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.

Judicial Liens on Home – Can They be Discharged Through Bankruptcy?

For the most part, yes.  Many people who file for bankruptcy have credit card or other monetary judgments against them.  This can occur if lawsuits filed by creditors go ignored by the credit card holder.  Eventually, the credit card company or whoever owns the debt (collection agencies, for example) will try to use the judgment to place a judicial lien on your home.  

Getting rid of the lien at this point takes some work for your bankruptcy attorney.  If you file for bankruptcy after a judicial lien is placed on your home, the equity in your home must be exempt.  For most people who file for bankruptcy, this usually is not an issue because there is no equity in the home anyway.  

The bankruptcy attorney will then file a motion to avoid the judicial lien with the bankruptcy court.  Once the bankruptcy court judge signs off an order, the order can then be given to the clerk of the courts where the judicial liens on the home have taken place in order to lift them.

Hostess to Liquidate

Hostess, maker of famed snacks such as Twinkies and Ho-Hos, has moved on to liquidate the company’s assets in order to pay back its creditors.  Much like a personal Chapter 7 bankruptcy, liquidation can involve the process of selling assets such as warehouses, factories and proprietary holdings, however it is still yet to be seen whether there will be a buyer.  Hostess had already attempted to reorganize its debts in prior bankruptcy filings, but was unable to recover.

I’m Married; Can I File for Bankruptcy Individually?

Yes, you can, however there are some factors to consider.  First, any debts that co-signed will remain obligated by your non-filing spouse.  Many people co-sign on credit cards for the convenience, but with unforeseen consequences.  If the relationship sours, one spouse may go on a shopping spree.  Another is the mistaken belief that if one spouse files for bankruptcy, the entire credit card would be discharged for both spouses.

You may have to include your spouse’s income even if you file individually.  The current monthly income (CMI) most likely will include your non-filing spouse’s income because most married couples contribute to each others’ expenses (rent/mortgage, food, utilities, etc.)  The non-filing spouse’s income can sometimes cause problems because the addition of their income may bring the income level over the state’s median income.  This may force the non-filing spouse into filing for a Chapter 13 instead if they are not able to pass the Means Test for a Chapter 7 filing.

Married, but Separated – How Will This Affect My Bankruptcy?

Sometimes life happens and individuals decide to part ways without legally getting divorced.  If the separation is legitimate and it does not look like the husband and wife are going to reconcile, then the non-filing spouse’s income does not have be included for Means Test purposes when filing for bankruptcy.  This can be vital especially if the filer makes considerably less than the non-filing separated spouse.  That said, there still may be an issue as to jointly held property or co-signed instruments such as credit cards.  A bankruptcy discharge does NOT discharge the non-filing co-signer’s liability.  Depending on how joint property is designated, a filer’s interest in this type of asset may be treated differently as well.

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..