situation now is he only has one amount of $1600. He can use this to pay alimony or pay the minimum on $50K of credit cards. Either way, it’s not a pretty sight because instead of saving $1600 a month, he’s paying that out to a person who no longer is his wife. Between paying alimony and credit cards, the choice is clear. He has to pay alimony.
Client is however fortunate that the current value of his house does not exceed the balance of his first mortgage. This means that Chapter 13 will allow him to strip the 2nd mortgage of $76K. The $76K was discharge in his 2012 Chapter 7, but the mortgage lien survived. Although creditor cannot legally collect on the note because it is discharged, the fact that the mortgage survived the discharge leaves creditor with the legal remedy of foreclosure, which it will not do because foreclosure will yield zero for payment of the 2nd mortgage.
Chapter 13 now plus Chapter 7 in 2012, makes this case a Chapter 20. So he loses his wife and has to pay alimony of $1600 but he gets to strip his 2nd mortgage and make a partial payment on his $50K credit cards over 60 months. As the 2nd mortgage is stripped, client doesn’t have to pay the mortgage because the note has been discharged in Chapter 7 previously.
If you need bankruptcy relief, please call my office for an appointment and I will analyze your case personally.
“Cast all your anxiety on God because He cares for you.” — 1 Peter 5:7

IRS calling people to collect debt

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A new tactic the IRS is using to collect back taxes may cause people to think they are the target of a scam.
After years of news reports and scam alerts assuring the public that the IRS will never call you to get you to pay a tax bill- this month the IRS will begin using debt collectors to do just that.

Experts think this new development will open taxpayers up to fraud.

“People won’t know, they won’t understand,” said University of Dayton marketing professor Randy Sparks, “it’s a recipe for people to be ripped off and scammed.”

The collection agencies will only call taxpayers with old tax debts who have already received letters in the mail from the IRS and the agency, according to IRS spokesperson Patricia Russomagno.

Legitimate agency callers will not ask for credit or debit card information, payment in the form of gift cards, or threaten to arrest you, said Russomagno.

“If you know that you are current on your taxes and you get a call from someone demanding you pay an overdue federal tax bill right now on the spot-that’s a sure sign of a scam,” Russomagno said.

“They say they aren’t going to call you and now they are going to? I think that’s horrible,” said Rosie Miller of Dayton.

The IRS may also come to your door to collect a tax bill — as this women in North Carolina discovered.

Bankruptcy Glossary

341 MEETING
A meeting required by law in all cases during which the debtor is questioned under oath by a trustee and creditors about his or her financial affairs. The debtor’s attendance is mandatory.

ACQUISITION
A Acquisition versioning arising in or related to a bankruptcy case. An adversary proceeding is started by filing a complaint in the Bankruptcy Court.

ADVERSARY PROCEEDING
A lawsuit arising in or related to a bankruptcy case. An adversary proceeding is started by filing a complaint in the Bankruptcy Court.

AFFIDAVIT
A written statement of facts, confirmed by the oath taken before an officer having authority to administer such oath (a notary public) or affirmation of the party making it. For example, an affidavit of service is a sworn statement of facts by the person who served the papers on the person named in the summons.

ANNUITY
A right to receive fixed payments periodically for a specified duration. The right to periodic payments is commonly acquired under a life insurance policy, pension, or personal injury settlement.

ANSWER
A defendant’s response setting out the facts, denying or affirming (admitting) allegations of plaintiff’s complaint. An involuntary petition against an alleged debtor filed by petitioning creditors also requires the alleged debtor to file an answer. This answer could be the filing of a voluntary petition by the debtor or a motion by the debtor contesting the involuntary petition.

APPLICATION
A formal request, usually in writing, to a court to ask the court to grant certain relief by signing a court order.

ARREARAGE
An unpaid or overdue debt.

ASSET AND NO ASSET CASES
An asset case is one in which money is likely to be recovered for distribution to unsecured creditors over and above the costs of administration and the debtor’s exemptions. A no asset case is one in which there is no money to distribute to unsecured creditors.

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ASSETS
Everything the debtor owns or has a legal interest in that has value. Assets include homes, cars, bank and other financial accounts, cash, and household goods and furnishings.

ASSIGN
To transfer rights or property.

ASSUME
An agreement to continue performing duties under a contract or lease.

AUTOMATIC STAY
An injunction that arises under federal law and automatically stops lawsuits, foreclosures, garnishments, and all collection activity against the debtor and debtor’s property the moment a bankruptcy petition is filed. The automatic stay may be limited or not apply at all if a debtor has filed a prior bankruptcy case.

AVOIDANCE
Federal law permits the debtor to eliminate, or to avoid, certain liens that interfere with an exemption the debtor has claimed. The trustee also may avoid payments or other transfers of property that are made before the bankruptcy case is filed.

