By JESSICA SILVER-GREENBERG and CATHERINE RAMPELL The nation’s largest private student lender, Sallie Mae, is cleaving itself into two companies — a move that will create a new home for more than $100 billion of student loans amid broad concerns from federal authorities and consumer advocates that graduates hobbled by debt are increasingly falling behind on their payments.The overhaul by Sallie Mae is playing out as college students, facing persistent unemployment and a sluggish economy, are defaulting on their loan payments at a rate of 13.4 percent, a level not seen for more than a decade, according to the latest statistics from the Department of Education. As student loan debt grows — it has outpaced total credit card debt, reaching more than $1 trillion — more loans are going to the riskiest borrowers, according to a January report by TransUnion Corporation, which provides credit information to lenders.Federal authorities, including the Consumer Financial Protection Bureau, are worried that lenders have rekindled their dangerous infatuation with subprime borrowers, leading some to ignore lending standards and to court borrowers who cannot repay the loans.Earlier this month, Richard Cordray, director of the consumer bureau, compared the student loan market to the market for subprime mortgages that collapsed, leading to a precipitous drop in housing prices, during the financial crisis.“We learned a hard lesson in the wake of the mortgage meltdown,” Mr. Cordray said. “We cannot just sit by and watch this happen to people again.”Sallie Mae, which is formally the SLM Corporation, announced the split on Wednesday. It will create dual companies and hasten the retirement of the lender’s longtime chief executive, Al Lord. One company, the education-loan management business, headed by John F. Remondi, Sallie Mae’s chief operating officer, will contain about 95 percent of the student loan giant’s assets, including $118.1 billion in federal loans and $31.6 billion of private loans. The other, fashioned as a consumer-banking business, will make student loans to fill a seemingly insatiable demand from borrowers, stoked by skyrocketing college costs.At four-year public schools, the average net tuition and fees that in-state undergraduates pay — that is, after taking grant aid, tax benefits and inflation into consideration — climbed to $2,910 in the 2012-13 school year from $1,490 a decade earlier, according to the College Board’s annual survey of colleges. Room and board costs have also risen, to $9,200 from $7,090. Altogether, costs have risen 41 percent. At private, four-year nonprofit schools, average net tuition rose to $13,880 in the latest school year from $13,150 a decade earlier, and room and board increased to $10,460 from $8,660.Alongside the private loans, Sallie Mae will try to bolster its banking business by offering students more traditional products like savings accounts, the company said on Wednesday. The banking company is expected to house about $9.9 billion in assets, made up of private loans, and other assets including its servicing platforms.Until 2010, Sallie Mae occupied a plum position: it was paid by the federal government to act as a kind of middleman, making federal loans to students that were backstopped against losses. The loans, called Federal Family Education Loans, grew drastically during the heady days of the economy, swelling to $630 billion from $149 billion between 2000 and 2009.Then in 2010, the government opted to cut out the private lenders like Sallie Mae and increase its own lending to students, effectively removing Sallie Mae’s federal subsidy. By creating a separate bank, Sallie Mae can finance new streams of loans, analysts said. The banking company will be headed by Joseph A. DePaulo, a Sallie Mae executive.Last month, Sallie Mae reported that its first-quarter earnings had more than tripled. On a conference call with investors on Wednesday, Mr. Remondi outlined the split’s potential benefits, saying, “We see ourselves as having two distinct businesses.”“These entities can better succeed as distinct and separate entities,” he added.Still, Sallie Mae is at the center of a market that is roiled by trouble. More than half of outstanding student loans are in deferment because borrowers cannot afford to pay them back, according to the January report by TransUnion. Student loan balances surged by 75 percent between 2007 and 2012, the report showed.While the housing market is showing signs of a resurgence, with the Standard & Poor’s Case-Shiller home price index on Tuesday posting its largest gains in seven years, student loan debt could dampen the recovery. Authorities from organizations like the Federal Reserve Bank of New York and the Treasury Department have warned that graduates saddled with debt will put off big purchases like houses.Timothy Reeder and his wife, Christine, say they never imagined that after racking up almost $100,000 in student loan debt they would be struggling with low-paying jobs. The couple, who live in St. Louis, fell behind on their loan payments more than a year ago because Mr. Reeder, an Iraq veteran, and his wife, a social worker, could not cobble together enough money for nearly $400 a month in loan payments. Amplifying their distress, Mr. Reeder lost his job as a security guard in January. Struggling with the debt, the couple said they have delayed buying a home.“I just had no idea what this debt would do to me,” Mr. Reeder said.Whittling down student loan debt could become even more difficult. Interest rates on subsidized Stafford loans, which are currently at 3.4 percent, are poised to double to 6.8 percent on July 1 unless Congress passes legislation to stop the increase, said Mark Kantrowitz, who publishes a financial-aid information Web site called FinAid.org.Student loans can dog borrowers for their lifetimes, consumer advocates say. Herman De Jesus, a senior program associate with the Neighborhood Economic Development Advocacy Project, works with several people 65 and older who are still burdened with debt, particularly from for-profit schools.Josephine Soto, 65, was haunted by roughly $8,000 in federal student loan debt after enrolling in a for-profit nursing school in 1982. After she graduated, Ms. Soto, who lives in New York, was unable to find a job that paid enough to cover her loans. Ms. Soto ultimately won a disability discharge of the loan last year but says she still remembers the harassing calls from collectors.“I just felt lost and confused as they were threatening me,” she said.Copyright 2013 The New York Times Company.  All rights reserved.

