Tennessee Bankruptcy Lawyers Blog

Bankruptcy was created to help Americans relieve the burden of impossible debt. Yet for the past 7 years, there was one important type of debt it couldn't ease: student loans.

But some legislators are bent on changing that, according to The Wall Street Journal.

In 2005, Congress revised bankruptcy laws to exclude the discharge of debt from education loans, except in rare circumstances. The theory was that, without collateral like homes and cars, young graduates would find it all too easy to walk away from their obligations if bankruptcy was a possibility.

What Congress couldn't foresee was just how out of control the student debt crisis would get within the next decade.

Earlier this year, the collective total of education loan debt reached the $1 trillion mark, higher than the nation's collective credit card debt.

Meanwhile, college graduates are finding it difficult to make payments. It's estimated that 27 percent of borrowers who have begun paying back loans are already delinquent.

Some are referring to the situation as the next big economic bubble. For the many young grads struggling to find decently-paying jobs, paying down debt may not currently be possible. Not surprisingly, young adults are putting off major purchases like homes and cars, which is having an effect on the entire economy.

A proposed bill would allow the most overwhelmed graduates to file for bankruptcy in Tennessee and other states. Unfortunately, even if it passed, it would only apply to a small portion of borrowers - those with private loans from banks and other lenders.

Ninety percent of school loans are government-backed, and therefore wouldn't be eligible for bankruptcy.

However, Tennessee bankruptcy may still offer indirect assistance to students, and families of students, drowning in student loan debt.

By relieving other forms of unsecured debt such as credit card debt and medical expenses, filing for bankruptcy may help debtors better afford loan payments, lower their overall debt burden, and eventually begin rebuilding credit.

Continue reading "Concern About Student Loan Debt Drives Discussion Over New Tennessee Bankruptcy Laws" »

Most parents would do anything to help their kids succeed. But by co-signing loans for young adults, many families are unintentionally making things more difficult.

Despite everything Americans have learned in recent years about having too much debt, we are putting our kids under immense pressure to borrow money.

With tuition rising rapidly, most students don't believe they can achieve an education without taking out student loans. With the cost-of-living high and the number of job positions low, young adults are making ends meet with credit cards. And when it comes time to buy a car or home, many young people can't gain approval without assistance.

As a result, more students are asking for help from moms, dads, grandmas, grandpas, aunts, and uncles, say Tennessee bankruptcy lawyers. By co-signing loans, these adults believe they can help their young relatives attain financing and establish a credit history.

But the benefits of borrowing are quickly erased when the primary borrower - the person you co-signed for - cannot afford to pay back the money.

According to a recent Business Insider story, as many as three-quarters of all co-signers are left to foot the bill after the primary borrower fails to make payments. Many must file for Tennessee bankruptcy in order to regain control over finances.

Not all young people who default on loans are recklessly irresponsible. In fact, many are intelligent and motivated young adults who simply haven't been able to achieve the income necessary to keep up with their bills in today's economy.

When your name is attached to their credit card debt or loan, you are liable for making any payments they cannot afford. In the case of a default, your credit score, home, and life savings will be at risk. In fact, a growing number of parents are facing foreclosure as a result of providing financial help to their children.

Not only can co-signing loans have negative consequences for parents, but it also causes trouble for young borrowers.

Many young people learn to use credit before they learn to use cash, making it impossible to understand important concepts such as budgeting and saving.

With poor credit scores from the get-go, young adults are unable to qualify for loans or forced to accept ridiculously high interest rates.

If you can afford to part with the money, making a personal loan is a lower-risk option because, unlike with co-signing, a default won't be reflected on your credit score. If the damage has already been done and you're suffering the consequences of a co-signing gone bad, bankruptcy may be able to help.

Chapter 13 bankruptcy can allow the primary borrower to make payments over a period of time, preventing default and protecting the co-signer. If lenders agree to release you from liability, you may be able to file for bankruptcy yourself.

While Tennessee bankruptcy can't be used to discharge student loans, it can free up money by reducing or eliminating credit card debt and other unsecured debts.

Continue reading "Parents Who Co-Sign for Kids May Be Stuck With Credit Damage, Tennessee Bankruptcy" »

Most of us would rather eat glass than knowingly sign up for a credit card with a 365% APR. Yet consumers are increasingly being tricked into loans with exactly that kind of sky-high interest rate - by their own banks, according to CNN Money.

Called advance loans, these short-term loans provide quick cash for bank customers with direct deposit checking accounts.

The arrangement is strikingly similar to that of payday loans, which are the cause for a large number of Tennessee bankruptcy filings each year.

Both payday and advance loans allow struggling consumers to pay the bills between paychecks. But because the balances and fees are due in full just two weeks to a month after the loan is established, it's common for borrowers to be unable to pay the money back.

As a result, many recipients of payday and advance loans are forced to take out an additional loan to pay off the first.

What makes the latest advance loans especially dangerous is that banks can debit the amount due directly from a person's checking account as soon as a recurring deposit - such as a paycheck - a is made.