BANKRUPTCY
A uniform, federal statutory system for collective creditor payment from the debtor’s non-exempt property.

BANKRUPTCY CODE
The informal name for title 11 of the United States Code (11 U.S.C. §§ 101 – 1330), the federal bankruptcy law.

BANKRUPTCY COURT
The branch of the federal judicial system that presides over bankruptcy cases.

BANKRUPTCY ESTATE
All legal or equitable interests of the debtor in property at the time of the bankruptcy filing. (The estate includes all property in which the debtor has an interest, even if it is owned or held by another person.)

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BANKRUPTCY JUDGE
A judicial officer of the United States district court who is the court official with decision-making power over federal bankruptcy cases.

BANKRUPTCY PETITION
A formal request for protection under the federal bankruptcy laws. The filing of the bankruptcy petition commences the bankruptcy case.

BANKRUPTCY TRUSTEE
A private individual or corporation appointed in all chapter 7, chapter 12, and chapter 13 cases to represent the interests of the bankruptcy estate and the debtor’s creditors.

BAR DATE
A date set by the court that is the last day to file a Proof of Claim.

BUSINESS BANKRUPTCY
A bankruptcy case in which the debtor is a business or an individual involved in business and the debts are for business purposes.

CAPTION
The caption of a pleading or other document filed with the Court is the heading which shows the names of the parties, name of the Court, the case number assigned by the Court and, if applicable, the adversary proceeding number.

CERTIFICATION OF DOCUMENT
The process by which a copy of a document or docket is signed and verified as a true copy by the court.

CHAPTER 11 OR REORGANIZATION CASE
A type of bankruptcy in which debtors attempt to obtain creditor approval of a plan of reorganization providing for the payment of debts and disposition of assets that must be approved by the Bankruptcy Court. A trustee is not appointed unless the creditors convince the Court to oust the debtor’s current management. Corporations, partnerships and individuals may file a Chapter 11 bankruptcy. Chapter 11 was primarily designed for business reorganizations.

CHAPTER 12, FAMILY FARMER OR FISHERMAN CASE
This chapter is similar to a Chapter 13 case. However, eligibility to file under this chapter is limited to family farmers or fishermen.

CHAPTER 13 CASE
A type of bankruptcy in which an individual with “regular income” proposes a plan—an arrangement of debts and assets (up to a three- to five-year period), previously called a “wage earner” bankruptcy. Only an individual may file a Chapter 13, and must meet specified debt thresholds and limits. A standing trustee serves only as disbursing agent to collect part of the debtor’s income and pay it out under the plan.

CHAPTER 13 PLAN
A debtor’s detailed description of how the debtor proposes to pay creditors’ claims over a fixed period of time. When confirmed, the plan becomes binding on the debtor and his or her creditors unless modified under certain limited circumstances.

CHAPTER 13 TRUSTEE
A person appointed by the United States Trustee to serve as trustee for all Chapter 13 cases filed in a region. The Chapter 13 trustee serves as a disbursing agent, collects payments from the debtor, makes distributions to the creditors, and makes recommendations to the court as to whether debtor’s plan should be confirmed.

CHAPTER 7 OR STRAIGHT BANKRUPTCY CASE
A type of bankruptcy in which the debtor’s assets are liquidated by a Court-appointed trustee. Corporations, partnerships and individuals may file a Chapter 7 bankruptcy.

CHAPTER 7 TRUSTEE
A person appointed in a Chapter 7 case by the United States Trustee to represent the interests of the bankruptcy estate and the unsecured creditors. The trustee’s responsibilities include: presiding at the meeting of creditors (§341(a) meeting), reviewing the debtor’s petition and schedules, liquidating the non-exempt property of the estate, and if applicable, making distributions to creditors. The trustee may also bring actions against third parties or the debtor to recover property of the bankruptcy estate.

CLAIM
A right to payment.

CLASS
Claims or interests that have been placed in the same category for treatment in bankruptcy.

CODEBTORS
Persons who are both liable on the same debt.

COLLATERAL
Property that is subject to a lien or security interest.

COMMON LAW LIEN
A lien arising by operation of common law, not by agreement, statute, or court order. Common law liens are typically intended to provide security for charges owing to a person for who has repaired or improved personal property or provided services at the owner’s request.

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COMPLAINT
A complaint is the first document filed in an adversary proceeding that notifies the court and the defendant of the relief sought by the plaintiff against the defendant and the grounds for that claim.

