Archive for June, 2014

Utah Legislators should take a Lesson in Property Exemptions from the Recent Supreme Court Decision about Inherited IRAs

Some debtors can, but others cannot, choose between the federal and state exemptions. That’s because of a major political compromise.   Our last blog post summarized the U.S. Supreme Court’s ruling handed down on June 12, 2014 in Clark v. Rameker.  In a unanimous opinion the Court held that a woman who filed a Chapter 7 case could not exempt—or shelter from her creditors—an Individual Retirement Account (IRA) that she had received years earlier as the beneficiary on her mother’s IRA. This opinion by the “highest court in the land” is a great vehicle for understanding property exemptions in…

Supreme Court Decision Excludes Federal Exemption for Inherited IRA’s But Utah’s Exemption Statute May Come to the Rescue

An Individual Retirement Account no longer consists of “retirement funds” once it is transferrd to a beneficiary. So it’s not exempt under Federal Law.    The U.S. Supreme Court usually hands down only a handful of decisions each year directly about bankruptcy. So when it does, we pay attention. It issued one earlier this month in a case called Clark v. Rameker.  The Court ruled that a woman who had filed a Chapter 7 case could not shelter from her creditors an Individual Retirement Account (IRA) that she had inherited, worth $300,000 at the time of the bankruptcy. The

Older Americans Have the Worst “Student Loan Literacy” – in Utah is that a badge of honor?

Americans over 55 years old flunk the “student loan literacy” test. We have a generational divide in one of today’s biggest economic issues.   We said in our last blog post a couple days ago that it was the last one in our series about student loans. But we noticed this issue that demanded attention. The Test That Older Folks Do So Badly On Maybe we’re showing our own bias, but we think in general that older folks—if for no reason than by simply having been around for longer—know things. But they don’t know student loans, nor the means by which…

America in general and Utah in particular has a low “Student Loan Literacy” — what you don’t know can hurt you.

How well do Americans know what collection actions can be taken to collect on student loans? Or whether bankruptcy can write them off?   We finish this series of blog posts on student loans with an admission of ignorance. People making good choices about whether to take out student loans to fund a college education—both the students and their parents—ought to know about both the costs and benefits of those loans.  Utahans in particular, where we value independence, self reliance, and provident living should be more informed. The broader public needs to have a good basic understanding about student loans as…

What Smart Cache Valley Residents Know: Student Loans ARE Hurting the Broader Economy

Student loan borrowers are now buying houses and cars less, and have worse credit, than less educated people without student loans.   In general Americans who have attended college, and especially if they have gotten a degree, earn more than those how have not. So not surprisingly in the past they have bought homes and vehicles more than those who did not have a college education. But what if, because of the rapidly increasing burden of student loans, college-educated Americans stopped buying homes and vehicles at the rate they had in the past, and otherwise avoided or delayed their participation in…

Student Loan Debt Is Growing Astoundingly Fast

Credit card debt is almost the same as it was 10 years ago, vehicle debt is only modestly higher, but student loan debt is 4 TIMES as much.   U.S. Credit Card Cumulative Debt Has Been Relatively Stable Ten years ago—during the 1st quarter of 2004—the nation’s households owed $690 billion in credit card balances. Now—during the 1st quarter of 2014—the amount is $660 billion, just slightly less than an entire decade ago. True, the amount steadily increased during the run-up to the Great Recession, peaking at $870 billion during the last quarter of 2008, before falling consistently as…

Student Loan Delinquencies Are Skyrocketing

The delinquency rate has doubled in just 4 years, in 2012 alone increasing as fast as at the worst of the 2007-2008 mortgage crisis.   Most Consumer Loan Delinquency Rates Are Falling After the beginning of 2010, as the economy improved after the Great Recession, less and less people have had trouble paying their mortgages, home equity loans, vehicle loans, and credit cards. The delinquency rate in each of these categories of consumer credit has gone down steadily during this four-year span. From the 1st quarter of 2010 until the 4th quarter of 2013, the percentage of loans delinquent…

The Most Important Fine Print in This Week’s News on Student Loan Relief

The best way to improve how student loan borrowers are treated is to change the incentives for their loan servicers. That happened this week.   The Headline News President Obama signed a Presidential Memorandum earlier this week greatly expanding the Pay As You Earn (PAYE) student loan repayment program. Under PAYE, eligible borrowers’ monthly payments will be capped at 10% of their adjusted gross income, and any balance of the student loans remaining after 20 years of payments will be forgiven. This week’s Presidential initiative was to extend PAYE to most federal student loans, not just ones entered into after October…

The New Expansion of the “Pay As You Earn” Cap on Student Loan Payments

The essential facts on the President’s action to allow 5 million more student loan borrowers to cap payments at 10% of their monthly income.   On Monday, June 9, 2014, President Obama signed a Presidential Memorandum which directed the Secretary of Education to expand the Pay As You Earn student loan repayment program to many borrowers who have until now not qualified for it. Here is what you need to know about this news. What Present Program Does This Expand On? Pay As You Earn (PAYE) is relatively new. It went into effect December 2012, an improvement on the Income-Based…

20 Extraordinary Tools of Bankruptcy

In so many often surprising ways, bankruptcy can fix your earlier mistakes, undo harms caused by creditors, and clear a better path forward.   The last several blog posts have been about the powerful tools available to you if you file either a Chapter 7 “straight bankruptcy” or a Chapter 13 “adjustment of debts.” It’s worth seeing these tools and more all listed in a row. These are just a sampling of the ways that a bankruptcy filing can turn your financial life around. You won’t use all the available tools, but this list gives you an idea of how deeply…