Gotham Gazette.com/city/8621-council-to-examine-city-s-role-in-taxi-medallion-crisis
Monday, June 24, 2019
Sunday, June 23, 2019
James Shenwick presented a Continuing Legal Education (CLE) class at World Wide Land Transfer on May 7, 2019-his outline for the presentation is below
“PERSONAL BANKRUPTCY IN 2019”
OUTLINE FOR PRESENTATION AT WORLD WIDE LAND TRANSFER
122 EAST 42ND STREET, SUITE 620
NEW YORK, NY 10168
PHONE: (212) 541-6224
FAX: (646) 218-4600
E-MAIL: JSHENWICK@GMAIL.COM
The goal of this presentation is to discuss issues and the law regarding filing for personal
bankruptcy in NYS in 2019.
1. The process begins with the client preparing three pieces of information:
1. A list of assets or property that they own,
2. A list of liabilities or who they owe money to and
3. An after-tax monthly budget.
-With this information and a 45 minute to one-hour consultation with the client, a determination can be made if the client should file for bankruptcy or not, what remedies are available to the client outside of bankruptcy under NYS law and what type of bankruptcy would most help the client.
-What is the goal of personal bankruptcy? To allow the client to keep as much property as possible and to discharge (legally wipe out) as much debt as possible or obtain “the fresh start” for the client.
2. Types of Personal Bankruptcy. There are three (3) types of personal bankruptcy:
chapter 11, chapter 13 and chapter 7
-Chapter 11 is most commonly used to reorganize businesses but is sometimes used by high net worth individuals who have too much debt to qualify for chapter 13. It is a very expensive process.
-Chapter 7 is known as a liquidation and “fresh start.” If you only have credit card debt and exempt assets, you would file a chapter 7 bankruptcy. You can only file for chapter 7 bankruptcy once every eight years.
--Approximately 90 to 95% of our clients file chapter 7 bankruptcy.
-Chapter 13 is known as a “wage earner reorganization”–it is a blend of chapter 7 and chapter 11. If you had a house or a car that you wanted to keep, then you would file a chapter 13 bankruptcy. If your debts were discharged in a prior Chapter 13 case, you cannot receive a discharge in a subsequent Chapter 13 unless it is filed at least two years after the date the first case was filed.
3. Median Income and Means Test. Effective May 1, 2019, if a single person in New York State has income in excess of $55,333, then they fail the Median Income Test and they must take the “Means Test” to determine whether they qualify to file for chapter 7 bankruptcy (liquidation of debts). For a family of two, the income threshold for the Median Income Test is $71,343, for a family of three it is $83,887 and for a family of four it is $102,384. Add $9,000 for each individual in excess of four.
-To perform the Median Income Test, you need to determine your gross monthly income for the last six months, subtract Social Security and Victims of Terror payments, divide this figure by six and multiply the result by 12. This figure is your annualized current monthly income (CMI). Compare your annualized CMI to the applicable Median Family Income as provided above. If you fail the Median Income Test provided above, then you must take the “Means Test.”
-The “Means Test” is an extremely complex test consisting of six pages of calculations! In its simplest form, you take your gross monthly income and subtract certain expenses based on the IRS National Standards, Local Standards and other actual expenses to calculate your monthly disposable income.
-This is one of the most complex calculations under the law; it is very difficult to do without a computer program and it is a six to eight-page calculation!
-If the majority of a Debtor’s debts are “business debts,” then they do not need to take the Means test, even if their income exceeds the Median Income for their state and family size.
4. Chapter 13. There are several requirements to file a chapter 13 bankruptcy-(a) $419,275 or less of unsecured debt; and (ii) $1,257,850 or less of secured debt; (iii) you most devote all of your disposable income (income after taxes and other living expenses) to the plan; (iv) the plan may range from three (3) to five (5) years; (v) your creditors must get $1 more that they would get in a chapter 7 filing (liquidation analysis and best interest of creditors test); and (vi) as a general rule, if you have a lot of equity in your property and not a lot of disposable income. then it is not possible to confirm a chapter 13 plan.
-The Debtor’s attorney must do a liquidation analysis and determine how much the Debtor must pay each month to fund the plan
-The Chapter 13 Bankruptcy Trustee receives a 10% commission on each plan payment.