CONFIRMATION, CHAPTER 13
Approval of a plan by a bankruptcy judge for a debtor to pay creditors, provided that specific criteria are met (for a Chapter 13 plan, the confirmation criteria are listed in 11 U.S.C. § 1325(a)). The acceptance of a plan is determined by the debtor’s budget provided to the Court, list of assets, and ability to make monthly plan payments. Regular monthly income from all sources must be disclosed including salary, commissions, investment income, tax refunds, public benefits, and unemployment compensation. Any change to the debtor’s income or expenses must be disclosed to the Court. Modification to the plan after the confirmation hearing may be at the request of the debtor, trustee or an unsecured creditor.

CONSUMER BANKRUPTCY
A bankruptcy case filed to reduce or eliminate debts that are primarily incurred for personal or household purposes.

CONSUMER DEBT
A debt incurred by an individual primarily for personal, family, or household purposes. Taxes are neither consumer debts nor business debts.

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CONTINGENT CLAIM
A claim that may be owed by the debtor under certain circumstances, for example, where the debtor is a cosigner on another person’s loan and that person fails to pay.

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CRAMDOWN
The confirmation of a plan despite opposition from some creditors.

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CREDITOR
A person or business to which the debtor owes money.

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CREDITOR MATRIX
A list of creditors and their representatives with their full addresses. The Court uses this list to mail notices to all the debtor’s creditors.

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CURE OF DEFAULT
The payment of arrears or the rectification of any other breach of contractual obligation so that the party’s performance is brought into compliance with the terms of the contract.;

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DEBT
An obligation to pay money.

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DEBTOR
An individual, partnership, corporation, or other business entity liable on a debt. In bankruptcy, the debtor is the person concerning whom a bankruptcy case has been commenced.

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DEBTORS EQUITY
An individual, partnership, corporation, or other business entity liable on a debt. In bankruptcy, the debtor is the person concerning whom a bankruptcy case has been commenced.

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DEFAULT
The debtor’s breach of contract, often the failure to pay a debt on the due date.

DEFICIENCY
The shortfall that results when a debt is undersecured, that is, when the property securing the debt is worth less than the amount owing, so that the sale of the property does not fully satisfy the debt.

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DISCHARGE
The official order of the Bankruptcy Court that releases the debtor from unsecured debts incurred before bankruptcy and bars creditors from future collection efforts on released debts. Secured debts are not discharged, except to the extent that the collateral is insufficient to cover the amount of the claim.

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DISCHARGEABILITY
Refers to a process or finding on whether a particular debt is not eligible for discharge.

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DISMISSAL
A dismissal is an order or judgment terminating a motion, adversary proceeding or bankruptcy case.

DISMISSAL WITH PREJUDICE
A dismissal of a case with prejudice prohibits the party from bringing the same case, claim or cause of action again.

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DISPOSABLE INCOME
The portion of a debtor’s income that is not reasonably necessary for the maintenance and support of the debtor or a dependent and not necessary for the operation of any business in which the debtor is engaged.

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DOCKET
The summary of pending legal matters and their times, dates, and places. Law firms often maintain a docket as a calendar system. Court clerks maintain dockets of all proceedings in cases to indicate matters pending on the Bankruptcy Court’s calendar.

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EMERGENCY FILING
A bankruptcy case filed either without schedules or with incomplete schedules listing few creditors and debts. (Emergency filings are often made for the purpose of delaying an eviction or foreclosure.)

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EQUITY CUSHION
The amount of collateral’s value above the amount of the lienholder’s debt secured by that collateral.

ESTATE
Created by the filing of a bankruptcy petition, the estate consists of all assets and equitable interests of the debtor. The representative of the estate in a Chapter 7 or 13 case is the trustee.

EXECUTORY CONTRACT
A contract under which both parties to the agreement have duties remaining to be performed. (If a contract is executory, a debtor may continue to fulfill the terms of the contract or lease (“assume” it) or cancel the contract or lease (“reject” it).) Examples of an executory contract are: a lease for a residence, car or equipment, or an employment agreement, home improvement contract or service contract or for delivery of goods in the future.

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EXEMPTION (EXEMPT PROPERTY)
A right granted by state or federal law to an individual debtor to hold specified property free from the claims of creditors. Some examples of property a debtor may claim as exempt are:

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FAMILY FARMER
An individual, individual and spouse, corporation, or partnership engaged in a farming operation that meets certain debt limits and other statutory criteria for filing a petition under Chapter 12.

FIRST MEETING OF CREDITORS
A hearing that is conducted by a representative of the U.S. Trustee’s office. Its primary business is the examination under oath of the debtor regarding his or her assets, liabilities, and financial condition.

FORECLOSURE
The process whereby a lienholder enforces the lien following the debtor’s default and subjects the collateral to satisfaction of the debt. Following seizure, the collateral is normally sold and its proceeds applied to payment of the debt.

