Albuquerque Bankruptcy Attorneys

'Albuquerquebankruptcylaw.com’ is a sister site to Albuquerque Business Law, P.C. Partner attorney, James Burns has teamed up with one of Albuquerque’s most experienced bankruptcy attorneys, Don Harris.

Don F. Harris

Don Harris has represented clients in numerous complex cases involving business and financial matters. Mr. Harris has experience as a former Assistant Attorney General for the State of New Mexico and a former Assistant City Attorney for the City of Albuquerque. Don’s trial and courtroom skills are formidable. For several years, Mr. Harris was a Barrister in the Oliver Seth American Inn of Court.

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James T. Burns

Prior to the practice of law, James was a corporate manager with a large market research firm. Like many of our clients, James has started and successfully managed businesses of his own, primarily in the area of technology start-ups. James was also a prizewinner in the UNM Business Plan Competition and has completed numerous consulting projects to help clients achieve their legal and business goals.

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Get the fresh start you want - and deserve!

Bankruptcy can mean a new beginning. If you are experiencing any type of financial distress, whether personal or business related, you are probably experiencing a great deal of feelings and emotional trauma you may have never felt before. Seeking help from a bankruptcy attorney in New Mexico can help ease the pain associated with insurmountable debt, relieve anxiety that comes every time a creditor calls you, and give you hope for a financially secure future.

New Mexico Bankruptcy solutions tailored to your situation

We are here to help you craft a plan to deal with your situation, not try to make your situation fit into a one-size-fits-all bankruptcy. We also understand that it can be very difficult to openly seek help from a bankruptcy attorney during these times of difficulty. This is why we handle each business bankruptcy, and each personal bankruptcy case with complete confidentiality and extreme sensitivity towards each unique financial situation.

Together, we can help you formulate a solid financial plan to get you back on track.

What type of bankruptcy should you file? Or should you?

When considering bankruptcy in Albuquerque, New Mexico, or anywhere else for that matter, the type of bankruptcy you file, largely depends on the type of debt you are facing. Bankruptcy may not even be the best solution for you. Everyone’s debt situation is unique, therefore each case is unique. Don Harris and James Burns have over 40 years of combined New Mexico bankruptcy experience. This experience includes chapter 7 bankruptcy, chapter 11 bankruptcy, chapter 13 bankruptcy and alternative creditor workout scenarios.

Contact a New Mexico bankruptcy attorney

New Mexico bankruptcy attorneys, Don Harris and James Burns can guide you through the entire bankruptcy process. Although we are based in Albuquerque, we can help with any type of bankruptcy in any part of New Mexico. The fresh start you deserve is only a phone call or (email) away.

Can My Student Loan Debt Be Discharged in Bankruptcy?

Can My Student Loan Debt Be Discharged in Bankruptcy

The short answer is usually no for federal loans. Let’s explore why and the possible exception.

In a case from 2012, a married couple who was filing for bankruptcy tried to get their student loans forgiven. They argued that the loans were not “educational loans” under the chapter 13 bankruptcy statute, and repaying the loans would cause “undue hardship” if the loans were not discharged in the bankruptcy. Between the husband and wife, there were eleven different creditors with a combined total of $456,221 in unsecured student loans. Each of them had over $100,000 in individual loans, and nearly $200,000 in joint loan debt.

The husband was 29 years old and had a bachelor’s degree in business administration, and the wife was 27 years old with a bachelor’s degree in business. Their combined annual salary was just over $100,000 in 2011.

Under the federal bankruptcy statute, educational loan debt cannot be discharged in the bankruptcy.

Educational loan debt that cannot be discharged in a bankruptcy breaks down into four categories:

Loans made, insured, or guaranteed by a governmental unit

  • Loans made under any program partially or fully funded by a governmental unit or nonprofit
  • Loans received as an educational benefit, scholarship or stipend
  • Any “qualified educational loan” as defined by in the Internal Revenue Code(IRC)
    • Basically, the IRC defines this as any indebtedness incurred by the taxpayer solely to pay for higher education expenses, or the “cost of attendance” at an eligible educational institution, as defined under Title IV of the Higher Education Act of 1965
      • The cost of attendance includes tuition, books, room and board, etc.

