Bankruptcy Blog

Student Loans are generally not dischargeable in bankruptcy, absent exceptional circumstances. However, there is a new student loan program in effect that may be able to make your student loan payments more affordable. It is an income-based repayment (IBR) loan program and you can learn more about by going to to the US Department of Education’s Income Based Repayment Plan website.

There is a calculator that will allow you to determine what your payment might be under the program. If you are struggling with your student loans you should definitely plug in your numbers and see where you stand.

This is a different program than the income-contingent program offered by some student loan servicers when you first left college. Those programs were available only during the first five years after you left school. This program is available each year and while your interest may capitalize, your debt is forgiven after 25 years.

The risk associated with this program is that as your income increases each year, your payment will increase as well. But if your income decreases, your payment will decrease as well.

If, after you enter your information in the IBR, you still cannot afford your student loans, you should contact your servicer and see if they offer any other options to assist you. In extreme circumstances you may be able to discharge your student loans and should consider speaking with us to see if you might qualify. Give us a call to find out if bankruptcy is an option for you. Also, if getting rid of credit card debt or other debt would help you in paying your student loans, bankruptcy also may be a good option.

In Pennsylvania, mortgage lenders were required to give homeowners a special notice prior to filing a mortgage foreclosure action.  This notice was called an Act 91 notice.  It gave borrowers 33 days to cure the default on their mortgage, or apply for assistance through an emergency program that could provide money to help borrowers catch up on their mortgages.  If a borrower applied for assistance during the 33 day period, the foreclosure could not proceed until a decision was made as to whether or not the borrower was eligible for assistance.

Unfortunately, this program has been suspended (indefinitely at this point) and mortgage lenders are no longer required to provide consumers with the Act 91 notice.

However, lenders are still required to provide borrowers with the Act 6 notice, which applies only to mortgages under a certain amount (currently $221,540).  Prior to the changes above, the Act 6 and Act 91 notices were combined.

For home owners who have mortgages in excess of $221,540, neither the Act 6 nor the Act 91 notices are required.

What does the Act 6 notice provide:  Prior to filing an action in mortgage foreclosure, your lender must give you the Act 6 notice.  So if you are late even one month, your lender can send you a 30 day default notice, giving you 30 days to catch up on your mortgage. Once those 30 days expire, the mortgage lender can file a mortgage foreclosure action against you.  It is the lender’s choice as to when to send the Act 6 notice.  The notice could be sent when you are one month late, or could be sent months later.  The important thing to know is that once it is sent, the lender has to wait only 30 days to file an action in foreclosure against you.

After the 30 days expire, Lender can file an action in mortgage foreclosure.  You have 20 days to respond, but are then given another 10 days.  The SHERIFF must serve you with an action in mortgage foreclosure; it is not sent via certified mail.  The 10 day notice then comes in the regular mail.

Sample timeline:

June 1:  Borrower one month behind

July 1: Lender sends 30 day notice

August 1: Lender files mortgage foreclosure action; Sheriff serves borrowers with the Complaint in Mortgage Foreclosure.  Borrower has 20 days from the date of service to file an Answer.

August 20:  Borrower’s last day to file Answer.

August 21: Lender sends Borrower the 10 day “Important Notice” if no Answer has been filed.  This gives the Borrower another 10 days to file an Answer.  The notice is sent via regular mail – NOT certified – and the 10 days start to run from the first day AFTER the DATE OF THE NOTICE, not the date the Borrower gets it.

August 31:  Borrower has not filed Answer; Lender can seek default judgement on September 1st.

Lender must then file a writ to have the property listed for sale.  See here for dates regarding the filing of a writ and the date of the sale.

Read the letter from PHFA regarding the changes to Act 91 here.