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FRAUDULENT CONVEYANCE OR TRANSFER
A transfer of a property by the debtor for less than the true value of the property during the year (or more) before bankruptcy or with the intent to hinder, delay, or defraud creditors.

GARNISHMENT
A creditor’s levy on property of the debtor in the possession of a third party, or on a debtor or obligation due by the third party to the debtor. Common examples include wage garnishments whereby an employer is ordered by a court to pay a portion of the debtor’s wages to a creditor.

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GOOD FAITH
Honesty in belief or purpose.;

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IN FORMA PAUPERIS
Describes permission given by a judge to a debtor, who meets certain income criteria, to proceed without paying court fees or costs.

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INDEMNIFY
To guarantee against any loss which someone else might suffer. For example, a spouse in a divorce proceeding may agree to assume debts of the marriage and see that the other spouse is not forced to pay.;

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INSIDER
Someone with a particularly close relationship to the debtor. An insider can be a relative, partner, or affiliated company.

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INSOLVENT
Inability to pay debts, determined by one of two tests: (1) inability to pay debts as they become due, or (2) an excess of liabilities over assets.

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INVOLUNTARY PETITION
A Chapter 7 or 11 bankruptcy filed by creditors against an insolvent debtor.

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JOINT ADMINISTRATION
A court-approved mechanism under which two or more cases can be administered together. (Assuming no conflicts of interest, these separate businesses or individuals can pool their resources, hire the same professionals, etc.)

JOINT PETITION
A bankruptcy case filed by husband and wife together.

JUDGE OF THE UNITED STATES BANKRUPTCY COURT OR BANKRUPTCY JUDGE
The official title of the judicial officer presiding over a bankruptcy case. Bankruptcy judges are appointed to fourteen year terms.

JUDICIAL LIEN
Any lien arising under court proceedings.

JURISDICTION
Jurisdiction is the legal authority to hear and decide a case. The United States District Court has original and exclusive jurisdiction over all cases under the Bankruptcy Code.

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LEVY
The seizure or taking control of property pursuant to a court order.

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LIEN
A creditor’s right to repossess or foreclose specific property if the borrower fails to make loan payments. Liens are taken to secure the payment of a debt or the performance of an obligation.

LIQUIDATE
To convert assets into cash.

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LIQUIDATED CLAIM
A claim for a fixed amount of money.

MEANS TEST
A term describing the standard for dismissing a Chapter 7 consumer case on the grounds of abuse where the debtor’s disposable income, calculated under a formula established under federal bankruptcy law, is deemed sufficient to support payments under a Chapter 13 repayment plan. A version of the means test is also used to measure the debtor’s disposable income in a Chapter 13 case.

MOTION
A motion is an application for relief or request for an order of the court presented to the Court. Certain motions have response deadlines by which another party shall respond or object to the relief requested in the motion. The person making the motion should provide a memorandum of law in support of the motion or include a statement that no separate memorandum of law is being submitted. Motions may be decided by a judge without a hearing.

MOTION TO LIFT THE AUTOMATIC STAY
A request by a creditor to allow the creditor to take action against a debtor or the debtor’s property that would otherwise be prohibited by the automatic stay. For example, an order granting the creditor’s motion may allow the creditor to start or to continue a lawsuit in state court to foreclose a mortgage.

NO-ASSET CASE
A Chapter 7 case where there are insufficient assets to allow for a distribution to creditors.

NONDISCHARGEABLE DEBT
A debt that cannot be eliminated in bankruptcy. Some examples of nondischargeable debts are alimony, child support, student loans, and taxes.

OBJECTION TO DISCHARGE
A trustee’s or creditor’s objection to the debtor’s being released from personal liability for all debts brought by an adversary proceeding under 11 U.S.C. § 727.

OBJECTION TO EXEMPTIONS
A trustee’s or creditor’s objection to a debtor’s attempt to claim certain property as exempt.

ORDER
A judicial command or direction. An order is sought by motion and directs a party to perform an act or to refrain from taking action. A judgment generally is broader than an order, determines all rights at issue, and resolves all matters pending in a dispute. A judgment is sought in an adversary proceeding.

ORDER FOR RELIEF
A court order for relief is an order (“injunction”) that stops all proceedings against the debtor and debtor’s property. The order for relief or automatic stay occurs is effective immediately upon filing a voluntary petition.

PARTY IN INTEREST
A party who is actually and substantially interested in the subject matter, as distinguished from one who has only a nominal or technical interest in it.

PERSONAL PROPERTY
Everything that isn’t real estate, for example, cars, cash, furniture, etc.

