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Cuyahoga Falls Bankruptcy Law Blog

Bankruptcy and financial aid for college

Prospective college students have many responsibilities, from figuring out which school they want to attend to submitting an application and adjusting to life as a college student. However, the financial demands of college can be significant, and may even prevent some students from going to college in the first place. In order to address high tuition, many students and their parents take out student loans (which can be very difficult to pay off and may raise additional concerns related to unmanageable debt). However, financial aid eligibility, in some instances, may be affected by a previous bankruptcy.

If a parent has recently filed for bankruptcy, they may be ineligible for certain types of student loans. In these instances, a student may become eligible for another form of financial aid, and there may be other options on the table with respect to financing a young person's college education. Certain types of student loans are not affected by the parents of a college student filing for bankruptcy, so parents should not feel hopeless if they have recently filed for bankruptcy but are determined to help their child attend college.

Proposals made regarding student loan debt

For many people in Ohio who have gone to college in the last 10 to 20 years, the burden of student loans may continue to weigh on them, especially if they went on after receiving an undergraduate degree to pursue advanced or professional degrees. Regardless of the nature of a person's degree or line of work, they may well experience severe financial challenges that make them consider filing for bankruptcy. However, discharging student loan debt via a bankruptcy has to date been difficult if not impossible for many consumers.

As reported by MarketWatch, the American Bankruptcy Institute's Commission on Consumer Bankruptcy recently released a series of recommendations or proposals that, if heeded, may pave the way for more people to experience relief from their massive student loan burdens through a bankruptcy plan. The proposals attack the problem from multiple angles and include instituting new guidelines as well as amending existing ones.

Is Chapter 13 bankruptcy right for you?

Many in dire financial straits fear bankruptcy. Facing a possible bankruptcy can be stressful but there is no need to be afraid of the process. Unexpected medical bills and loss of income are two common causes of bankruptcy. These reasons are often out of one’s control, and the wise financial move could be filing bankruptcy.

Those concerned about losing their home should consider filing for Chapter 13 bankruptcy because it ceases foreclosure proceedings if mortgage payments are on time. While Chapter 7 bankruptcy allows the filer to protect certain property, the potential to lose it in the proceedings is greater.

The impact of filing for bankruptcy during your retirement

Filing for bankruptcy can shake your financial foundation no doubt, but there are certain periods of your life when its presence could be even more impactful. At Debra Booher & Associates CO., LPA, we are committed to educating people in Ohio about how bankruptcy works and how utilizing it as a resource under dire circumstances is something that can be fully recovered from.

Some examples of situations that may complicate your decision to file for bankruptcy include if you are getting divorced, if you still have dependent children at home and if you are in the heart of retirement. The latter example can be especially challenging as you are already facing a substantial decrease in your income and are probably relying on checks from Social Security to make ends meet. One of the most important things to remember is that your decisions earlier on in life can have a significant impact on your ability to maintain a comfortable and stable lifestyle during your retirement years. Experts suggest that you honor the budget you have set, modify your budget as needed, live within your means and avoid accumulating crippling debts. 

Should I borrow from my retirement account to pay my debts?

If you are struggling with debt, you may be feeling overwhelmed. It may seem hopeless to keep making small payments to chip away at a large balance.

This is especially difficult if you are sitting on a significant sum of money, like your retirement account. Wouldn’t it be easier to erase the debt with all its interest and rebuild the retirement funds instead?

What can I expect from a Chapter 7 creditor meeting?

It is natural if you are feeling nervous about your upcoming meeting with your creditors in Ohio. However, you should realize that your meeting with your Chapter 7 bankruptcy trustee and your creditors is not complicated and proper preparation can help ensure that the meeting is a success. The U.S. Courts website explains what you can expect and how you should prepare for your meeting.

One of your first tasks before the creditor meeting is to send financial and tax information to your trustee. This information will consist of your most recent federal income tax return, though in lieu of the actual return, you can give your trustee a transcript of your return. Your trustee should also receive copies of your pay stubs from within sixty days before you filed your petition for bankruptcy.

Recover quickly from bankruptcy

Filing for bankruptcy in Ohio may cause many people to feel like financial failures. However, bankruptcy is better described as an obstacle than the end of the road. In fact, the whole point of bankruptcy is to provide as clean a slate as possible for people to start over and rebuild trust with banks and other creditors.

Forbes recommends using a secured credit card as a great first step toward redeveloping trust with a bank. Even so, after a bankruptcy filing, Americans need to remember that they can still be choosy too. Hold out for accounts that do not charge annual fees as this can eat away at the initial deposit so badly needed to rebuild credit.

Do you have a strategy to pay off credit card debt?

Many people in Ohio have found that credit card debt is easy to incur and hard to pay off. Fortunately, there are a couple of techniques that can help you get out from under your credit card debt

One strategy is to pay your cards with the lowest balances first. If you feel like you have been paying on your cards for a long time, but it does not seem to be making a dent, this may be a good method for you. With this type of repayment plan, you make only minimum payments on all your cards except the one with the lowest balance. For that card you pay as much as you can afford every month. When the lowest balance card is paid off, put the money you were allocating monthly to that card toward the next lowest outstanding balance in addition to the minimum payments you were already making. The dent in your debt will be easier to see, which keeps you motivated to stick with the large payments.

Does Ohio have homestead exemption laws?

Many states have homestead exemption laws, which permit homeowners to list a portion of their home as a "homestead" and thus make it off limits to creditors in the event of a bankruptcy. Ohio is one such state. FindLaw explores Ohio's homestead laws in brief.

Homestead laws vary drastically from state to state. For instance, Pennsylvania and New Jersey do not offer homestead exemptions while other states, such as Florida, Kansas, Iowa, Oklahoma, Texas and South Dakota, offer exemptions for up to 100 percent of the equity in a home. Ohio's homestead laws, while not nearly as generous as the latter states, are certainly more forgiving than Pennsylvania or New Jersey's laws, allowing homeowners to protect up to $25,000 of a person's property. However, if you count on claiming the homestead exemption in your bankruptcy case, you should know that Ohio's exemption only applies to property taxes.

Types of debt and your bankruptcy options

If you are like many people in Ohio, when you think about filing for bankruptcy, you might automatically think about a Chapter 7 bankruptcy plan. This is generally the most well-known type of consumer bankruptcy. However, it is not the only one as many consumers find Chapter 13 plans better for their needs. Many factors will go into helping you decide what type of bankruptcy is right for you and one of these factors is what type of debt you struggle with the most.

As explained by The Motley Fool, there are essentially two primary forms of debt: secured debt and unsecured debt. A secured debt is one that is associated with a form of collateral, making is more secure from a creditor perspective because the creditor can seize the asset or collateral if payments are not made. One example of a secured debt is a vehicle loan. By contrast, an unsecured debt has no associated form of collateral. One example of an unsecured debt is credit card debt.

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