5. Exemptions-Debtor may choose NYS or Federal Exemptions. Exemptions are calculated at the time a Debtor files a Bankruptcy Petition with the Bankruptcy Court.
-NYS law determines what property is exempt from creditors and what property is not exempt. Non–exempt property can be reached by your creditors and exempt property can be kept after the discharge.
-Common exemptions include up to $1,150 for jewelry, a watch and art;
-$1,150 in personal property, bank account or cash (if no homestead exemption is taken); $3,400 for tools of trade, necessary working tools and implements necessary for profession or calling; and
-$170,825 of equity for a homestead (or $341,650 in equity for joint debtors).
However, debtors can also choose to use a federal exemption scheme instead of the NYS exemption scheme. We sometimes advise debtors to use the federal exemption scheme when they do not own real estate and have other assets that they need to protect, since the federal “wildcard” exemption can exempt up to $1,325 plus up to $12,575 of any unused federal homestead exemption, for a total of $13,900.
6. Automatic Stay. When a bankruptcy petition is filed, the automatic stay pursuant to § 362 of the Bankruptcy Code comes into effect-and no creditors can sue you, garnish your wages or restrain your checking or savings account.
7. Bankruptcy Trustee. When a bankruptcy petition is filed, a trustee is appointed to administer the estate, and his or her job is to liquidate the non–exempt assets; most chapter 7 cases are no asset cases. There are chapter 7 and chapter 13 Trustees. In a chapter 13 case, the trustee will review the plan and related documents and make a recommendation as to whether the plan should be confirmed. If the plan is confirmed, he or she collects the debtor’s payments into the plan and distributes them to creditors.
8. Benefits of Bankruptcy. (A) Discharge-the goal of a chapter 7 filing is to get a discharge, which means that all the dischargeable debts listed in the bankruptcy petition are wiped out-it is important to list all creditors on the petition with the correct addresses; and (B) It may improve a person’s creditworthiness. Certain debts such as recent taxes, student loans, fraud and drunk driving awards are non-dischargeable. See section 727 and 523 of the Bankruptcy Code.
9. Property of the Estate-(1) tax refunds, (2) causes of action where Debtor is the plaintiff (such as a personal injury lawsuit); and (3) inheritances within 180 days of the filing are subject to the reach of your creditors.
-Under the NYS exemption scheme, a personal injury payment up to $8,550 for bodily injury, not including pain and suffering or compensation for actual pecuniary loss, is exempt from the Debtor’s bankruptcy estate.
10. Taxes-as a general rule “old” “income taxes” can be discharged. Trust fund taxes such as sales taxes and the employee’s portion of employment taxes (FICA/FUTA) are non-dischargeable.
The following conditions all need to be met for taxes to be dischargeable in bankruptcy:
(a) The tax year in question is more than three years prior to filing the bankruptcy (counted from last date the return is due for that year, including extensions);
(b) The tax in question has been assessed more than 240 days prior to the filing the bankruptcy;
(c) The tax return for the year in question was filed at least more than two years prior to the bankruptcy filing (substitute returns don’t count);
(d) The tax return was non-fraudulent and there is no showing of willful evasion of payment of a lawful tax; and
(e) The claim is unsecured: if secured, the tax is discharged as to the debtor personally (in personam liability) but the lien is still valid as to any property it has attached to (in rem liability).
-To discharge taxes client will need to obtain a tax transcript from IRS, which lists the nature of taxes owed and year for which taxes are due
11. Student Loans-In the 2nd Circuit and many other circuit courts of appeal, courts follow the Brunner “undue hardship” test (based on Brunner v. New York State Higher Education Services Corp., 831 F.2d 395 (2nd Cir. 1987)), which requires a three part finding for a student loan to be dischargeable in bankruptcy: (1) that the debtor cannot maintain, based on current income and expenses, a “minimal” standard of living for herself and her dependents if forced to repay the loans; (2) that additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period of the student loans; and (3) that the debtor has made good faith efforts to repay the loans.
-Recently many judges, law professors and bankruptcy practitioners have started advocating for a more liberal test to discharge student loans other than the Brunner test.