PETITION
The document filed by a debtor that initiates a bankruptcy proceeding. The petition may be filed by the debtor (voluntary case) or by creditors against the debtor (involuntary case). Events that happen before the petition is filed are called prepetition events and those that happen after are called postpetition events.

PLAN
A debtor’s detailed description of how the debtor proposes to pay creditors’ claims over a fixed period of time. When confirmed, the plan is a contract between the debtors and the creditors.

POSTPETITION
Claims that arise or events that take place after the filing of a bankruptcy case.

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POSTPETITION TRANSFER
A transfer of a debtor’s property made after the filing of a bankruptcy petition.

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PRE-BANKRUPTCY PLANNING
The arrangement (or rearrangement) of a debtor’s property to allow the debtor to take maximum advantage of exemptions. (Pre-bankruptcy planning typically includes converting nonexempt assets into exempt assets.)

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PREFERENCE
Generally, certain payments or transfers of a debtor’s property to a creditor within ninety (90) days before the filing of a bankruptcy case (or within one year before the filing of the petition if the creditor was an “insider”) which enables the creditor to receive more than it otherwise would have received in a hypothetical Chapter 7 case. The trustee may take action to nullify or avoid certain preferences and obtain a court order requiring the creditor to return the property or money.

PREPETITION
Claims that arise or events that take place before the filing of a bankruptcy case.

PRIORITY CLAIM
A claim that must be paid before non-priority (or “general”) unsecured claims may be paid anything. Examples of priority claims include certain taxes, child support, wages, consumer deposits, and employee benefit plan contributions.

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PRO SE
A pro se debtor is a debtor who does not have legal representation.

PROOF OF CLAIM
A written statement, filed by a creditor, describing the reason a debtor owes the creditor money. The document also states how much the creditor is owed. Typically, a creditor will not be paid through the bankruptcy unless a proof of claim is filed.

REAFFIRM
To assume personal liability after bankruptcy for a debt that would otherwise be discharged in the bankruptcy case.

REAFFIRMATION AGREEMENT
An agreement between a debtor and a creditor in which the debtor agrees to pay all or a portion of a debt even though the debt would have been discharged otherwise.

REINSTATEMENT
An agreement with your mortgage lender letting you pay off your arrearages over time.

SCHEDULES
Forms that must be filed with the Bankruptcy Court under penalty of perjury that show the debtor’s assets, liabilities, and other financial information.

SECURED CREDITOR
An individual or business holding a claim against the debtor that is secured by a lien on the debtor’s property.

SECURED DEBT
A debt that is secured by a lien on the debtor’s property.

SETOFF
When two persons are mutually indebted, the two debts are treated as canceling each other out so that neither need be paid. If one of the debts is smaller, for example, if a debtor owes a creditor $100, but that creditor also owes the debtor $80, under the principles of offset, the debtor could take the position that it only owes the creditor $20 and not the full $100 because of a credit of the debt owed by the creditor to the debtor.

STATEMENT OF FINANCIAL AFFAIRS
A series of questions the debtor must answer in writing concerning sources of income, transfers of property, lawsuits by creditors, etc. The kinds of information which must be provided are:

STATEMENT OF INTENTION
A declaration made by a Chapter 7 debtor concerning plans for dealing with consumer debts that are secured by property of the estate, such as a home (if securing a mortgage) or car. The debtor must disclose whether he or she intends to surrender the asset or keep it. To keep possession of an asset, the debtor must continue to pay for it. The debtor may choose to “redeem” the property, which means that the debtor can arrange to pay the creditor the full current or “market” value of the property in one lump sum, even if the debt is considerably higher. The debtor may “reaffirm” the debt, which means the debtor agrees to continue to make payments until the debt has been paid in full. Either option must be in writing, and under certain circumstances may require approval by the bankruptcy judge.

STATUTORY LIEN
A lien created by operation of law, such as a mechanic’s or landlord’s lien.

STIPULATION
A stipulation is a voluntary agreement between opposing parties.

SUBSTANTIAL ABUSE
The characterization of a bankruptcy case filed by an individual whose debts are primarily consumer debts where the Court finds that the granting of relief would be an abuse of Chapter 7. A bankruptcy petition should include a detailed list of current sources of income and regular expenses. The trustee assigned to the bankruptcy case may decide that the budget reflects that payment to creditors can be made by the debtor(s) under a plan. If such is the case, the bankruptcy case may be dismissed.

SUMMONS
An official court document informing the party served that an action has been filed against them in the court where the summons originated, and that the party is required to appear, on the date indicated on the summons, and answer the complaint in such action.

TRANSCRIPT
A written record prepared by the court reporter of the proceedings that took place in court.

TRANSFER
Any means by which a debtor disposes of property.