If you’re interested in learning how to bring in more business and streamline your practice for greater efficiency, there’s no better place to be than in Boston this July. If the living isn’t easy in your practice, spend an intense, no frills weekend with me  and Jay Fleischman working the marketing and management side of a consumer law practice. You need to be there if your firm website just occupies space in the internet you think Penguin is an arctic water bird you like filing  and filing cabinents your staff takes home more than you do you’re competing for clients with petition preparers and cut rate mills your blog is as interesting as a parts manual you have no one to ask about law as business your SEO is DOA your kids are more techno savvy than you are your paid leads lead nowhere All the legal skills in the world are useless if aren’t attracting clients who can benefit.  And no one taught us this stuff in law school. In fact,  if what you know about SEO is more than a couple years old, you’ve likely gotten left behind in internet marketing. So let’s talk about network building, online and off line.  Content creation, traffic growth, staff hiring, and cost effective technology. The classroom is small, so we can take questions and have real discussions. Joining Jay and me will be Gene Melchionne, Rachel Foley and Michelle Kainen.  These are all practicing bankruptcy lawyers with years of experience and a passion for the management side of law, as well as the client side. Read what those attended earlier workshops said about the experience. Early-bird pricing ends June 7th.  Sign up with the promo code lanning and you save an extra $100. If the living is easy in your practice, stay home and BBQ. If it isn’t, join Jay and me in Boston for some down home practice building.

A Chapter 13 bankruptcy can be filed by an individual or a joint case husband and wife.  Chapter 13 cannot be filed by a corporation.  In order to file for Chapter 13, an individual must complete several prefiling requirements.  The most important requirement is the taking of a credit counseling session.  The credit counseling session+ Read MoreThe post Who can file a Chapter 13 bankruptcy? appeared first on David M. Siegel.

Chapter 13 bankruptcy is reorganization through a Chapter 13 trustee.  The reason why many people will file Chapter 13 is to save a home that has gone into foreclosure.  Now, the reason why the home fell into foreclosure could be several; in many cases, someone has lost their job, fallen behind on their bills and+ Read MoreThe post What are the most common causes of Chapter 13 bankruptcy? appeared first on David M. Siegel.

