Congress to Shuffle Deck Chairs on the Titanic!

Student Loans

News came out recently that Senator Elizabeth Warren has proposed new legislation called the Bank on Students Emergency Loan Refinancing Act. Under this legislation students who borrowed prior to 2013 to fund an undergraduate degree to refinance both public and private student loans into a new loan bearing a 3.86 percent rate. Loans taken out for graduate school could be refinanced at a 5.41 percent rate, while parent loans could be refinanced at 6.41 percent.

The good part of this program is that it would apply not only to federal student loans, but to private loans as well. However, the devil is in the details. In order for private student loans to be included, the borrower must be in good standing with the lender and must meet certain debt to income ratios that have yet to be determined by the Department of Education. The problem is really two-fold.

First, private student loan borrowers who are in default need this the most but will be unable to get it. Those in default on private student loans often face interest rates of 29%, and they won’t be able to do a thing about it. Second, the debt to income ratio will probably keep most people out of this. It is very common for a borrower with private student loans to have over $100,000 in student loans and due to the economy they only have a job that pays $45,000 or less. Ironically, it seems that the people with the most student loan debt often have the least amount of income.

So what is the real solution? Simple. Restore Bankruptcy Protection to Student Loans. Lowering interest rates is great, but that still leaves us in a situation where students have exorbitant amounts of debt that they will never be able to pay off. This debt keeps them from fully participating in the economy by doing things such as buying houses and cars. While allowing bankruptcy protection on student loans may mean less student loans are granted, that may end up being the best thing. It used to be that someone could get a decent job without a college degree, but now that everyone has bought into the idea that they need a degree, it is almost impossible to get a decent job without one.

Ultimately, I tend to think this won’t pass anyways. Why not? Well, it would be harmful to the banks that lent the money, and the banks have a much better lobbyists than borrowers. Secondly, the government makes too much money off of student loan interest. the government will make $66 billion off of federal student loans disbursed between 2007 and 2012. Yes, Billion, with a B. If loan rates are reduced, so is the amount the government will take in. While i try not to be too cynical, I have yet to see the government do things that reduce revenues.

So, this is a step in the right direction, and it could help a lot of people, but let’s not pretend it is actually going to solve anything.

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Get out of Debt for $0 down and as little as $100.00 per month.

Each year I meet with hundreds of people who need to file bankruptcy. As of today, I have met with 587 potential clients in 2013. Some don’t need to file bankruptcy, and I tell them so. Some retain us to file for bankruptcy and eliminate their debts. Some need to file for bankruptcy but simply cannot afford it– It is those people who keep me up at nights. Bankruptcy is a powerful tool that can help people get back on their feet, give them peace of mind, give them equal access to justice, and I believe no one should be denied that relief.

So why can’t people afford to file for bankruptcy? Well, there are two types of bankruptcies, one under Chapter 7 of the United States Bankruptcy Code, and one under Chapter 13. A chapter 7 bankruptcy is great, but the law requires that attorneys collect all fees and costs up front. The problem with that is that it means you have to pay between $1,300 to $3,500 up front before you can get relief. In order to file a Chapter 13, our office normally requires a minimum of $1,000.00 up front to file and the rest of the money is paid to us over time.

Those methods have worked well for us, but times are tough in West Michigan and we want to help. That’s why for at least the next month  we can file your bankruptcy for $0 down.

When I say $0 down, that is exactly what it means. Zero money out of pocket for financial relief. Zero dollars to make the phone stop ringing. Zero dollars to stop garnishments. There are so many people who are desperate to get out of debt and desperate for relief, people who could afford a monthly payment in a chapter 13 bankruptcy if they could only get the up-front costs together. I decided that we need to help them.

My staff thinks I’m crazy, and other bankruptcy attorneys hate it, but I need to help my community. I am in the business of helping people get a fresh start through bankruptcy, to set their past mistakes behind them and move on. If I needed help, I would want someone to do this for me, so I want to do it for others. We do it by using the awesome power of the Chapter 13 bankruptcy.

With the Chapter 13 bankruptcy we can lower your car loan interest rates, save your home, and we can actually make your creditors pay my fees. You will have a small monthly payment, as little as $100 per month, and we will propose a plan that forces your creditors to accept our offer.

If you qualify for our $0 down program, you can get the help you desperately need today. So call us now and get set up for a free consultation. There is no risk, you get to talk to us for free and get professional advice. So call us now and let us help you.

Dave Ramsey’s Worst Advice Ever

Let me say first, I like Dave Ramsey. I enjoy his radio program and I find most of his advice to be  a dose of common sense that people are all too often lacking. I even agree with Dave that Bankruptcy should be avoided id possible, but today I came across some advice Dave gave out that made me start yelling profanities at my computer screen. So what is this terrible awful no good advice that turned me into a red faced brute? This:

“You never cash out a 401(k) or IRA to pay off debt, unless it’s to avoid a foreclosure or bankruptcy.”

If Dave had just stopped after You never cash out a 401(k) or IRA to pay off debt, I would wholeheartedly agree. Why is cashing out a 401(k) or an IRA to pay off debt bad advice? Well, let’s let Dave himself answer that:

“Let’s say you take $50,000 out of your 401(k). Do you know what happens next? They’re going to charge you a 10 percent penalty, plus your tax rate. If you make $75,000 a year, that puts you in a 25 percent tax rate, plus the penalty. That’s a 35 percent hit, and that’s how much of your money is going straight down the toilet.”

So both Dave and I agree that taking money out of a retirement plan to pay off debt is a terrible idea, but why on earth does Dave think you should do it to avoid Bankruptcy? I wish I knew, there is no good reason. Let’s look at what a bankruptcy could do in a situati0on like this:

  • Chapter 13 could stop a foreclosure and allow you to cure the arrears over time, AND let you keep your retirement savings.
  • Chapter 13 could allow you to repay most or all of your debts in one payment, AND let you keep your retirement savings.
  • Chapter 7 could eliminate most if not all of your debts, AND let you keep your retirement savings.
  • Either Chapter 7 or Chapter 13 would allow you to continue saving for retirement and free up more money to do so.

I can understand Dave’s idea that you should do whatever it takes to repay your creditors, but this idea is irresponsible. If for not other reason that those retirement funds are there for a reason — FOR RETIREMENT! If people don’t have those funds when they retire, they become reliant upon the government or go further into debt, so I just don’t see how anyone would benefit in that scenario.

Cashing out a retirement plan is not a solution, it is a stop gap measure. You are trading one creditor for another, because you may get Visa or MasterCard off your back, but the IRS will take their place. I don’t know about you, but I’d rather deal with Visa than the IRS. More often than not, people who cash out retirement plans still end up filing bankruptcy, except now they don’t have any retirement savings.

Obviously Dave Ramsey is a successful guy who has made a career out of giving financial advice, but that doesn’t mean it is always good advice. Dave himself went through bankruptcy and it helped to set him up for future success, and it very well could do the same for you. If you are thinking of taking money our of your IRA or 401(k) to avoid bankruptcy, you owe it to yourself to talk to a competent bankruptcy attorney first.