TRUSTEE
A person appointed by the Bankruptcy Court to administer the bankruptcy estate. In a Chapter 7 case, the trustee’s primary function is a liquidating and collection agent. If a trustee is appointed in a Chapter 11 Proceeding, he is charged with responsibility for proposing a plan of reorganization. In Chapters 12 and 13, a standing trustee exists to administer the plan.

UNDERSECURED CLAIM
A claim for payment that is secured by property that is worth less than the amount of the claim.

UNEXPIRED LEASE
A real or personal property lease under which the debtor is the lessee or lessor and that has not ended under its own terms pre-bankruptcy, or that has not been terminated pre-bankruptcy. Only unexpired leases in existence as of the date the petition is filed may be assumed.

UNITED STATES TRUSTEE
The Office of the United States Trustee is arm of the U.S. Department of Justice. The U.S. Trustee, not the Bankruptcy Court, appoints trustees from a private panel. The U.S. Trustee program was designated to free the Bankruptcy Courts from administrative supervision over trustees.

UNLAWFUL DETAINER ACTION
A lawsuit brought by a landlord against a tenant to evict the tenant from rental property—usually for nonpayment of rent.

UNLIQUIDATED CLAIM
A claim for which a specific dollar amount has not been determined.

UNSCHEDULED DEBT
A debt that should have been listed by a debtor in the schedules filed with the Court but was not. If the debtor fails to list a debt on the bankruptcy petition, it might not be discharged and the debtor may be obligated to pay it unless the creditor actually knew there was a bankruptcy proceeding in time to file a claim in an asset case.

UNSECURED CLAIM
Debt obligations that are not backed by a security agreement or a lien on property of the debtor.

VACATE
To cancel, annul, or render of no effect. If a judgment or other is vacated, it is as if the order or judgment were never entered.

VENUE
A concept determining proper geographical location for filing a bankruptcy case or other action. Venue is proper if the debtor has resided or has a domicile, place of business, or property in the district 180 days preceding the filing of the petition. More than one venue may be proper in a case.

VERIFICATION
Confirmation of the correctness, truth, or authenticity of a complaint, statement, or document.

VOLUNTARY CASE
A case under the Bankruptcy Code in which the debtor has filed a voluntary petition either to reorganize the debtor’s finances or to liquidate the debtor’s assets.;

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Phone: 770-671-8830
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Email: david@gallerlaw.com
Web: www.gallerlaw.com

How to File an Offer in Compromise for Your Tax Bill

If you owe the IRS more in taxes than you can comfortably pay, then you may be able to negotiate an offer in compromise. An offer in compromise is pretty much what it sounds like: a compromise on your existing tax bill, meaning you agree to pay part of what you owe, and the IRS agrees to forgive the rest.

Offer in compromise requirements
Before you can start the offer in compromise process, you’ll need to meet certain requirements. First, you must have filed all required tax returns. Second, you must have received at least one bill from the IRS for your existing tax debt. And third, you must have made all estimated tax payments for the year and (if you’re a business owner) made all your payroll deposits as well.

You also need acceptable grounds for making the offer. The IRS will accept one of three official grounds: doubt as to collectibility, effective tax administration, and doubt as to liability. The most frequently used of the three reasons, doubt as to collectibility means that the IRS isn’t sure it will ever be able to collect the full amount of your tax bill. Effective tax administration is a fancy way of saying that you have some special circumstance that would make paying your tax bill in full an economic hardship for you, even if you technically have enough assets and/or income to cover the debt. Finally, doubt as to liability means that you can prove you shouldn’t owe the taxes at all. This last option is so rarely successful that it’s usually not even worth trying.

Filling out the paperwork
Getting started with an offer in compromise means filling out a whole lot of paperwork. First, there’s Form 656, the main Offer in Compromise form. It asks for basic information about you and your debt, asks you to select one of the official grounds, and allows you to make a payment offer in the form of either a single lump sum or a periodic payment plan running anywhere from six to 24 months.

Next, you get to fill out Form 433-A (or Form 433-B, if you’re requesting an offer in compromise on business taxes). This form requires you to disclose your assets, income and expenses in excruciating detail. Tedious as this form is, you have to fill it out as completely and accurately as possible, as this is the information the IRS will use when deciding whether or not to approve your offer.
If you would rather not take on this process alone call Galler Law 770.671-8830.

How to Stop the IRS from Contacting You

Are you receiving notices from the IRS?

Do you owe federal or state taxes to the IRS?

Do you have tax returns that haven’t been filed?

Once the IRS zeroes in on you, you’re usually in store for a bumpy ride. Letters from the IRS are hard to understand and menacing. Fortunately, there are ways you can minimize and oftentimes eliminate the stress associated with resolving your tax situation.

