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Don’t refinance your student loans until you get all the facts.

Posted by Feb03, 2017 Comments Comments Off on Don’t refinance your student loans until you get all the facts.

We have all seen them – the ads telling us to refinance our student loans. They are on social media, television and in the mail.  Lower your monthly payments? Potentially lower your monthly interest rate? Sounds great, right? However, here is the problem and what you are not told by these private refinance programs unless you read the very fine print: if you refinance federal student loans, you lose any protections that the federal repayment or forgiveness programs afford for future unforeseeable events. What does that mean? If you do not know, you should NOT refinance your student loans until you do.

The U.S. Department of Education provides many income driven repayment programs (IBR, ICR, PAYE, REPAYE, etc.) that forgive student loan debt after a certain period of time depending on the program. Moreover, if you work for a nonprofit entity (the government, military or a 501(c)(3) organization) for a period of 10 years, your student loans can be forgiven but only if you are on an income-based repayment program throughout that 10 year period. If you refinance your student loans into a private loan, you lose these benefits.

Keep in mind the federal student loan repayment programs are INCOME-based. No one likes to think that potentially he or she may not be able to work or that his or her income would be dramatically reduced, but what if these things happen? On an income driven repayment program, you can potentially drop your payment to as low as $0/month and continue to show a current status for your student loan on your credit report. These programs have helped many student loan borrowers stop the garnishment of social security benefits and tax refunds and others who find themselves either permanently or temporarily unemployed.  With a private student loan, you have no built-in ability to change your payment if your circumstances change for the worse.  Also, if you become totally or permanently disabled, federal student loan programs allow for permanent forgiveness of some student loan debt. You can also forbear or defer your federal student loan payments if necessary, although these are not generally good options. These forms of relief are not available if you have refinanced your federal student loans into a private student loan. A private student loan is just like any other loan or credit card debt, however it is not dischargeable in bankruptcy. Have you ever tried negotiating with your credit card company to lower interest or reduce payments when times are tough? It will be the same thing with private student loans.

Refinancing student loan debt is not always a bad idea, but it only makes sense in certain situations. It is critical that before you refinance you are educated as to your particular circumstance. You must know if you currently have private or federal student loans. The distinction is crucial. If you only have private student loans, then refinancing to lower the interest rate and monthly payments makes sense. You are not harming yourself if your circumstances change as you currently do not have the benefits of federal programs and a lower interest rate and/or monthly payment would be a benefit, much like refinancing your home. If you have a combination of federal and private student loans, it could make sense to refinance only your private student loans, but keep your federal loans as they are so you are still afforded their benefits. If you are worried about having multiple monthly student loan payments, you can always consolidate your federal student loans into one payment and then have a separate private student loan payment.

The point is this – you need to get educated as to your personal circumstances before refinancing your student loans, and you need to get educated on your own and not by a refinance company that has a vested financial interest in refinancing your student loan debt. Also, you should never forbear, defer or enter into any income driven repayment plan until you understand every option available to you. Once you know the facts, make an educated decision as to what is right for you. It may be refinancing or it may not, but you need to be sure that you understand whether it’s right for you.

Please share this important information with your friends and family.

The Law Office of Kathryn L. Johnson PLLC has added student loan law to the practice.  If you have questions about your student loans, email Kathy@kathyjohnsonlaw.com or call (520)743-2257.

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Student Loans Causing You Problems? You May Be Eligible For Relief.

Posted by Aug24, 2016 Comments Comments Off on Student Loans Causing You Problems? You May Be Eligible For Relief.

Student loan debt is rising at alarming rates.  It accounts for over $1 trillion in national debt.  The student’s hope is that if all goes well, education will lead to a better economic situation.  However, some graduates find that their professions are not as lucrative as they hoped they would be, or they end up losing their jobs with the changing economy.  Some graduates will also face major life changes, such as death of a family member, divorce or disability.  Some will also choose career paths that promote social good, but that don’t pay well (i.e. teachers, social work).
Meanwhile, their payments on their student loans become due, and if they can’t be timely made, they go delinquent and default.  The calls and letters then start.  The service providers are required to outline options for borrowers, but a lot of times don’t.  Collection attempts begin, and the borrower gets overwhelmed not knowing which way to turn.

If the loans are federal loans, the government has great collection powers far beyond those of other unsecured creditors.  They can garnish wages without a judgment, they can seize tax refunds and portions of federal benefits like Social Security, and they can deny eligibility for new student loans.  They are also allowed to charge large collection fees and interest that when re-capitalized create an ever-increasing loan balance.  A student can pay on loans for many years and still owe more than the original loan balances.  A bankruptcy can be filed to temporarily stop collection attempts but in most cases, a bankruptcy will not discharge the debt.

