Law School Graduate Granted Discharge of Student Loans

The 9th Circuit recently affirmed a Bankruptcy Court judge’s decision to allow former law school student Michael Hedlund discharge $53,000 in student loans through bankruptcy.  Will this set a precedence on future bankruptcy filings?  Student loan default rates are rising at an accelerated rate.

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Atari Files for Bankruptcy

It was a nostalgic hit when I heard news about Atari filing for bankruptcy.  Their goal, however, is to survive the bankruptcy and hopefully have their debts restructured.  This is similar to an individual’s Chapter 13 filing.  Atari also has the option of selling its assets, so perhaps the buyers may continue the Atari brand or its holdings.

Rich Dad, Poor Dad Company Files for Bankruptcy

Robert Kiyosaki’s company, Rich Global LLC, has declared bankruptcy. Mr. Kiyosaki often has extolled how the rich have taken advantage of certain laws and loopholes in order to build wealth, whereas the vast majority of people are simply unaware of these tactics and that is why they remain poor.  The corporate bankruptcy filed on behalf of his company is indeed a restructuring of the company’s debts, however more importantly, it should be noted that even the “richest” out there may resort to bankruptcy when needed.

Warren Sapp Auctions off $6,500 worth of Air Jordan Sneakers

The need for bankruptcy does not discriminate among the sports.  Former NFL star Warren Sapp recently had to auction off a massive collection of Air Jordan sneakers for his bankruptcy case.  The Air Jordans were assets that could not be exempt and therefore becomes part of the bankruptcy estate.  Child support payments have priority over unsecured creditors such as credit cards, and therefore ahead in the line of creditors.

Former Law Student Discharges Student Loans Due to Asperger’s

A former law and phD student amassed nearly an incredible $340,000 before applying for Chapter 7 bankruptcy.  The Maryland bankruptcy court found that her condition rendered her impossible to pay back the loans.  Student loans are dischargeable only if “undue hardship” can be proven.  Undue hardship does not simply mean the loan cannot be repaid; rather the banks and courts have purposefully made it almost impossible to have student loans dischargeable.  The “Brunner Test” is applied and the elements that must be proven for undue hardship include: (1) debtor must show they can’t maintain a minimum standard of living if forced to repay; (2) debtor must prove that their ability to repay the loans will not improve; and (3) debtor must prove that they made a good faith effort to repay before filing for bankruptcy.

Transferring Assets

Are you planning on filing for bankruptcy?  Have assets?  Do not plan on giving away or transferring assets before filing for bankruptcy.  Transferring property to family or friends will look like an attempt to defraud the bankruptcy process.  If such transfers are not disclosed and the trustee finds out about the transfer even after the debts are discharged, any discharge of debts granted by the court could be nullified.  In the worst case scenario, if a transfer is found to be purposefully performed and hidden, the filer may face criminal charges.  Assets include physical personal property, investments, real estate, past interests, future interests and money.

Bankruptcy Statistics

Many people feel a stigmatic guilt associated with filing for bankruptcy.  This should not be the case since bankruptcy is simply a legal tool.  If it was unjust or inappropriate, policy and lawmakers would have gotten rid of it a long time ago.  Bankruptcy has been around forever; it’s even in the Bible and the US Constitution.  A considerable amount of individuals have filed.  In fact, from 2001-2011 in New York alone, over 600,000 individuals filed for bankruptcy.

This is a great website that overviews basic nationwide bankruptcy stats.  Credit to Christopher Lee, Esq..