Did you know that IRS cannot legally contact you once you hire a representative?

Instead of going to battle with the IRS yourself, use Fee Auction to enlist the help of a qualified IRS representative. Let an experienced tax professional do all the heavy lifting as they review the correspondence, diagnose the issues, and map out a resolution strategy.

When you’re represented by an Enrolled Agent, CPA or Tax Attorney, they walk you through every step of the process, explaining the situation, verifying information presented by the IRS, and preparing responses and requests for reductions, penalty abatement, or Offer-in-Compromises. You can rest assured that:

Your taxpayer rights are protected;
They will make certain the IRS follows all procedures and acts within their guidelines;
They will represent you to ensure compliance and reduce your possible exposure before federal & state tax agencies.
Whether your IRS problems require assistance with an audit or help negotiating your tax debt, they can get you back on track.

Do You Need a Student Loan Ombudsman?

Do You Need a Student Loan Ombudsman?

As outstanding student loan debt stays above the trillion-dollar mark, many fresh graduates are faced with the seemingly insurmountable task of paying down their loans in a weak labor and economic environment.

For many new grads, the student loan payments have started rolling in, but a steady and adequate paycheck might be more elusive, making it hard to make payments. To help sort through their budget and work with lenders, some young adults have started working with student loan ombudsman.

An ombudsman serves as a neutral party to review discrepancies and disputes to work with borrowers and loan holders or servicers (lenders, guarantors, collection agencies, the Department of Education to fix any mistakes and potentially reach a compromise.

“They help the borrower understand his or her specific issue and provide options for the borrower, both immediate and longer term, so future problems can be avoided,” says Karen McCarthy, spokesperson for the National Association of Student Financial Aid Administrators .

While an ombudsman can be a great resource for grads seeking additional guidance, experts stress it should be an avenue of last resort only after the borrower has taken extensive steps to resolve the issue(s) on their own with the loan servicer.

“The loan servicers want to help the borrowers resolve the issues [and] is the entity with which they’re going to have that long time relationship with while they’re repaying that loan, so it’s really important for them to try to work through it with the loan servicer,” says Joyce DeMoss, Federal Student Aid Ombudsman .

Do You Need Help?

If borrowers have reached an impasse with loan servicers, the Federal Student Aid Ombudsman Group will listen to their issue and help them figure out a solution that’s tailored to their situation, according to DeMoss.

“Maybe they feel that the servicer [is not] developing a personalized enough solution for them or they’re just not explaining things in a way that is helpful to the student,” she says.

It’s essential to understand that an ombudsman is completely impartial when it comes to resolving issues on behalf of the borrower, says Dave Macoubrie, vice president of Repayment Solutions for Inceptia, a division of National Student Loan Program (NSLP) http://www.nslp.org

“The ombudsman does not always automatically take the student’s side in complaint; their role as an independent third party is to investigate complaints, not take a side or render a decision,” he says. “They work to ensure both parties understand the facts in an effort to find agreement.”

While students and recent grads with federal student loan disputes can contact the U.S. Department of Education FSA Ombudsman Group, The Consumer Financial Protection Bureau Opens a New Window. has a complaint process for private student loans. Although the services of an ombudsman are free, students and grads may incur costs for providing copies of documentation, says Macoubrie.

What to Expect From an Ombudsman

The ombudsman’s office can help resolve discrepancies and disputes regarding loan payments, tax offsets, consolidation, default status, interest and collection charges, and other related loan repayment issues, explains McCarthy.

“They can also help borrowers who don’t necessarily have disputes, but need help understanding loan repayment issues,” she says.

According to Federal Student Aid , an ombudsman will not make binding decisions or overturn the decisions of other entities, accept complaints about grants or private student loans, accept complaints when the Education Department has already begun formal or legal investigations, accept loan payments or process deferment, forbearance, or discharge requests (loan servicers or collection agencies must be contacted directly), testify or serve as a witness.

“We’ve got to work within the current law, within the regulations,” says DeMoss. “If you’re looking to have a loan written off or forgiven for something that is not explicitly stated in the law or statute, we’re not going to be able to get that for you.”

How to be Prepared for Help

Before meeting with an ombudsman, grads should ready questions about the process, gather supporting documents (previous contact with servicer, documentation of loan balance and create a detailed payment history to save time and effort, says Macoubrie.

“Be patient and don’t assume they know everything about your situation,” he says. “If the representative is unable to provide a response to your questions, calmly state your issue again and request the information or resolution you are seeking.”

Borrowers should have prepared answers to a series of questions: What are their expectations? What is preventing them from resolving the issue? Is the borrower willing to complete the necessary actions to achieve the desired outcome?

