Bankruptcy Knoxville

When it comes to bankruptcy there are a few things that cannot be discharged. One of them is student loan debt. There are some exceptions but for the most part student loan debt will not be discharged in a bankruptcy proceeding. However, in a case before the Supreme Court right now, a 20-year-old student loan debt sits at the heart of the debate. Back in 1992, Francisco Espinosa filed for Chapter 13 bankruptcy and asked to be relieved of the $5,000 accrued interest on his student loan debt. After reaching an agreement with the lender, Espinosa paid off the principal over 5 years. The company, however, then tried to collect on the interest owed and the battle has landed them both in the Supreme Court.

The implications are huge. Scholarships dot com summarizes it as follows:

An article in the Chronicle of Higher Education previewing the case this week looked at the implications of the court’s eventual ruling. If the Supreme Court overturns the last appeals court’s decision, lenders could feel free to collect back interest on student loans that have already been approved for Chapter 13. If the Supreme Court rules in favor of Espinosa, lenders could be open to abuse by borrowers taking advantage of the law to get out of their student loan repayments. The article suggests that the Court should consider redefining the “undue hardship” criteria to make it easier for judges to apply that criteria across the board, as many say it is already too subjective.

The case is an important one for students, especially in a difficult economic time when college students are not only borrowing more, but having a tougher time finding jobs to make payments on their student loan debt. Student loan default rates are also on the rise for both federal and private loans as tuitions only continue to rise. If you’re worried about the amount of debt you’ll accrue going to that dream school, consider all of your options. Factor college cost into your college search, and make sure you have a good idea of financial aid and scholarship money available to you before taking out student loans.

Having trouble with your debts? Looking for Knoxville bankruptcy help? You’re in the right place? Call us today for a free consultation with an experienced Knoxville bankruptcy attorney.

A Minnesota law firm is arguing against a provision in a 2005 bankruptcy law that can put lawyers in conflict with ethics rules and result in misleading disclosures in advertising. The case hinges on a provision that bars debt relief agencies from encouraging a person to “incur more debt” with the understanding of filing for bankruptcy soon thereafter. The question arises, then, of whether attorneys are debt relief agencies. Until now the law has required such a disclosure be made by bankruptcy attorneys. But the Milavetz law firm is challenging that designation on the grounds of it misleading their clients. Law dot com has more:

“This provision requires truncated advice,” he said, adding that the practical effect is to make it impossible for lawyers to comply with their ethical obligation to truthfully advise a client.

The provision also has a chilling effect on lawyers, Brunstad said, noting that penalties for violating the provision are serious and have driven “conscientious bankruptcy lawyers” from this practice area.

Assistant to the Solicitor General William Jay countered that the restriction on advice is limited to advice intended to abuse the bankruptcy system. But he quickly ran into a fast series of questions and hypotheticals from a skeptical Chief Justice John Roberts Jr.

“Under your construction, it seems a lawyer trying to give correct, ethical advice has to pause before every sentence,” Roberts said. “This is a regulation of the attorney-client relationship to pursue an unrelated objective.”

Jay insisted the objective was not unrelated. “The statute protects the client from unethical advice,” he said. “The attorney is the sophisticated player here.”

Brunstad told the justices that they could avoid the constitutional issues raised by the advice prohibition and a requirement that attorneys giving bankruptcy advice disclose in advertisements that they are a “debt relief agency” if the justices find that lawyers are not covered by the debt relief agency provisions.

It’s an interesting case that could have far-reaching affects on this industry.

Do you need bankruptcy help? Come speak to an experienced Knoxville bankruptcy lawyer today about your case. We offer free consultations so call us now to schedule yours.