12. Exception to discharge under § 523(a)(2)(C)–purchase of more than $725 in luxury goods or services in 90 days prior to filing or cash advances aggregating more than $1,000 in the 70 days prior to filing.
13. Other exceptions to discharge under § 523-intentional torts, fraud, defalcation and alimony, maintenance and support for a spouse or child in connection with a separation agreement or divorce decree.
14. Negatives of a chapter 7 Bankruptcy Filing-chapter 7 can only be filed once every eight years and a filing will stay on a credit report for 10 years.
15. Reaffirmation Agreement-if you want to retain an asset and money is owed to a creditor with respect to that property, you can file a form with the Bankruptcy Court and reaffirm the debt-which means that you agree to repay the debt as if you had not filed for bankruptcy. The Bankruptcy Judge will review the Reaffirmation Agreement to determine if the Debtor needs to retain or keep that asset (is there a business reason for the reaffirmation?). Example reaffirming a car lease or a car loan for a car that the Debtor needs for business reasons.
-You can keep a credit card with a zero balance.
16. Credit Rehabilitation-Earn as much as you can, save as much as you can, get a securitized credit card, charge on it, pay it down and then get the credit limit increased.
17. Adversary Proceeding-an action in your bankruptcy case by your creditors objecting to your discharge with respect to a debt-potential grounds include fraud, false financial statements or constructive fraud-when was last time the debtor took a cash advance or purchased luxury goods or services?
18. Fraudulent Conveyances and Preferences.
-A fraudulent conveyance is where you transfer property to a third party without fair consideration, and the statute of limitations under NYS law is six years.
-A preference is where one creditor is preferred over another similar creditor, and the key time periods are 90 days (for general creditors) and one year (for creditors that are “insiders” of the debtor-individuals or entities with close relationships to the debtor).
19. Fees and Getting Started-The filing fee for a chapter 7 bankruptcy is $335 and the filing fee for a chapter 13 bankruptcy is $310.
20. The Process:
-When a potential client contacts us, we schedule an hour-long meeting and ask for the following documents to be brought to the meeting: (1) a list of assets; (2) a list of liabilities; and (3) an after–tax monthly budget.
-At the meeting, we review the documents and discuss their finances, debtor and creditor law and pre–bankruptcy planning. Our goal in a chapter 7 filing is to discharge as much debt as possible (giving the client a “fresh start”) and exempting as many assets as possible from the bankruptcy estate that’s created when their petition is filed.
-When the client retains us, we send him or her a link to enter the financial data we need to prepare the bankruptcy petition and information about the mandatory credit counseling course.
-We draft the petition, review and review it with the client, and finally electronically file the petition and pay the filing fee.
-Shortly after the petition is filed, we receive notice of the § 341 meeting of creditors
-We attend the meeting with the client (who must bring an original Social Security card and a current photo ID) to the 341 meeting.
-Before the meeting, we prepare the client on how to dress and questions that he or she can expect from the chapter 7 bankruptcy trustee.
-Creditors may also attend the meeting and have 60 days from the date of the meeting to object to a discharge of their claim in bankruptcy or the debtor’s discharge. Our goal is to have the chapter 7 trustee close the case at the end of the meeting, which happens in about 90% of our cases. Within 60 days after the meeting, the debtor needs to take a post–bankruptcy debtor education course.
The process usually takes about two to six months from start to finish.
Other Bankruptcy Filing Requirements:
1. Have you filed for bankruptcy in the past? As stated above, a chapter 7 debtor can only file another chapter 7 case eight years after a prior chapter 7 case was filed and if your debts were discharged in a prior Chapter 13 case, you cannot receive a discharge in a subsequent Chapter 13 unless it is filed at least two years after the date the first case was filed. However, the issue of multiple filings is complex depending on chapters filed and sequencing, so each situation needs to be reviewed individually.
2. Have you resided in the district for the last 730 days?
Documents Needed:
i. Valid NYS Driver’s License or Photo ID with current address
ii. Original Social Security Card
iii. Tax Return (last year federal, but bankruptcy trustee may request additional returns)
iv. Real Estate-if you own real estate, you need a recent appraisal for the real estate and mortgage statement showing the mortgage balance.
v. Last 60 days of pay stubs or payment advices
JHS
OUTLINE FOR PRESENTATION AT WORLD WIDE LAND TRANSFER
122 EAST 42ND STREET, SUITE 620
NEW YORK, NY 10168
PHONE: (212) 541-6224
FAX: (646) 218-4600
E-MAIL: JSHENWICK@GMAIL.COM
The goal of this presentation is to discuss issues and the law regarding filing for personal
bankruptcy in NYS in 2019.