The good news is that if the loans are federal loans, there are numerous options available that may result in substantial relief.

1. If you are in default, there are consolidation and/or rehabilitation options available to get you out of default and back onto a repayment plan.  Some of the repayment plans are based on your income.  If you have low income, your payment could be reduced dramatically (in some instances it can be literally a $0 monthly payment). Once you’re on one of the repayment plans, your loan could be forgiven in 20-25 years, depending on the type of loan.  (Without being on a repayment plan, you may be looking at paying on your student loans for the rest of your life.)  Keep in mind, you must re-submit your income every year to verify your eligibility for the repayment programs.

IMPORTANT:  Do not consolidate your federal and private loans into a new loan.  You will lose the protections afforded to you under the federal programs.

2. If a person is totally disabled and unable to work, their loans can be forgiven.

3. If a person is employed by a government or nonprofit entity, and has been making payments on their student loans, they may qualify for public service loan forgiveness for some of the loans (but only if you’re on a qualified income-based repayment plan).

4. If a person is employed as a certain type of teacher for a specific period of time, they may have $5,000 to $17,500 of their student loans may be forgiven.

5. Some loans can be administratively discharged if you can prove certain things related to death, school closure, false certification, identity theft or unpaid refunds.
6. There are deferment and forbearance options available to delay collections while you figure out a game plan.

Keep in mind, these programs only apply to federal student loans.  If you have private student loans, there are no requirements that they offer you income-driven repayment plans or forgiveness options so you must look at other ways to try to resolve them.

If you are having issues with student loans, the first step is to determine what types of loans you have. Our office will do an initial analysis of your student loan situation and help you determine your options.  Contact the Law Office of Kathryn L. Johnson PLLC at (520) 743-2257 or email kathy@kathyjohnsonlaw.com.

 

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Contemplating bankruptcy is very emotional.

Posted by Jul15, 2015 Comments Comments Off on Contemplating bankruptcy is very emotional.

I meet with a lot of potential clients, and most of them are very leery of the idea of filing bankruptcy. For some, they can’t fathom not paying their bills since they’ve paid them on time their whole lives. (They just don’t know how to handle them now.) For others, they are stressed and worried that they will lose everything, including their house or car, or other property, if they file bankruptcy.

The truth of the matter is that if you file bankruptcy, you get to keep a lot of your things. For example, under Arizona law, you can keep your house even if it has up to $150,000 in equity. You can keep your car if it has less than $6,000 in equity (up to $12,000 in equity if you’re disabled). You get to keep various household goods not exceeding $6,000 (valued at their current used condition). And the list goes on.

Some people also think that if they file bankruptcy, they’ll never get credit again. The truth of the matter is that in today’s post-bankruptcy world, new credit offers are made after your bankruptcy is filed, and an individual can now qualify for a new mortgage in as early as 2-3 years following a bankruptcy discharge. I have numerous clients who thought they’d never get to buy another house (after having to surrender a house in bankruptcy that was upside-down) who have now purchased another house after filing bankruptcy. Each of them would have told you in the beginning that there’s no way they’d be able to do that. However, it happens over and over again.

Don’t let your emotions take over rationally deciding the best way to take care of your debts.  We offer free consultations to discuss your options.  If bankruptcy is not a good option, we will tell you that.  Contact us at (520) 743-2257 or email Kathy@kathyjohnsonlaw.com for more information.

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It’s Time to Deal with Your Debt Now.

Posted by May27, 2015 Comments Comments Off on It’s Time to Deal with Your Debt Now.

Are you afraid to answer your phone because you know there’s a debt collector on the other end?

People in that situation know they owe debt, but they don’t want to think about it, and if they do, they think that if they ignore it, the debt collector will go away.

DEBT COLLECTORS DO NOT GO AWAY. In Arizona, they can sue you and get a judgment for up to 6 years from your last payment. They can then garnish 25% of your paycheck until their debt is paid. They can also take other property, including bank accounts. And a judgment can be renewed every 5 years until it’s paid in full.

If you or someone you know is in this situation, please call us at (520) 743-2257 or email kathy@kathyjohnsonlaw.com to review your options for free. It’s time to take charge and deal with your debt now so you can move on with your life.

