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Public Service Student Loan Forgiveness Law Change

Did the Public Service Student Loan Forgiveness Law Change?

Student in cap and gown

The first wave of 10-year faithful payers under the public service student loan forgiveness program (PSLF) will soon mature. These payers should have their loans forgiven under this program for their 10 years of work as a public employee. Now, it appears that the Department of Education is signaling that such generous loan forgiveness may never happen as promised.

The Public Service Loan Forgiveness Program (PSLF)

The U.S. Congress created PSLF through the College Cost Reduction and Access Act of 2007. To qualify, the participant was required to work for any qualified public or non-for-profit employment. In addition, they were required to make 120 on-time, monthly payments (10 years of payments). Upon completion, the student loan borrowers would be rewarded with the entirety of their student loans being “forgiven” under this law. At least, this was the story everyone participating was told. The way things are going it looks like the government may be going back on their word.

Signs That a Law Change to PSLF is Coming

U.S. Department of Education is taking legal steps to reduce the number of qualified recipients under the program. The Republican budget proposal also eliminates the funding for such a program. The U.S. Government is realizing that the cost of the program far exceed original expectations. Essentially, the government is not going to be able to afford the payouts required to indefinitely continue the PSLF program.

Will Anybody Receive the Promised PSLF Relief? Will They Retain the Full Balance of Their Loans?

Although it is too soon to be sure, doubts are arising as to whether the original participants in the program will receive any student loan forgiveness. The first wave of qualified participants should be in October of 2017. With dubious legal challenges as to who qualifies along with a lack of budget funding, many are getting nervous. If you are currently participating in the PSLF program, make sure to keep an eye on how the first wave of participants are treated. If you are intentionally working in the public sector due to this program, the defunding or eligibility shifting that may soon occur may force you to rethink your employment options.

Puerto Rico Bankruptcy

Puerto Rico Bankruptcy – What Does This Mean for the U.S.?

Puerto Rico Bankruptcy

Puerto Rico, a U.S. territory, has become completely bankrupt: it can no longer service its debts. Puerto Rico is barred technically from filing for bankruptcy due to its territory status. However, similar reorganization relief will be sought under PROMESA (the Puerto Rico Oversight, Management, and Economic Stability Act) that was passed by congress in 2016.

The magnitude of Puerto Rico’s “Bankruptcy” must first be put into perspective. Puerto Rico itself and many of its associated governmental and community based systems are now seeking bankruptcy-like relief. The debts associated with Puerto Rico’s bankruptcy alone reach over $70 billion. To put this in comparison, the infamous 2013 Detroit Chapter 9 bankruptcy was dealing with an estimated $19 billion debt load. Further back, the largest municipal bankruptcy had a debt load of approximately $4 billion during the Jefferson County, Alabama filing in 2011.

Municipal bankruptcies are rare – at least until now. The worrisome aspect that confronts the U.S. is that these municipal bankruptcies are growing. They are growing in size and debt load. Puerto Rico has a population of almost 3.5 million people. Detroit’s population was less than 20% of Puerto Rico at 680,000 people. This new Puerto Rico bankruptcy poses the question: will entire U.S. states be next?

Municipal bankruptcy is becoming a common concept. It is becoming normal and acceptable. As global debt systems begin to default on a wide scale, there may be no limits to what governments and states will fall into bankruptcy (or its equivalent). The dominoes of our overladen debt system will fall. It is not a question of if more will fall. It is a question of how many and in what manner.

The U.S. national debt is approximately $17 trillion. Much different than almost all other nations, the U.S. has only meager supplies of foreign exchange currency, gold, or other reserve methods. Although the U.S. currency is the primary world reserve currency, this arrangement to indefinitely perpetuate the unlimited spending of the U.S. cannot continue forever. Eventually, there must be some form of financial correction. Balance sheets can only be stretched so far even if everybody is playing on the same team. Eventually, it just deviates too far from reality.
Essentially, Puerto Rico’s bankruptcy may be the start of a long over due U.S. financial correction and reorganization. This reorganization may go from the bottom all the way to the top.

Loans vs Credit Cards- What You Need To Know

Loan vs Credit CardLoans and credit cards have many similarities. However, loans and credit cards do have distinct differences from each other.  Loans and credit cards differ in their terms and how they are repaid.

Loans are Predictable: They Do Not Change

Loan terms are definite. This means that the amount to repay, the interest rate terms, and the payment structure do not usually change.  A loan is usually set for repayment within a specific duration such three, five, or ten years of monthly payments.  The amount loaned does not change and the interest rate usually does not change (at least the interest rate stays within a rigid framework.)   

The framework of the loan is usually concrete and predictable. This should allow the borrower to make a solid budget for repaying the loan.  Loans are generally “safer” than credit cards because they are more predictable and do not change.

