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Credit Counseling vs. Bankruptcy in Tacoma
We are frequently asked about credit counseling and debt consolidation services in Tacoma, Washington. Everyone considering filing bankruptcy in Tacoma wants to know if Chapter 7 bankruptcy or credit counseling has more of an impact on your credit and what are the pros and cons of each.
Chapter 7 bankruptcy in Tacoma.
This is designed for people unable to pay their debts. Chapter 7 eliminates most existing unsecured debts.
Pros:

• You wipe out all your unsecured debts in Tacoma. These include credit cards, personal loans, and medical bills.
• Generally, you may be able to keep your home and cars
• You get a fresh start to credit usually six to eight months after you file
• You can usually qualify for home loans in Tacoma two to three years after filing
• It will relieve a lot of financial pressure

Cons:

• The bankruptcy stays on your credit report for the next 10 years
• You may have a hard time getting credit or pay higher interest rates for a while
• It could make it more difficult to get certain jobs in Tacoma

Credit Counseling in Tacoma
Credit counseling is an alternative to bankruptcy. With credit counseling, you make a monthly payment to one company, which in turn pays your creditors.
Pros:

• You may be able to avoid bankruptcy in Tacoma.
• Your bills are consolidated into one payment.

Cons:

• Credit counseling doesn’t work for more than 50% of the people who try it. Most people cannot follow the strict payment plans and budget constraints make it too difficult
• Creditors will still consider you a bad credit risk. Credit counseling will be reported on each account in the repayment plan. Potential creditors see this and will not lend you money
• Credit counseling in Tacoma will take longer for you to re-establish credit because a typical credit counseling re-payment plan in Tacoma will last 3 to 6 years thus, delaying your ability to re-establish credit until your plan has been paid off
• Like bankruptcy in Tacoma, credit counseling may prevent you from getting some jobs
• You might not be able to consolidate all creditors. Some creditors in Tacoma are unwilling to work with credit counseling agencies. In that case, you would pay those creditors the full amount you own them directly. If you cannot do this, you may end up filing bankruptcy anyway
• Your credit score may be affected the entire time you are in credit counseling
• There is a great deal of fraud in credit counseling. Many credit counseling agencies are not properly licensed and often do not follow the rules. Many so-called agencies have taken money from people without paying a dime to creditors and then disappear.

The notion of credit counseling and what it can do for people may sound good, but when you look at how the benefits of credit counseling in Tacoma stacks up against Chapter 7 bankruptcy in Tacoma, Chapter 7 bankruptcy may be the best choice for people with financial problems in Tacoma. Chapter 7 bankruptcy simply gets you back on the road to financial recovery faster. It also wipes out debt that credit counseling cannot, but when you consider the failure rate of credit counseling, Chapter 7 bankruptcy is the best choice for most people facing financial problems in Tacoma.
Contact Us
If you have gone the credit counseling route and it didn’t work for you or if you have looked at your options and think bankruptcy in Tacoma may be the way to go, give our Tacoma bankruptcy lawyers a call.
The post Credit Counseling In Tacoma appeared first on Portland Bankruptcy Attorney | Northwest Debt Relief.

By Ben Miller

Millions of students will arrive on college campuses soon, and they will share a similar burden: college debt. The typical student borrower will take out $6,600 in a single year, averaging $22,000 in debt by graduation, according to the National Center for Education Statistics. 

There are two ways to measure whether borrowers can repay those loans: There’s what the federal government looks at to judge colleges, and then there’s the real story. The latter is coming to light, and it’s not pretty. 

Consider the official statistics: Of borrowers who started repaying in 2012, just over 10 percent had defaulted three years later. That’s not too bad — but it’s not the whole story. Federal data never before released shows that the default rate continued climbing to 16 percent over the next two years, after official tracking ended, meaning more than 841,000 borrowers were in default. Nearly as many were severely delinquent or not repaying their loans (for reasons besides going back to school or being in the military). The share of students facing serious struggles rose to 30 percent over all. 

Collectively, these borrowers owed over $23 billion, including more than $9 billion in default.
Nationally, those are crisis-level results, and they reveal how colleges are benefiting from billions in financial aid while students are left with debt they cannot repay. The Department of Education recently provided this new data on over 5,000 schools across the country in response to my Freedom of Information Act request.

The new data makes clear that the federal government overlooks early warning signs by focusing solely on default rates over the first three years of repayment. That’s the time period Congress requires the Department of Education to use when calculating default rates.
At that time, about one-quarter of the cohort — or nearly 1.3 million borrowers — were not in default, but were either severely delinquent or not paying their loans. Two years later, many of these borrowers were either still not paying or had defaulted. Nearly 280,000 borrowers defaulted between years three and five.
Federal laws attempting to keep schools accountable are not doing enough to stop loan problems. The law requires that all colleges participating in the student loan program keep their share of borrowers who default below 30 percent for three consecutive years or 40 percent in any single year. We can consider anything above 30 percent to be a “high” default rate. That’s a low bar.
Among the group who started repaying in 2012, just 93 of their colleges had high default rates after three years and 15 were at immediate risk of losing access to aid. Two years later, after the Department of Education stopped tracking results, 636 schools had high default rates.
 For-profit institutions have particularly awful results. Five years into repayment, 44 percent of borrowers at these schools faced some type of loan distress, including 25 percent who defaulted. Most students who defaulted between three and five years in repayment attended a for-profit college. 