“If you speak with a representative on the phone, keep track of whom you spoke with, the date and time of the call, and what was said,” says Macoubrie. “If you choose to communicate in writing, keep a copy of your letter or e-mail and any replies you receive.”

DeMoss recommends borrowers use the FSA’s Ombudsman Information checklist Checklist

as a guide to prepare their questions about resolving their federal student loan issues.

“We’re confidential so we can help people think through some really tough situations and they can ask all kinds of questions and express some things to us that they might not feel comfortable expressing directly to their loan holder or loan servicer,” she says. “The [desired] outcome is resolving the issue and seeing it brought to closure.”

Understanding Bankruptcy

Understanding Bankruptcy

Bankruptcy is a set of federal laws and rules that can help individuals and businesses who owe more debt than they can pay. Federal courts have exclusive jurisdiction over bankruptcy cases. This means that a bankruptcy case cannot be filed in a state court.

Bankruptcy laws help people who can no longer pay their creditors get a fresh start by liquidating their assets to pay their debts, or by creating a repayment plan. Bankruptcy laws also protect troubled businesses and provide for orderly distributions to business creditors through reorganization or liquidation. These procedures are covered under Title 11 of the United States Code (the Bankruptcy Code). The vast majority of cases are filed under the three main chapters of the Bankruptcy Code, which are Chapter 7, Chapter 11, and Chapter 13.

The primary purposes of the law of bankruptcy are

• to give an honest debtor a “fresh start” in life by relieving the debtor of most debts, and
• to repay creditors in an orderly manner to the extent that the debtor has property available for payment.

US student debt tops $1.31 trillion: Does Betsy DeVos have a plan?

US student debt tops $1.31 trillion: Does Betsy DeVos have a plan?
The growth of student loans drove or a substantial increase in household debt last year, say experts.

FEBRUARY 18, 2017 —Student loans were the leading cause for a substantial increase in household debt last year, the Federal Reserve Bank of New York said Thursday.

While the high balance of US student debt is not news anymore, the new record-high $1.31 trillion balance, up 2.4 percent in the fourth quarter, is another reminder of the severity of a problem that has cast a shadow over the nation in recent years.

During her confirmation hearing, now-Secretary of Education Betsy DeVos suggested a vision for higher education that might not require as much student debt.

“We need to embrace new pathways of learning,” said Ms. DeVos, who has championed trade schools and for-profit online universities. “For too long, a college degree has been pushed as the only avenue for a better life. The old and expensive brick-mortar-and-ivy model is not the only one that will lead to a prosperous future.”

Loans taken out by undergraduate and graduate students are a key driver of household debt, explained Wilbert van der Klaauw, senior vice president at the New York Fed, in a statement. “Debt held by Americans is approaching its previous peak, yet its composition today is vastly different as the growth in balances has been driven by non-housing debt,” he said.

Student loans: 10 states with the lowest college debt
“Since reaching a trough in mid-2013, the rebound in household debt has been led by student debt and auto debt, with only sluggish growth in mortgage debt,” he said.

Contributing $31 billion of the $226 billion increase in total household debt, student debt balances have rise every year for the past 18 years, the report shows. While the total household loan balances have dropped 1 percent since year-end 2008, student loan and auto debt are the only two categories of consumer debt tracked by the New York Fed that have steadily increased during the same period.

But the $1.31 trillion figure is lower than the one reported by the Federal Reserve Board in Washington, which pegs total student debt $100 million higher, at $1.41 trillion.

Regulators blame the discrepancy on the New York Fed’s sampling of household credit reports, which are often filled with errors.

Five high-paying jobs for high school graduates
The news of the record-high student loan balance comes two weeks after DeVos was confirmed as the new secretary of Education, the department that is the largest provider of student loans. While she said she recognized the severity of the issue, as someone who has no personal experience with college financial aid – neither she nor her children had ever borrowed money for school – her nomination had come under much scrutiny.

“The issue of student debt and the amount of student debt – over $1.3 trillion right now up, almost 1000 percent in the last eight years – that’s a very serious issue,” DeVos said at her confirmation hearing, mistakenly referencing the growth of college costs over 30 years.

With her support for the for-profit industry and upholding vocational education as “a noble pursuit,” DeVos also signaled an unwillingness to commit to enforce the “gainful employment” rule championed by the Obama administration. This controversial standard, which seeks to punish schools that leave students with high levels of debt but weak job prospects, was seen as targeting for-profit colleges.

During her hearing, she was asked about tuition-free colleges, which formed a major part of Sen. Bernie Sanders’s campaign platform.

“Senator, I think that is a really interesting idea and it’s really great to consider and think about,” she said. “But we also have to consider the fact that there is nothing in life that’s truly free. Somebody has got to pay for it.”

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