1. The process begins with the client preparing three pieces of information:
1. A list of assets or property that they own,
2. A list of liabilities or who they owe money to and
3. An after-tax monthly budget.
-With this information and a 45 minute to one-hour consultation with the client, a determination can be made if the client should file for bankruptcy or not, what remedies are available to the client outside of bankruptcy under NYS law and what type of bankruptcy would most help the client.
-What is the goal of personal bankruptcy? To allow the client to keep as much property as possible and to discharge (legally wipe out) as much debt as possible or obtain “the fresh start” for the client.
2. Types of Personal Bankruptcy. There are three (3) types of personal bankruptcy:
chapter 11, chapter 13 and chapter 7
-Chapter 11 is most commonly used to reorganize businesses but is sometimes used by high net worth individuals who have too much debt to qualify for chapter 13. It is a very expensive process.
-Chapter 7 is known as a liquidation and “fresh start.” If you only have credit card debt and exempt assets, you would file a chapter 7 bankruptcy. You can only file for chapter 7 bankruptcy once every eight years.
--Approximately 90 to 95% of our clients file chapter 7 bankruptcy.
-Chapter 13 is known as a “wage earner reorganization”–it is a blend of chapter 7 and chapter 11. If you had a house or a car that you wanted to keep, then you would file a chapter 13 bankruptcy. If your debts were discharged in a prior Chapter 13 case, you cannot receive a discharge in a subsequent Chapter 13 unless it is filed at least two years after the date the first case was filed.
3. Median Income and Means Test. Effective May 1, 2019, if a single person in New York State has income in excess of $55,333, then they fail the Median Income Test and they must take the “Means Test” to determine whether they qualify to file for chapter 7 bankruptcy (liquidation of debts). For a family of two, the income threshold for the Median Income Test is $71,343, for a family of three it is $83,887 and for a family of four it is $102,384. Add $9,000 for each individual in excess of four.
-To perform the Median Income Test, you need to determine your gross monthly income for the last six months, subtract Social Security and Victims of Terror payments, divide this figure by six and multiply the result by 12. This figure is your annualized current monthly income (CMI). Compare your annualized CMI to the applicable Median Family Income as provided above. If you fail the Median Income Test provided above, then you must take the “Means Test.”
-The “Means Test” is an extremely complex test consisting of six pages of calculations! In its simplest form, you take your gross monthly income and subtract certain expenses based on the IRS National Standards, Local Standards and other actual expenses to calculate your monthly disposable income.
-This is one of the most complex calculations under the law; it is very difficult to do without a computer program and it is a six to eight-page calculation!
-If the majority of a Debtor’s debts are “business debts,” then they do not need to take the Means test, even if their income exceeds the Median Income for their state and family size.
4. Chapter 13. There are several requirements to file a chapter 13 bankruptcy-(a) $419,275 or less of unsecured debt; and (ii) $1,257,850 or less of secured debt; (iii) you most devote all of your disposable income (income after taxes and other living expenses) to the plan; (iv) the plan may range from three (3) to five (5) years; (v) your creditors must get $1 more that they would get in a chapter 7 filing (liquidation analysis and best interest of creditors test); and (vi) as a general rule, if you have a lot of equity in your property and not a lot of disposable income. then it is not possible to confirm a chapter 13 plan.
-The Debtor’s attorney must do a liquidation analysis and determine how much the Debtor must pay each month to fund the plan
-The Chapter 13 Bankruptcy Trustee receives a 10% commission on each plan payment.
5. Exemptions-Debtor may choose NYS or Federal Exemptions. Exemptions are calculated at the time a Debtor files a Bankruptcy Petition with the Bankruptcy Court.
-NYS law determines what property is exempt from creditors and what property is not exempt. Non–exempt property can be reached by your creditors and exempt property can be kept after the discharge.