Credit Cards are Constantly Changing Lines of Credit

Although credit cards can be used responsibly, some dangers can arise because of their flexible and ever-changing nature.  Credit cards are ever-changing lines of credit. The amount owed constantly changes.  Therefore, the amount of interest charge is also constantly changing.

Balances can increase quickly on a credit card because there is no limit on the card’s use.  Credit cards can be used for anything. Traditional loans are usually used for a specific, singular purpose.  Credit cards can be dangerous. They can be used quickly to make up for lack of income or unexpected expenses. They can also be used irresponsibly to purchase items that would normally not fit into the monthly budget.

Another credit card danger is flexible terms.  Flexible terms can quickly destroy your financial situation. Credit cards frequently charge late fees and can increase the total interest rate at any time for a variety of reasons.  When the terms change on a credit card, the amount that you must repay monthly can drastically increase.  Such a raise in required credit card payments has forced countless people in the past to file for bankruptcy.

Conclusion: Stay Away From Both

Although credit cards are worse in some ways than traditional loans, it is best to stay away from both as much as possible. Credit cards and loans should be used responsibly.  They should only be used for practical and convenience purposes.  Credit cards and loans should never be used to purchase items you cannot afford. If you purchase items that you cannot afford with cash, you are putting yourself in jeopardy financially.  Make loans and credit cards work for you instead of the other way around.  They can be powerful tools if you use them only for convenience and investment purposes.

Will My Home Be Searched When Filing Bankruptcy?

Many people fear that a bankruptcy trustee will search their house or apartment during bankruptcy.  Many believe that a cataloging of property or an auction takes place during every bankruptcy case.  In reality, these things virtually never happen in bankruptcy.  In Indiana, no search or other intrusion into your household is likely to happen during bankruptcy.   This article explains why such personal intrusions are uncommon and unnecessary in most bankruptcy cases.

The Petition Already Lists All Property

Your petition for bankruptcy already lists all of your property and financial information.  When you file for bankruptcy, you sign under penalty of perjury that all the information is correct.  In addition, certain verifying documents are required to be presented to the bankruptcy court and trustee.   The trustee can review these documents and do their own due diligence searches if they desire.  With all this information at hand, it is rare that the trustee will need to do any personal examination of your property.

Indiana Bankruptcy Exemptions Protect Most People’s Property

In Indiana, the bankruptcy exemptions protect the vast majority of bankruptcy filer’s property in entirety.  Using these exemptions, you were allowed to keep over $10,000 of personal property per filer.  You are also allowed to keep almost $20,000 in residential real estate per filer.   This protects the vast majority of property held on most cases. It also makes excessive searches of property completely unnecessary.

The Trustee Will Not Do Anything That Does Not Benefit the Creditors

Excessive searches or research almost never proves to produce any more funds for creditors in bankruptcy.  Therefore, the  trustee will not waste their resources on such unnecessary matters.  In addition, the bankruptcy system is designed to be efficient and effective. Such searches or intrusions would be over burdensome and undesirable within the bankruptcy system.  Although the trustee has wide latitude in researching and cataloging assets, such actions are only necessary and a very limited amount of high asset Bankruptcy cases.

What Happens if I Default On My Credit Card Debt?

What happens if you default on your credit card debt?Credit card balances can increase in size easily.  The monthly payments can quickly become impossible to pay.   What happens if you are forced to default on your credit cards?  There are a few important things to know about what happens after you begin to default on your credit cards.

Your Rates Will Go Up

If you default on a monthly credit card payment, your interest rate will likely increase.  This can double or even triple your new minimum monthly payment.  Many credit cards offer low interest rates such as 8% or less.  These rates will increase to rates as high as 15% or even higher than 20% if you begin to default on your payments.

You Will Be Charged Late Fees

Most credit card payments charge late fees.  For the first offense, it is very common to charge $27 for being late.  Future offenses may increase the monthly late fee to as much as $38. These late fees coupled with higher interest rates can make credit card payments very difficult.   If you are planning to default on your credit cards, you may need to make a plan to get rid of your debts.  You may need to settle your credit card debts or file for bankruptcy.

Your Credit Score Will Decline

Another consequence of defaulting on credit cards is the lowering of your credit score.  Your credit score is determined by a carefully calculated system that takes into account the timeliness of your credit payments.  Any missed payments will very quickly effect your overall credit score.  This can prevent you from obtaining loans or other credit items due to concerns that you may be forced to default on all of your debt.

Default on Credit Cards Can Sometimes Be A Good Thing

If you have excessive credit cards or other debts, it may be a good thing to default on your credit cards if you do not have any other options.  Credit cards are “unsecured debts” which means that you will not generally lose a house, car, or other item if you stop paying on the debt.   In some situations, it is good to stop paying credit cards first as opposed to your mortgage or car payment.  If you are forced to default on your credit cards, you need to talk to a bankruptcy attorney as soon as possible.   An attorney can guide you through the bankruptcy process, the settlement of your debts, or some other debt relief option.