The secret to avoiding accountability? Colleges are aggressively pushing borrowers to use repayment options known as deferments or forbearances that allow borrowers to stop their payments without going into delinquency or defaulting. Nearly 20 percent of borrowers at schools that had high default rates at year five but not at year three used one of these payment-pausing options.  

The federal government cannot keep turning a blind eye while almost one-third of student loan borrowers struggle. Fortunately, efforts to rewrite federal higher-education laws present an opportunity to address these shortcomings. This should include losing federal aid if borrowers are not repaying their loans — even if they do not default. Loan performance should also be tracked for at least five years instead of three. 

The federal government, states and institutions also need to make significant investments in college affordability to reduce the number of students who need a loan in the first place. Too many borrowers and defaulters are low-income students, the very people who would receive only grant aid under a rational system for college financing. Forcing these students to borrow has turned one of America’s best investments in socioeconomic mobility — college — into a debt trap for far too many.

Copyright 2018 The New York Times Company.  All rights reserved.

PARKER, Colo. (CBS4) – The Federal Reserve estimates that student loan debt is a $1.5 trillion problem in America. This debt is sinking many families into bankruptcy, but a new interpretation of the law may be offering some relief.

Paige McDaniel decided to go back to school to get a bachelors and masters degrees in business administration. She chose the online program at Lakeland University.

“I didn’t want a publicly traded school. I wanted a school that was an actual university, and had a focus on academics,” McDaniel told CBS4.

She took out federal student loans to cover the cost of her bachelors and masters degrees in business administration.

“You’re always raised, the more education you have the better off you’re going to be,” she explained.

In addition to the federal student loans, McDaniel signed up for about $120,000 in private student loans.

“Started getting direct mail from Sallie Mae, who had my federal loans at the time, offering additional loans to help with additional expenses, so I did take out some of those loans as well,” McDaniel said.

She didn’t realize the loans were different. Federal student loans have a fixed interest rate, and manageable repayment options. Private education loans have a variable interest rate, and no repayment help.

“That one mistake is…is the biggest regret of my life, and has hurt my family, to the point where it would have been better for me not to get the degrees,” McDaniel said.

She soon found herself in over her head. The loan servicing company was billing her $1500-a-month just on the private loans. She ended up declaring Chapter 13 bankruptcy, but even that didn’t help. She paid on the loans through the proceeding, but still came out owing more than she borrowed.

“We knew the federal loans could not be dismissed, but the private loans were supposed to be,” she explained.

Traditionally, in bankruptcy court, any loan with the word “student” associated with it has not been dismissed. New York lawyer, Austin Smith, has a different take on the law.

“These loans that we’re litigating, these are just like credit card debt. It’s the exact same thing as if a bank gave a student as credit card,” Smith explained.

He argues that private loans that are not used for education expenses, should be treated like any other personal debt, and be dismissed in bankruptcy.

“We have not lost on this issue yet,” Smith told CBS4.

Navient Solutions holds McDaniel’s loans, and is one of the largest student loan servicers in the country. It’s facing several lawsuits about it’s lending practices including those filed by Attorneys General in Illinois, Washington, Pennsylvania, and California. It’s called the allegations in those cases unfounded, and in a statement to CBS4 about McDaniel’s proceeding, it said:

“It went from this is the solution, not one we wanted, but this is the solution, to we’re in worse shape than we were before,” McDaniel said.

Her payments are on hold pending a court decision, but the balance keeps ticking up. It’s at more than $260-thousand now.

“I can’t breathe when I look at it. It’s a panic. There’s no way out of this,” she said.

Colorado Congressman Jared Polis has introduced a bill designed to keep student from getting into this situation. The Know Before You Owe bill would require Universities to counsel students on the difference between federal and private loans before they sign up for them.

©2018 CBS Broadcasting Inc. All Rights Reserved.

Since February 5, 2018  debtors filing bankruptcy in Nebraska have been allowed to sign their petitions and other court documents using digital signatures pursuant to  General Order 18-01.  So what have we learned about the use of  digital signatures in bankruptcy since then?
I recently had the pleasure of speaking to an official at the Administrative Office of the U.S. Courts who was seeking some feedback on how digital signatures were affecting the bankruptcy practice. (Nebraska is the only bankruptcy court the nation that allows debtors to sign documents digitally.)  Here are some of my observations:

• Clients absolutely love the convenience of signing documents digitally.  They no longer have to take time off work or drive through sometimes hazardous weather to sign documents.
• Debtors are able to review documents in a less hurried fashion.  Instead of feeling rushed to sign documents in front of an attorney without much chance to review the paperwork, debtors are now able to read the information at their leisure and they frequently point out errors and omissions.  Although some critics of using digital signatures worried that debtors would just click on “Sign Here” buttons without reading the content, my experience is that clients tend to read the paperwork more thoroughly when they don’t feel rushed and they tend to ask questions or demand corrections when the information is not accurate.
• Debtors receive a full copy of what they sign immediately.  I think the courts would be shocked to learn how many debtors NEVER receive a copy of what they signed (even though bankruptcy rules say they must receive a copy).
• The temptation to alter signed documents is gone.  A dirty little secret of bankruptcy attorneys is that they alter the content of bankruptcy schedules after they are signed.  Why do they do this?  Because they are fixing errors and adding missing creditors and, generally, improving the accuracy and quality of the petition.  The problem is, they don’t get updated signatures after the changes are made to signed documents.  And since they often fail to provide clients with a copy of the documents they signed, who is the wiser? Digital signatures prevent such changes because clients get a copy of what they signed immediately and it is easy to spot unauthorized changes.  Also, since digital signatures allow attorneys to get updated signatures so quickly the temptation to make unauthorized changes goes away.
• Postage and copy expenses decrease for attorneys.  Once we started using digital signatures (we use DocuSign) we began to question why we could not send most general correspondence to clients digitally.  Why is this better than email?  Because you can have your client sign off that they received whatever you sent them. We discovered that the cost of the digital signature service is more than offset by the savings in postage.
• We make debtors sign more documents.  For example, debtors must attend a court meeting about 30 days after their case is filed to meet the Trustee assigned to their case and to provide the trustee with identification, bank statements, etc. Frequently clients would show up in court without ID or bank statements and the Trustee would not conduct the meeting. Clients would be frustrated and say they never got our letter advising them of what to bring to court. Digital signatures changed that. When a client signs something the excuses stop.  They become more accountable.  And since it is so easy to get a client to sign off on warnings you give them and disclosures they need to know, we seem to solicit more signatures on a daily basis.  Digital signatures literally allow us to “get on the same page” with our clients.

Digital signature technology is allowing us to make debtors annotate bank statements with explanations and then we require them to sign the document.

• Bank Statement explanations.  Part of a bankruptcy attorney’s job is to verify the income of a debtor, and we must collect 6 months of bank statements and scrutinize large deposits and expenses.  It is not uncommon to collect statements totaling a hundred pages, especially if clients have multiple bank accounts.  With digital signature services we are able to highlight large deposits and expenses in these bank statements and make a client fill in a text box to explain the source of the deposit or the purpose of the expense. So digital signature technology is allowing us to make debtors annotate bank statements with explanations and then we require them to sign the document.  Talk about accountability! These documents really come alive when debtors must write explanations and sign the document as opposed to just calling the debtor for an explanation only to have the debtor change their story when it turns out the “gift from grandma” deposit was really a paycheck from a source of income they were concealing.

What digital signatures allow us to do is to send a client home with a rough draft of their case and then when they send us the missing documents we can instantly send them an updated petition to sign electronically.

• Digital Signatures take the pressure out of signings.  Signing a bankruptcy petition is like shooting a moving target. We have to perfectly capture a client’s financial situation on one day of their life, and that is hard since bank account balances change daily and six-month income averages that we must calculate change with every paycheck. Ask any bankruptcy attorney and they will tell you the most frustrating part of their job is getting their client to provide all the necessary documents–tax returns, paycheck stubs, bank statements, etc.  There is always a missing document, but cases must be signed and frequently these signings are made in haste to stop paycheck garnishments and home foreclosures.  So, a bankruptcy attorney is charged with the duty of perfectly stating a person’s financial condition on one day in their life while all the underlying data is constantly changing.  That’s hard to do well.  What digital signatures allow us to do is to send a client home with a rough draft of their case and then when they send us the missing documents we can instantly send them an updated petition to sign electronically. Even when a client lives a few blocks away from my office, I frequently sign the case digitally so they can review a draft of the petition at home when their two-year-old they dragged to the signing appointment goes to bed and then they can send me the missing bank account balances or paycheck stubs the next day. Digital signatures bring sanity to the process.
• Small town clients get better service.  Nebraska is a big state and 11 of our 93 counties have no attorneys at all, let alone a bankruptcy attorney.  But they do have smart phones and internet services and we can prepare their case as well as any client who lives locally. By the time we used to mail out a paper petition to a client living 450 miles from Omaha and then get a signed copy back, the information was 10 days old.

I have a great concern to live up to my duty to protect the integrity of the bankruptcy process and the integrity of bankruptcy documents in general. And I realize that many folks out there worry that allowing debtors to sign court documents digitally may undermine the trustworthiness of those documents. However, my experience is just the opposite. Digital signatures improve attorney-client communication and increase client accountability. Clients get a full copy of what they sign immediately and that improves transparency. Attorneys are able to get updated signatures quickly when helpful changes are made to petitions. Really, I can’t think of a single negative consequence of using digital signatures in bankruptcy cases, and I suspect we are going to see bankruptcy courts nationwide begin to adopt this technology in the next two years.
 
Image courtesy of Flickr and sbethany09