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Jan 2017

Holly Gets Hired after Bankruptcy and Gets a New Credit Card

Posted by / in After Bankruptcy, Weekly Posts /

Holly Gets Hired After Bankruptcy and Gets a New Company Credit Card

Holly was at the end of her rope. She’d been out of work for two years; she kept getting interviews but no offers; and she was feeding partial payments to her creditors, to try to keep them off her back. She believed she was losing job offers because of the late payments on her credit. She was doing everything possible, borrowing from family and friends, to stay close to current.

Finally, she gave up

She came to see me about bankruptcy when she finally got court papers; she assumed she’d never be able to get hired after bankruptcy in the tech field. I told her she would be fine.

After bankruptcy, the opposite of what she expected

We filed Holly’s bankruptcy case September 1; it was discharged—approved and done—December 12. On January 22, she got a job offer. She was offered Chief Technology Officer of the small business. She was excited to get hired after bankruptcy.

But still had a big concern. What would happen when she applied for a corporate Amex Card for business travel. She would be so embarrassed—might even lose her job offer—if Amex turned her down.

Check your credit score, I told her. “It’s 688,” she said, amazed. Of course she got the company card.

Everybody’s case is different.

Everybody’s case is different. Employers look for different things; and your credit score is based on very complicated and secret formulas. But I can say this. For many people, once you’ve started struggling with late payments, bankruptcy can be the quickest (and easiest) way to get your credit score back up.

Many employers are hesitant to hire someone who is struggling financially. They don’t want employees who

Easier to Get Hired After Bankruptcy

When she was dragging around bad credit, Holly got interviews but no offers. She got hired after bankruptcy—in only six weeks.

don’t sleep at night because of bills. They don’t want the sheriff bringing garnishments to the payroll office. (And maybe they don’t want people who are too dumb to take advantage of the laws in their favor.)

That’s why some people find it’s easier to get hired after bankruptcy. 


For most people, bankruptcy works.

Every month I see people who have put off bankruptcy for years in order to “protect their credit.” They aren’t protecting anything. Like Holly, they think they are “protecting their credit” but actually just making things worse.  



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Jan 2017

Short sale tax forgiveness has expired

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Short sale tax forgiveness has expired.

If your house is “under water” you need to read this.

The general rule of tax law is that debt forgiveness is income—if I lend you $1,000 and then say you don’t have to pay me back, you’ve made $1,000. And you’re subject to tax on that.

That matters in a big way when there’s a short sale. You could be taxed for the amount the sale is “short.” That tax was repealed for the duration of the housing crisis.—2007-2016. But that repeal is now expired.

So if you need to unload a property that’s “under water,” from a tax viewpoint bankruptcy is lots better. (There’s no debt forgiveness tax on debts wiped out by law in a bankruptcy.)

If you owe $340,000 on your house and get approved for a short sale at $300,000, you’ll get a $40,000 1099-c at the end of the year. And owe something like $15,000 in taxes.

If you file bankruptcy and give up the house in the bankruptcy, no tax.


Starting in 2017, you can get hit with the debt forgiveness tax on a short sale. You’ll get a 1099-C on the amount the short sale is “short.” And the IRS will expect you to pay taxes on that.

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Jan 2017

Trump, Republicans and Student Loans: Don’t Follow Obama’s HAMP

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Looking Back on HAMP and Forward on Student Loan Relief

Congress should soon take a look at fastest growing category of consumer debt—student loans. During the 2016 Presidential election, Donald Trump added his voice to the Democratic law makers, led by Senator Elizabeth Warren, calling for student loan relief. President Trump was elected on the promise of quick action for hard working Americans. Here’s why student loan relief is a good place for the Republican Congress to start. And why it’s important that Republican student loan relief avoid the mistakes the Obama Administration made with HAMP. 

Student Loan Debt is a Job Killer

Student loan relief is one way President Trump and the Republican Congress can deliver on their promise of faster economic growth.  Forty three million Americans have student loans. One third of those, fourteen million Americans, have student loans greater than $25,000.00.

The Republican case for student loan relief

Fourteen million Americans have more than $25,000 in student loans. That holds down economic growth for all of us.

One cause of the slow recovery from the recession—which was a major factor in Hillary Clinton’s defeat—is student loan debt. This article from Business Insider explains. Student loans are “having a crippling effect on economic activity, says Barbara O’Neill, a specialist in financial resource management for Rutgers University.”

Here’s one example of how that works. A debt free college graduate can expect to save enough money to be a home owner five years after graduation. With $28,950.00 it takes ten years. And 13 years for people with $50,000.00 in student loans. That’s fewer jobs in construction and in manufacturing household appliances and furniture. It puts off the age when young people get married and start a family. And it makes it harder for young families to start college savings for the next generation. 