 

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Fear

Posted by Feb25, 2015 Comments Comments Off on Fear

Fear is one of the main reasons people don’t file bankruptcy. They are afraid to admit they made financial mistakes, and they become paralyzed with that fear so they put their head in the sand hoping creditors will go away. This only exacerbates the situation. Creditors do not go away.  A lot of people spend all of their time and energy beating themselves up instead of doing something significant to change their situation.  Think about this:

What would it feel like to get through the day or the week without having your phone ring from a creditor?

What would it feel like not to have to speak to a creditor?

What would it feel like to get out of a mortgage you can’t afford on a house that’s upside down?

What would it feel like to fix your credit?

Overcome your fear. We can help. If you or someone you know is in this situation, please contact our office to review options for free. Let’s change your financial life today. Call us at (520) 743-2257 or email Kathy@kathyjohnsonlaw.com.

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TOP REASONS PEOPLE WAIT TO FILE BANKRUPTCY.

Posted by Oct09, 2014 Comments Comments Off on TOP REASONS PEOPLE WAIT TO FILE BANKRUPTCY.

Nobody wants to file bankruptcy, but sometimes it’s a necessity and a good option to get a fresh start. Here are the top three reasons given by most people as to why they don’t want to file bankruptcy right now:

1. I will try to resolve the debt on my own or through debt consolidation or debt settlement.

Sure – creditors are willing to accept less than what’s owed, but the only way it works is if you have cash to pay them quickly! (Creditors are typically willing to accept 35% to 60% of what’s owed to them, but you must pay them off now.) It does not work otherwise. Beware of debt consolidation or debt settlement companies as they charge a large fee for setting up a savings account for you to then try to use to settle. They will not stop the ongoing harassment or lawsuits.

2. I don’t have the money to pay an attorney to file bankruptcy.

Keep in mind you’re paying fees of approximately $1500-$5000 to get rid of debt that far exceeds that amount.

Paying an attorney to file bankruptcy gives you a much greater return on your money. We offer a convenient payment plan so you can pay your fees and costs to file the bankruptcy easier than you think. (If you’re going to file bankruptcy my recommendation is to stop paying the rest of your unsecured debt as in most cases that debt will be discharged.)

Also beware of using a document preparer/paralegal to file your bankruptcy. While this type of service can ultimately save money, it can sometimes cost you more money in the long run. Because they are not actual attorneys, they cannot offer any legal advice to those filing for bankruptcy; without proper advice, you could potentially lose assets and/or have other major problems with your case. I’ve had many people come to me after their filing to try to correct problems – by that time, it is oftentimes too late.

3. I’m going to ignore the creditors (and hope they go away).

Unfortunately creditors will not go away. They may sell the debt to collectors, who can be even more aggressive than the original creditor. If you ignore the collection efforts, lawsuits will occur, and if judgments are obtained, garnishment of wages and bank accounts can occur, liens can be placed on real property, etc. Ignoring the creditors is not a good option.

Also if you wait to file, and your circumstances change (i.e. you receive an inheritance, you receive a lump sum disability award, you win the lottery, etc.), you may not be able to file bankruptcy then. Unforeseen circumstances can severely limit your options.

For those people that don’t make the decision to file bankruptcy, I guarantee I will see you back in my office, whether it be 4 months from now or a year or two down the road. If you wait, you’re that much more delayed when you could already be on the road to recovery.

THE LONGER YOU WAIT, THE MORE LIMITED YOUR OPTIONS BECOME. PLEASE DON’T WAIT TO DECIDE. Call (520) 743-2257 or email us now at kathy@kathyjohnsonlaw.com to set up an appointment to review your situation.

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Bankruptcy Warning Signs

Posted by Sep24, 2014 Comments Comments Off on Bankruptcy Warning Signs

If you are experiencing more than one of these warning signs and have accumulated debt you cannot afford to repay, you may be on the verge of bankruptcy.

1. You are living paycheck to paycheck and you have no savings.

If you are living from paycheck to paycheck, you are spending your money as quickly as you receive it, and you do not have any set aside for a “rainy day.” That means any unexpected event (i.e. vehicle repairs) can easily cause you to fall behind on your credit cards and other accounts.

2. Your debt-to-income ratio is high.

Your debt-to-income ratio is the percentage of your monthly income that goes towards paying your debts. For example, if your income is $2000 and your debts are $1000 per month, your debt-to-income ratio is 50%. Lenders use your debt-to-income ratio to determine if they will approve your loan application. Generally, they do not want to see that you owe more than 40% of your monthly income to your debts. So, a debt-to-income ratio of 50% is significantly high.