The husband and wife debtors in this case only had to assert that their creditors had failed to prove that the loans fell into one of these four categories, because the burden of proof is on the creditors, since they have access to all the information regarding the debt. The creditors invoked the fourth category, which in itself is broad. Even though the debtors had attended numerous different schools during their undergraduate education, all of those schools were Title IV eligible.

Although the couple tried to argue that the creditors had to prove that the loans were used to pay for the cost of attendance, the court held that what mattered was the stated purpose of the loans when they were received, not how they were actually spent.

There is an exception to the statute if requiring repayment of the loans would create undue hardship.

The statute does not define undue hardship, so the question is usually on for the judge or jury, as a factual question, not a question of law. The court in this case considered three factors to determine if there was undue hardship.

Three factor test of undue hardship from forced repayment of student loans:

  • Unable to maintain a “minimal” standard of living for themselves and their dependents
  • Additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period
  • Good faith effort to repay the loans

All three of these factors must exist to satisfy the test and for the loans to be discharged, and any other extraneous concerns are not considered. This standard is high and difficult to meet. There is some debate as to whether part of a loan debt could be discharged to the extent that is did meet the test, while the rest of the debt would remain.

In this case, the husband and wife failed to meet any of the factors in the eyes of the court. The only cases that have satisfied the test are situations where the total income is around the poverty line. The situation must be beyond reasonable control, and the debtor must somehow prove that they will be unable to pay their student loan in the future, for the period of repayment, which is usually a long time. Also, maintaining a minimum standard of living does not include owning a car, or having a large house. Minimum means minimum. In this case, even a monthly loan payment of over $4000 a month was not excessive, although it would require the husband and wife to reduce their monthly expensive otherwise.

What if I Ignore My Student Loans?

Ignoring student loan debt will not make it go away. If you’re not in the extreme situation that would allow the loans to be discharged in bankruptcy, then not paying the loans will first cause you to default. Most federal loans are in default after you have not paid for 270 days. Your credit score will suffer and the interest will continue to pile up.

A private creditor could sue for continued non-payment, and if you lose then a judgment will be entered against you for the amount owed. This judgment means that the creditor can collect using any power the state grants, which may include garnishing your wages. The federal government on the other hand can intercept tax returns and garnish up to 15 percent of your wages without suing.

Some states such as Texas do not allow your wages to be garnished for private creditors, but the federal government can still garnish if the loan is in default.

There are other ways to relieve student debt

It’s not hopeless! There are several programs in place that help to ease the sting of student loans.

  • Under the Ford Program, a debtor can pay twenty percent of the difference between his adjusted gross income and the poverty level for his family size, or the amount the debtor would pay if the debt were repaid in twelve years, whichever is less. Each year the debtor’s monthly payment amount is adjusted to reflect any changes. The program requires making the specified payments for twenty-five years, and then the Secretary of Education cancels the remaining balance.
  • Income Based Repayment plans currently in place cap payments at 15 percent of discretionary income.
  • For newer loans, there is the Pay as You Earn program, which caps monthly payments at 10 percent of discretionary income, and after 20 years, the remaining balance is forgiven. If you work in public service, then after 10 years the remaining balance is forgiven.
  • President Obama just signed an executive order on June 9, 2014 that would expand the Pay as You Earn program, and to allow more borrowers to refinance their loans.

Check StudentLoans.gov for more information. Also, since some private loans can be discharged in bankruptcy, consult a bankruptcy lawyer to find out how.

Paying for Chapter 7 Bankruptcy: Tax Time is Also Bankruptcy Time for Many

Paying for Your Chapter 7 Bankruptcy: Tax Time is Also Bankruptcy Time for Many A Chapter 7 Bankruptcy is not an inexpensive endeavor.