As many readers of our blog probably know, IR As (Individual Retirement Accounts) are exempt under New York State Debtor and Creditor Law and the federal Bankruptcy Code. An exempt asset means that an individual can file for Chapter 7 bankruptcy and keep that asset after the bankruptcy filing. The reason for this exemption is twofold: (1) IR As are deemed "spendthrift trusts" under New York State and federal law; and (2) the purpose of the law is to give debtors a "fresh start" with some assets, and especially to protect retirement monies for debtors. As with many topics in bankruptcy, sometimes there is not necessarily a clear answer to an issue. While the law is clear with respect to IR As (New York State law provides that IR As of any value are exempt assets, with limited exceptions, and the Bankruptcy Code allows exemption of up to $1,245,475 in IR As or Roth IR As), what about inherited IR As? An inherited IRA is an IRA that debtor inherits from a family member, generally a parent, and the distinction from a regular IRA is that the debtor's earnings were not used to fund the IRA, but instead the monies were rolled over from the IRA of a deceased family member, usually after the death of the family member. Several Bankruptcy Trustees around the country have raised the issue of whether inherited IR As should be deemed exempt in bankruptcy. In the Southern District of New York, in In re Cutignola, 450 B.R. 445 (Bankr. S.D.N.Y. 2011), the exempt IRA of a debtor who died post–petition passed to her co–debtor husband through her will. The Bankruptcy Trustee moved for turnover of the IRA to the bankruptcy estate, arguing that the IRA lost its exempt status when it was transferred to the husband. In its analysis, the Court looked at the language of Bankruptcy Code § 522 and concluded that if the funds are: (1) retirement funds; (2) in an account exempt from taxation; (3) and arrived in that account through a direct transfer, the funds remain exempt. Accordingly, the Bankruptcy Trustee's turnover motion was denied. While the issue has not been definitively settled, this author's opinion is that in the Southern and Eastern Districts of New York, inherited IR As are exempt. The question of what assets are exempt in bankruptcy is very complex, depending on the asset, the jurisdiction and the type of bankruptcy relief sought. For more information, please contact Jim Shenwick.

Seen small business clients who clearly have the technical skill set for their field, but can’t make a go of it? There’s a mismatch between their professional skills and the operational knowledge they need to run a business using those skills. It’s the same in law:  you can be an insightful and accomplished lawyer, but if you can’t draw clients and serve them economically, you’re toast. We see it, and now we propose to fix it. Jay Fleischman and I are bringing the Bankruptcy Practice Workshop to Boston in July. Joined by three skilled and articulate friends, we’re presenting two, intense days of marketing and practice management, full of low cost, immediately actionable ideas for attracting clients and running a practice. We’ll cover making your online presence a client magnet expanding networks of people who feed your practice measuring how you’re succeeding creating content that speaks to readers hiring and working with staff going paperless Check out the complete two day agenda. The faculty Each one of our speakers walks the walk. They’re experienced consumer lawyers with skills and ideas to share.  They’re also sort of geeks, with an enthusiasm for technology that is useful and profitable, not just fun. The locale This isn’t a resort setting, and for two days, there won’t be much time for anything but sharpening the tools in your tool box.  We’ve scheduled it for Saturday and Sunday, so you don’t need to miss time in the office if you don’t choose. The room is small, so we can take questions and have discussions.  The room is small, so don’t get left out. Check out the comments from our earlier presentations of this program. The date Dates are July 13-14. Early bird pricing is $997, but use the Bankruptcy Mastery promo code  lanning and take $100 off the price. After June 7, the early bird price is gone and the cost is $1395.  And the room is small. What they didn’t teach you in law school, we will. Image courtesy of Flickr and Tudedude.  

You do not have to hire an attorney to file for bankruptcy; however, I would strongly recommend that you do so.  You do have the ability to fill out forms online or from an office supply company, go down to the clerk’s office and attempt to handle a Chapter 7 or Chapter 13 bankruptcy case+ Read MoreThe post Do I have to hire an attorney to file for bankruptcy? appeared first on David M. Siegel.

Chapter 13 bankruptcy is one form of bankruptcy under the United States Bankruptcy Code whereby someone reorganizes their debt and pays back either all or a portion of the debt over a 3 to 5 year period.  Chapter 13 is most commonly used to save a home that’s in foreclosure.  In a Chapter 13, a+ Read MoreThe post What is Chapter 13 bankruptcy? appeared first on David M. Siegel.

  Before filing your bankruptcy case, it is important to decide if bankruptcy is your best option. Depending on the specifics of your financial problems, we will gather and discuss as many of the facts in your case. We will want to know all aspects of your financial situation and what your desired outcomes are. [...]

Typically student loans are going to be non-dischargeable.  A non-dischargeable debt is a debt that is not going to be eliminated in a bankruptcy case.  Student loans are the type of debt that are typically non-dischargeable except for extreme hardship cases.  In my 21 years of practice, I have never had an extreme hardship case+ Read MoreThe post Can my student loans be discharged in bankruptcy? appeared first on David M. Siegel.