So What Does Student Loan Relief Have to Do With HAMP?

January 1 2017 marks the end of President Obama’s Home Affordable Modification Program (HAMP). The Obama Administration hoped that HAMP would help three to four million people save their homes. It reached far less than half of that. My own clients, like the people in this news article, reported constant frustration in applying for the program and lost paperwork the banks. However, the banks “will continue to receive billions in incentive payments for helping borrowers who signed up for HAMP for seven years.” 

No wonder commentators have said that HAMP was designed to help the bankers, not the home owners.

HAMP was a Political Disaster

HAMP failed the Obama Administration as badly as it failed the home owners. As early as January 2010, the New York Times warned President Obama that the lack of “serious relief for homeowners” was damaging the Democratic party politically. Voters watched while “the federal government rescued banks, financial firms and auto companies, but they themselves feel adrift, still awaiting the kind of decisive leadership on jobs and housing — in terms of both style and substance — that Mr. Obama promised in 2008.”

The Administration failed to heed the warnings of its media supporters. The political damage caused by HAMP continued the present.

The decision to protect banks over homeowners was debilitating. A tide of cynicism swept out Democrats in the last…elections, with voters more skeptical than ever that government can solve problems, or take the people’s side over the financiers. Two-thirds of voters in exit polls found the economy to be rigged for the wealthy.

“The consequence of these decisions was the disillusionment of his base in believing that political action is going to work,” says Damon Silvers. “They weakened the Obama presidency in ways he could never recover from.”

That prediction that the Obama presidency would never recover from the damage caused by the HAMP Program was written February 2015. It was born out by the collapse of the Obama coalition and the defeat of Hillary Clinton in 2016.

No Bureaucratic Program Please!

Republicans could have predicted that HAMP would fail. In fact, they did, as early as 2011.

“To many struggling Americans seeking permanent mortgage relief, HAMP offered little more than false hope. More homeowners have been kicked out of the program than have received permanent relief,” Rep. Darrell Issa, the California Republican who chairs the House Oversight Committee, said in a statement.

HAMP was a complex government program. As Republicans are quick to point out, complex government programs often don’t work as promised. You can look at this 255 page instruction manual, written by Fannie Mae, and see why: bureaucracy “in action.”

Rather than a new program, there’s a simple change in the law that will work wonders. Less than twenty years ago (before 1998), hard pressed consumers could discharge their student loans in bankruptcy, as long as the student loan had been in payment status for seven years.

Before 1976, student loans were dischargable in bankruptcy the same as any other debt. The special status of student loans is a recent change in the law.  It can easily be corrected.

What’s Wrong With Just Expanding the Obama Public Service Loan Forgiveness

Congress authorized, and the Obama Administration implemented, a program for forgiveness of Federal student loans for people working in “public service” who make 120 monthly payments (10 years worth). Rep. Karen Barr (D-CA-37) introduced a bill, HR 5487, that would remove the “public service”requirement—making student loan relief possible for people working in the private sector.

(The “pubic service” requirement essentially discriminates in favor of government employees, who are probably not underpaid. But expanding a failing program is not the best way to do that.) 

Like the HAMP program, the PSFL is set up by Federal regulations which the private loan servicer is required to follow in dealing with the consumer. Little wonder that only a tiny fraction of those eligible have signed up. (Only 295,000 people, according to one estimate, out of 43 million student loan debtors, one quarter of whom may be eligible for PSLF.  A participation rate of 2%.) 

Like its bigger cousin HAMP, PSFL has become the subject of litigation in court, for unfair rulings on what is and isn’t “public service.”

None of the websites describing this program give credit to George Bush, who signed it into law.  Nor are any of the handful of people who might be finishing the ten year commitment likely to remember him. 

The promise of student loan relief ten years down the road does nothing to provide economic growth now. As long as that student loan debt sits on a consumer’s credit report, it weighs down the consumer’s debt to income ratio, making it harder for that consumer to buy a home, start a family and save for the future.

For those who need it, Bankruptcy Provides Student Loan Relief Now

In 2005, Congress enacted more stringent tests to discourage unnecessary bankruptcy filings. Bankruptcy filings are at a historic low, with only 30 people per 1000 filing bankruptcy annually. Restoring the pre-1998 legal status of student loans in bankruptcy, Congress can provide immediate student loan relief to borrowers who need it—with safeguards already in place to prevent abuse. Economic activity will increase, as more young families are able to buy homes.

This approach implements the commitment of the Trump Administration to change with immediate impact and no bureaucracy. 

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