In filing a bankruptcy case, the goal of the filer is to obtain a discharge. The discharge is essentially an order of the bankruptcy court that permanently bars creditors from seeking payment on certain debts. While most debts are discharged through the bankruptcy process, student loans are an exception to this rule. This leads to the question, what qualifies as a student loan?

The Bankruptcy Code is very broad in its defining of student loans. Not only are government backed student loans such as Stafford, Direct, or Perkins loans non-dischargeable, but the Code sugoes further and excepts “any indebtedness incurred…solely to pay higher education expenses” from being discharged. See 11 U.S.C. §523(a)(8); see also 26 U.S.C. § 221(d)(1). Such a broad definition encompasses most loans obtained for educational expenses.

The only exception to this hard and fast rule is if there is a finding of undue hardship by the bankruptcy court. However, as recently demonstrated in a 4^th Circuit case, obtaining a finding of undue hardship can be extremely difficult. In the recent 4^th Circuit case, a debtor sought to discharge her student loans because she was unemployed and diagnosed with cancer. In denying her request to discharge her student loans, the court stated, “Being diagnosed with cancer, without more, does not necessarily mean that the debtor cannot take advantage…of the excellent education she received.” See In re Robinson, 19 CBN 766 (Bankr. E.D. Va. 2009).

As demonstrated above, it is difficult to discharge student loan debt. However, if you happen to live within the jurisdiction of the 9^th Circuit (and if you live in Arizona, you do), there may be another way to discharge your student loan debt. The court held that in a Chapter 13 bankruptcy case, a debtor can discharge their student loans through their Chapter 13 plan if the lender has notice that the plan provides for the discharge of the student loan. A Chapter 13 bankruptcy requires that the debtor put together a written plan that outlines how the creditors will be dealt with. In short, if the debtor provides that his student loans will be discharged in his Chapter 13 plan, and the lender fails to object, the court will deem those student loans discharged. See Espinosa v. United Student Aid Funds, Inc. 553 F.3d 1193 (9^th Cir. 2008).

This approach by the 9^th Circuit is at odds with courts around the rest of the country and as such the United States Supreme Court has agreed to hear arguments on the Espinosa case in the fall of 2009. However, as for now, Arizona and those other states within the jurisdiction of the 9^th Circuit can still seek to discharge their student loan debts through their Chapter 13 plans.

Arizona Bankruptcy Attorney John Skiba offers a free bankruptcy consultation to discuss your current situation and how the bankruptcy laws can help you obtain debt relief.

A recent study by Harvard University has found that medical bills are increasingly a contributing factor in the decision to file for personal bankruptcy. In fact, the study showed a medical bills were a contributing factor in 62% of all bankruptcies filed in 2007. Breaking down the numbers further, the study found of those filing medical-related bankruptcies, 78% had health insurance, two-thirds were home homeowners, and most had gone to college. Those with private insurance reported average medical bills of $17,749 while those who filed for bankruptcy who were not covered by health insurance reported average medical expenses of $26,971. Much of the bills were attributed to high deductibles and uncovered services coupled with the fact that many people pay for their medical bills on high interest rate credit cards. The full article can be read at: http://www.latimes.com/business/la-fi-medical-bankruptcy4-2009jun04,0,4193398.story .

Bankruptcy can bring relief when faced with overwhelming (and often unexpected) medical bills. In fact, medical bills will likely be completely discharged when included in a bankruptcy filing. Arizona Bankruptcy Attorney John Skiba offers a free bankruputcy consultation to discuss your current financial situation and what options are available.

It is common for people to believe that if they file a bankruptcy case that they must give up their property.  People are surprised to learn that in most cases they will be able to keep most if not all of their property during their bankruptcy case.  Arizona has numerous exemption laws that protect both real estate and personal property, even during a bankruptcy case.

For example, Arizona’s homestead exemption protects up to $150,000 in equity in a personal residence.  See A.R.S. § 33-1101(A).  Likewise, a car, household goods, wedding rings, and retirement accounts are all generally protected during a bankruptcy case.  Further, if there is property that would not be protected by one of Arizona’s exemption statutes, the filing of a Chapter 13 bankruptcy typically results in the keeping of all property while paying back a portion of your debts over a three to five year period.

If you are contemplating filing for bankruptcy, it is best to seek the advice of an attorney early on in the process so that you can utilize the full exemptions provided for by Arizona law.

Arizona has been hit particularly hard in the real estate market with dramatic decreases in the value of people’s homes.  Are you behind on your house payments?  Is your house in foreclosure?  Do you owe more on your house than it is currently worth?  If so, then you are not alone.  Much of the population here in the Valley are in the same situation.

The decision to file bankruptcy is not to be taken lightly, and does have lasting effects.  However, bankruptcy should not be immediately ruled out without a careful examination of what the bankruptcy laws can do to help keep you in your home.  Bankruptcy, and Chapter 13 in particular, permits you to catch up on missed payments and will even stop a foreclosure – even if the sale date is fast approproaching.  Not only will a Chapter 13 give you time to make up those missed payments, you may be able to discharge the home equity line of credit (HELOC) or second mortgage on your personal residence.

If, for instance, you are several months behind on your house payment, a Chapter 13 bankrutpcy will give you three to five years to get caught up.  Also, if you owe more on your first mortgage than your house is worth, you will be able to discharge your second mortgage or HELOC.  These are powerful tools that can help you stay in your home, even if there is already a trustee’s sale set.

Arizona Bankruptcy Attorney John Skiba offers a free consultation to help you determine if bankruptcy is an appropriate remedy for your situation.