Instead of just being unable to pay back the loan, now borrowers are also unable to pay any important bills, from the mortgage to the phone bill, because they never received their salary.

The loans have consumer protection groups crying foul. With big banks pushing predatory short-term loans, bank accounts are morphing from an important savings tool into an unsafe place for money. As a result, consumers may be encouraged to close bank accounts - and perhaps rely solely on credit cards and payday loans.

Short-term loans can result in the same vicious debt trap as credit cards, but because interest rates are much higher, consumers get into more trouble more quickly.

According to CNN Money, the average advance loan is for 10 days and charges $10 per $100 - but because the average consumer remains indebted to the bank for 175 days, the annual percentage rate can end up at more than 300 percent!

It's hard to turn down quick cash when you're living paycheck to paycheck, even when you know that the terms don't make sense. For many, bankruptcy is the only way to break the cycle.

If you're handing over every paycheck to the bank, you're essentially working for them. But as a customer, your bank should be working for you.

By allowing you to make manageable payments on unsecured debts - or discharge the debts entirely - filing for Tennessee bankruptcy can give you the foothold you need to get your finances, and your life, back on track.

Continue reading "As Banks Trap Consumers in Cycle of Advance Loans, Nashville Bankruptcy May Offer Relief" »

Tennessee universities are short on cash, and its students who are bailing them out.

While Tennessee funded 55 percent of public college budgets in 2002, a decade later the state is only covering 30 percent, according The Tennessean.

As a result, students are being crushed under a load of ever-increasing debt. Students at Middle Tennessee State University, for example, now have a cumulative student debt of $63 million - or $5 million more than the previous year.

Meanwhile, scholarships are increasingly more difficult to come by. For college students lucky enough to find financial aid, many programs are covering smaller percentages of expenses.

Despite threats by President Obama to withhold federal aid if colleges don't stop hiking costs, tuitions keep going up.

Typical student debts can range anywhere from $10,000 to $100,000 by graduation time.

When economic times are good, it's possible for new grads to pay the bills with an entry-level job. Unfortunately, today's economy means many graduates are working at the local coffee shop or fast-food joint rather than a corporate office.

Without a decent paycheck, it's easy for students and grads to get in the habit of relying on credit cards to cover costs while they continue to pay school loans. In fact, many young people are racking up credit card debts as high as their student debts.

Some are speculating that the rise of unmanageable student debt will be the new housing-bubble crisis.

In many cases, bankruptcy can provide relief.

Most students don't consider filing for Tennessee bankruptcy because student loans cannot typically be discharged unless they can be proven to provide an undue hardship. But bankruptcy can often help the millions of young people who have been pushed into overwhelming credit card debt because of student loans.

Filing for bankruptcy presents the ability to eliminate unsecured debts - i.e. credit card debt, medical bills, and other non-college-related burdens not secured by assets.

If you're regularly maxing out credit cards and making late payments, getting back in control of your debt can help you begin rebuilding your credit score so you can qualify for loans in the future.

College is supposed to increase our chances, not limit them. By conquering debt, you can finally transition into the real world, leaving college - and its impossible costs - far behind.

Continue reading "As State Cuts University Budgets, College Students Take Out Bigger Student Loans in Tennessee" »

More Tennessee residents are taking out personal loans to pay down debt - but while some borrowers are finding relief, others end up exacerbating their debt problem.

After falling out of favor during the recession, personal loans are once again being handed out by lenders for everything from kitchen remodels to debt consolidation, reports The Wall Street Journal.

With tighter lending standards and low real estate prices ruling out the possibility of a home equity loan for many homeowners, lenders see personal loans as a way to grow their business. Banks mailed out 424.8 million offers for personal loans in 2011, compared to just 290.5 million in 2010.

Personal loans don't come cheap, but they can be more affordable than credit cards. A typical interest rate for a borrower with good credit is between 9 and 15 percent for a five-year personal loan, whereas interest rates on credit cards are often more than 20 percent.

Some banks are sweetening the deal further by issuing "debt consolidation specials" with rates as low as 6.5 percent if customers agree to allow their payments to be directly deducted from their accounts.

For consumers committed to paying off debt, a personal loan may provide a solution. But Tennessee bankruptcy lawyers have also seen debt consolidation loans make a bad situation worse.

Many Americans have relied on credit cards to make ends meet during the recession. When our paychecks didn't cover car repairs, doctor's bills, or phone bills, we paid for them with plastic.

Unfortunately, leaning on the crutch of credit can be a hard habit to break. This is where Tennessee bankruptcy comes in handy.

People who take out debt consolidation loans or transfer credit card debt to a card with a lower rate often continue racking up debt. As debt continues to grow, the lower interest rate offers little relief.

Sadly, many people with personal loans find themselves burdened with new credit card debt on top of loan payments.

Consolidating debt is just another term for moving debt around. If debt is running your life, rearranging it isn't enough - you need to eliminate debt. Filing for bankruptcy in Tennessee provides the power to do just that.

Continue reading "Debt Consolidation Loans Make a Comeback, but Tennessee Bankruptcy May Offer Smarter Solution" »