A Chapter 7 Bankruptcy is not an inexpensive endeavor. A Chapter 7 Bankruptcy will normally cost between $1,700 and $3,000, including the filing fee, which is over $300, gross receipts tax and credit report fees. The more complex or difficult the case, the higher the cost, as a general rule

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Top Five Reasons for Filing Chapter 13 Bankruptcy

Typical Reasons Why Someone Would Need to File Chapter 13

Typical Reasons Why Someone Would Need to File Chapter 13 Chapter 13 Bankruptcy is sometimes referred as “personal reorganization” or “wager earner plan” bankruptcy. It is different than Chapter 7 bankruptcy, or so-called “straight bankruptcy,” because Chapter 13 requires regular monthly payments to the Chapter 13 Trustee. It is different than Chapter 11, which is […]

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Gay Marriage and Filing Joint Bankruptcy: Should the Nuptial Wait Until After Bankruptcy?

Should same sex couples, who are thinking about bankruptcy, think twice about getting married and file separately?

Same-sex couples fought hard to make same-sex marriage legal in New Mexico. Now they can file a joint bankruptcy petition – but should they? The issue of whether same-sex couples can marry legally in New Mexico is currently pending before the New Mexico Supreme Court. The New Mexico Supreme Court is currently comprised of five Democrats, and […]

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The Social Security Means Test in Bankruptcy Proceedings

The Social Security Means Test in Bankruptcy Proceedings

The Means Test The means test is a device used in bankruptcy proceedings to limit the filing of Chapter 7 bankruptcy and to influence how lenders are repaid in Chapter 13 bankruptcy. Simply put, the means test works by determining whether or not your disposable income is above the median disposable income in your state.

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What is a Judicial Lien and How Can You Avoid One?

A lien is an interest that a creditor acquires in property that allows the creditor to take the property upon the occurrence of certain conditions.

What is a Judicial Lien? Let’s start with a basic lien. A lien is an interest that a creditor acquires in property that allows the creditor to take the property upon the occurrence of certain conditions. In the case of a security interest, or a lien on personal property, the creditor can usually use “self-help” […]

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Lien Stripping: Removing a Second Mortgage in Chapter 13 Bankruptcy

In the wake of the 2008 housing bubble many homeowners are facing difficulties with refinancing, mortgages and foreclosure. In New Mexico 12.9% of homeowner’s mortgages are underwater, meaning homeowners owe more on their home than their home is worth. Underwater mortgages are a result of depressed home value and have become a difficult problem for both homeowners and lenders. However, there are options for homeowners with second and even third mortgages on their homes.

Lien stripping for home mortgages underwater: In the wake of the 2008 housing bubble many homeowners are facing difficulties with refinancing, mortgages and foreclosure. In New Mexico 12.9% of homeowner’s mortgages are underwater, meaning homeowners owe more on their home than their home is worth. Underwater mortgages are a result of depressed home value and […]

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Let’s Make a Deal: Negotiating with Your Chapter 7 Trustee

Let’s Make a Deal: Negotiating with Your Chapter 7 Trustee Just because a trustee is planning to sell your property doesn’t mean you can’t keep it anyway.

In a prior post I discussed what is called “nonexempt” property and used the colorful phrase from a bankruptcy case that discusses whether property can be transferred from the “nonexempt” category to the “exempt” category shortly before the bankruptcy is filed.

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Don’t Let Your Ex’s Debt Hold You Back Financially

Don't Let Your Ex's Debt Hold You Back Financially

Ensuring that your divorce completely separates your debts and assets so you are not financially tied to your ex for years to come. Oh, the horror! Sheila begins receiving notices from a creditor that the mortgage for the house she used to own and live in with her spouse is in default and she owes […]

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Pigs, Hogs, and Nonexempt Property in Bankruptcy

Nonexempt Property in Bankruptcy: In Bankruptcy Court, it’s all about the Pigs and the Hogs.

In Bankruptcy Court, it’s all about the Pigs and the Hogs. “There is a principle of too much; phrased colloquially, when a pig becomes a hog, it is slaughtered. While . . . some planning of one’s exemptions under bankruptcy is permitted, a wholesale sheltering of assets which otherwise would go to creditors is not […]

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