3. You can barely make the minimum payments due on your credit cards.

When you pay only the minimum payments due on your credit cards, only a small portion, if any, is applied to the actual principal you owe, and the remaining balance likely incurs additional interest. If you’ve been unable to pay more than the minimum payment on your credit cards or other accounts for an extended period of time, it’s likely you are nowhere near paying off the debt.

4. You owe substantial medical bills and expenses.

According to recent studies, nearly half of all bankruptcies nationwide can be attributed to substantial medical bills. If you have inadequate health insurance or none at all, you’re at risk of incurring substantial medical expenses due to unexpected injuries or illnesses. A significant rise in medical costs can ruin your personal finances, and force you to file bankruptcy.

5. You are unable to make your monthly mortgage payments.

Many homeowners are having a difficult time making their monthly mortgage payments. If you’re struggling to make your mortgage payments and are in risk of losing your home to foreclosure, you should consult a bankruptcy attorney immediately. In many instances, chapter 13 bankruptcy can prevent you from losing your home to foreclosure, or you may be able to get out from under a house that’s not worth what you owe on it via chapter 7 bankruptcy.

If you are experiencing one or more of the warning signs listed above, it’s time to evaluate your finances and see if you need the help of a bankruptcy attorney. Whatever you do, do not make your situation worse by putting it off.  Call us today at (520) 743-2257 or email us at Kathy@kathyjohnsonlaw.com for a free confidential consultation to determine your options.

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Some homeowners could get hit with a whopping tax bill if they accept help through Bank of America’s most recent settlement 

Posted by Aug25, 2014 Comments Comments Off on Some homeowners could get hit with a whopping tax bill if they accept help through Bank of America’s most recent settlement 

The Department of Justice just announced a $17 billion settlement last week with Bank of America.  The settlement is supposed to provide mortgage debt relief for troubled homeowners, but those who accept that help could be hit with a hefty tax bill later. According to the Attorney General’s office, here’s an example of how the settlement would work for a homeowner who owes $250,000 on a house that’s only worth $150,000.  Under the settlement, the balance of the mortgage would be reduced to about $112,000.  However, the roughly $137,000 forgiven under the deal could be a huge tax liability for the homeowner.  Although the settlement is supposed to help offset this, it is not enough.  Most homeowners won’t even realize it until its too late to do anything about it, and they will then have to deal with the IRS.   (Forgiven debt is straight income per the IRS.) If you have a mortgage with Bank of America, or know someone who does, please have them speak to a bankruptcy attorney before they accept any offers from the settlement.  Timing is critical to avoid the tax consequences.  Please spread the word.

Here’s the full article:  http://www.washingtonpost.com/blogs/wonkblog/wp/2014/08/21/some-homeowners-could-get-hit-with-a-whopping-tax-bill-if-they-accept-help-through-bank-of-americas-settlement%E2%80%82/

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Are you a real estate agent doing short sales? Do you know someone who is considering a short sale or foreclosure?

Posted by Aug21, 2014 Comments Comments Off on Are you a real estate agent doing short sales? Do you know someone who is considering a short sale or foreclosure?

A lot of real estate agents are afraid to refer their clients to me for a bankruptcy for fear of losing a commission on a short sale. What most agents don’t understand is that a bankruptcy filed PRIOR to a short sale or foreclosure will take care of any tax consequence to the seller. A short sale can then be done after the bankruptcy. If you know any real estate agents dealing with this issue, or if you know anyone who owns a house that they don’t know what to do with, have them contact me for a free consultation. The critical point is that the bankruptcy has to be done first – otherwise any taxes owed as a result of one of those transactions will not be discharged in a subsequent bankruptcy. Contact me at (520) 743-2257 or email Kathy@kathyjohnsonlaw.com for a free consultation.

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Bankruptcy myth

Posted by Jul10, 2014 Comments Comments Off on Bankruptcy myth

I know there are a lot of people out there that believe that if they file bankruptcy, they’re never going to be able to get credit again. Hogwash I say!

Bankruptcy does not have the stigma it once had. I have had numerous clients who filed bankruptcy even just 2 years ago that have now re-qualified for a new mortgage and have excellent credit. Please don’t believe the myth that bankruptcy will ruin your credit forever. It is simply untrue!

If you or someone you know has financial problems, please come talk about your options. I do free initial consultations. You may contact me at (520) 743-2257 or email Kathy@kathyjohnsonlaw.com.

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