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Washington Homestead Exemption Law Benefits Homeowners

September 1, 2021 in Bankruptcy

A recent change in the law made filing bankruptcy a possibility for homeowners struggling with debt problems. In the past, Washington residents who had more than $125,000.00 in equity in their homes faced the likelihood of losing their homes if they filed a personal bankruptcy. In May, 2021, the Washington state legislature passed a change in the law that dramatically increases the amount of home equity that is protected, and closed certain other loopholes that put homes at risk.

The new law sets the “homestead exemption,” – the amount of value that a person can keep in bankruptcy– based on the previous year’s data on the median home value in the county where someone lives. Current exemptions include:

Homestead exemption (2021)
King County            $729,600.00
Snohomish County $549,400.00
Pierce County         $424,300.00
Skagit County          $421,800.00

In addition, the new law ensures that a homeowner who files a bankruptcy with a fully exempt homestead does not need to fear losing the property if it increases in value after the bankruptcy is filed.

Asset value is one important piece of the puzzle when determining whether a bankruptcy is the best option to deal with overwhelming debt problems. Income, type of debt, and personal objectives are also important considerations. There’s no doubt that the new homestead law is a game-changer for Washington State homeowners struggling with debt.

Speaking Engagements

May 15, 2020 in Engagements

2021

National Association of Consumer Bankruptcy Attorneys (NACBA)

Topic:  Treatment of Student Loans In Bankruptcy

Northwest Bankruptcy Institute

Topic:  Practical Tools to Benefit Student Loan Debtors in Bankruptcy

2020

King County Bar Association, Bankruptcy Section

Topic: Student Loans: What’s New and What’s Coming 

2019

Eastern District of Washington Annual Bankruptcy Seminar and Retreat

Topic: Student Loans Demystified

Northwest Bankruptcy Institute

Topic: Student Loans and Bankruptcy

American Librarian Association, Financial Literacy Pre-Conference

Topic: Emerging Issues in Student Loans

Student Loan Debt Navigation Event Programs

Seattle and Tacoma presentations
Topic: What Borrowers Need to Know

Student Loan Debt Navigation Special Program

Topic: What Incarcerated Individuals Need to Know about Student Loans

2018

Student Loan Debt Navigation Event Programs

Seattle (multiple locations)
Topic: What Borrowers Need to Know

Washington State Bar Association (WSBA) Young Lawyer Division

Topic: Financial Focus CLE, panelist

2017

Student Loan Debt Navigation Event Program

Seattle
Topic: What Borrowers Need to Know

Washington State Bar Association (WSBA) Creditor-Debtor section

Topic: The Bankruptcy / Student Loan Interface

Washington State Bar Association (WSBA) Young Lawyer Section / Financial Focus

Topic: Overview of Student Loan Repayment for Federal and Private Loans

King County Bar Association Creditor/Debtor Section

Topic: Student Loans in Bankruptcy: an Update

Washington State Bar Association (WSBA) Antitrust, Consumer Protection, and Unfair Business Practices Section

Topic: Hot Topics in Student Loan Debt: Repayment, Litigation & Legislation

2016

King County Bar Association (KCBA)

Topic: Student Loan Discharge Project, Advising and Representing Pro Bono Clients

The CARES Act (COVID-19 Relief) Impact on Student Loans

April 7, 2020 in Student Loans

Welcome to my blog on Student Loan issues!

There is so much going on right now that student loan borrowers really need to know for their own financial health and planning. We’ll jump right in to the protections that Congress just passed as part of the CARES Act for Coronavirus relief.

The CARES Act provides a number of important relief measures, described here:

INTEREST RATE ABATEMENT

Interest is set at 0% for federal Direct Loans for the next few months. This doesn’t give any meaningful relief to people who can’t make their payments, but it’s nice anyway.

This benefit ONLY applies to Direct Loans, and a subset of FFEL loans and Perkins loans. If you don’t know what kind of loans you have, log in at www.studentaid.gov to see a breakdown of your loans.

PAYMENT MORATORIUM (AUTOMATIC DEFERMENT / FORBEARANCE)

Like the interest rate abatement, payments on Direct Loans are going to be automatically suspended through September 2020. Your loans should already be showing a zero payment due if you have qualifying loans. Again, qualifying loans are Direct Loans and the FFEL and Perkins loans that are held by Dept of Ed.

What this means for Direct Loan Borrowers

A few important things to know:

  • You don’t have to ask for the payment abatement to be applied to your account. This is a change from the news coming out last week.
  • If you are on PSLF, the non-payments for the next few months WILL apply toward your 120 month countdown to forgiveness. That’s a huge benefit.
  • It appears that the non-payments for people already in IDR plans will count toward your IDR forgiveness, though it’s likely still pretty far away.
  • IDR recertification deadlines will be pushed out 6 months.

If you are in Default on your federal loans

  • Now would be a good time to resolve your default. You can file a consolidation form, assuming your loans are eligible for consolidation (not previously consolidated), and get the benefits of zero interest or payments once the consolidation goes through, usually after 30 to 90 days.
  • If you are in an active rehab already, your rehab payments will stop being pulled, AND the payments will count toward your rehabilitation program.

What if you have FFEL loans?

FFEL lenders don’t have to give any benefits. I am aware that there are different programs emerging, including a 60 days of “disaster forbearance” on request. Check your servicer’s website to see what is being offered to you.

You might consider consolidating to Direct Loans to get the benefits of zero interest and payment abatement. Note that you will lose any accrued IBR time if you consolidate, however.

If you have FFEL loans and have suffered a decrease in income, you could recertify your IBR now for a lower payment to keep accruing time toward forgiveness while paying less money out. IBR payments can be as low as $0, depending on income and family size.

What about Private loans?

For loans that have no federal involvement, there are no guardrails. That said, if you are facing default, inquire with your servicer regarding COVID-19 forbearance programs. If you can avoid using your general forbearance, that’s preferable.

Questions?

If you have a specific question, don’t hesitate to reach out for more information. If you need help navigating your student loans or your overall debt situation, please contact me to schedule a consultation.

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