-Common exemptions include up to $1,150 for jewelry, a watch and art;
-$1,150 in personal property, bank account or cash (if no homestead exemption is taken); $3,400 for tools of trade, necessary working tools and implements necessary for profession or calling; and
-$170,825 of equity for a homestead (or $341,650 in equity for joint debtors).
However, debtors can also choose to use a federal exemption scheme instead of the NYS exemption scheme. We sometimes advise debtors to use the federal exemption scheme when they do not own real estate and have other assets that they need to protect, since the federal “wildcard” exemption can exempt up to $1,325 plus up to $12,575 of any unused federal homestead exemption, for a total of $13,900.
6. Automatic Stay. When a bankruptcy petition is filed, the automatic stay pursuant to § 362 of the Bankruptcy Code comes into effect-and no creditors can sue you, garnish your wages or restrain your checking or savings account.
7. Bankruptcy Trustee. When a bankruptcy petition is filed, a trustee is appointed to administer the estate, and his or her job is to liquidate the non–exempt assets; most chapter 7 cases are no asset cases. There are chapter 7 and chapter 13 Trustees. In a chapter 13 case, the trustee will review the plan and related documents and make a recommendation as to whether the plan should be confirmed. If the plan is confirmed, he or she collects the debtor’s payments into the plan and distributes them to creditors.
8. Benefits of Bankruptcy. (A) Discharge-the goal of a chapter 7 filing is to get a discharge, which means that all the dischargeable debts listed in the bankruptcy petition are wiped out-it is important to list all creditors on the petition with the correct addresses; and (B) It may improve a person’s creditworthiness. Certain debts such as recent taxes, student loans, fraud and drunk driving awards are non-dischargeable. See section 727 and 523 of the Bankruptcy Code.
9. Property of the Estate-(1) tax refunds, (2) causes of action where Debtor is the plaintiff (such as a personal injury lawsuit); and (3) inheritances within 180 days of the filing are subject to the reach of your creditors.
-Under the NYS exemption scheme, a personal injury payment up to $8,550 for bodily injury, not including pain and suffering or compensation for actual pecuniary loss, is exempt from the Debtor’s bankruptcy estate.
10. Taxes-as a general rule “old” “income taxes” can be discharged. Trust fund taxes such as sales taxes and the employee’s portion of employment taxes (FICA/FUTA) are non-dischargeable.
The following conditions all need to be met for taxes to be dischargeable in bankruptcy:
(a) The tax year in question is more than three years prior to filing the bankruptcy (counted from last date the return is due for that year, including extensions);
(b) The tax in question has been assessed more than 240 days prior to the filing the bankruptcy;
(c) The tax return for the year in question was filed at least more than two years prior to the bankruptcy filing (substitute returns don’t count);
(d) The tax return was non-fraudulent and there is no showing of willful evasion of payment of a lawful tax; and
(e) The claim is unsecured: if secured, the tax is discharged as to the debtor personally (in personam liability) but the lien is still valid as to any property it has attached to (in rem liability).
-To discharge taxes client will need to obtain a tax transcript from IRS, which lists the nature of taxes owed and year for which taxes are due
11. Student Loans-In the 2nd Circuit and many other circuit courts of appeal, courts follow the Brunner “undue hardship” test (based on Brunner v. New York State Higher Education Services Corp., 831 F.2d 395 (2nd Cir. 1987)), which requires a three part finding for a student loan to be dischargeable in bankruptcy: (1) that the debtor cannot maintain, based on current income and expenses, a “minimal” standard of living for herself and her dependents if forced to repay the loans; (2) that additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period of the student loans; and (3) that the debtor has made good faith efforts to repay the loans.
-Recently many judges, law professors and bankruptcy practitioners have started advocating for a more liberal test to discharge student loans other than the Brunner test.
12. Exception to discharge under § 523(a)(2)(C)–purchase of more than $725 in luxury goods or services in 90 days prior to filing or cash advances aggregating more than $1,000 in the 70 days prior to filing.
13. Other exceptions to discharge under § 523-intentional torts, fraud, defalcation and alimony, maintenance and support for a spouse or child in connection with a separation agreement or divorce decree.
14. Negatives of a chapter 7 Bankruptcy Filing-chapter 7 can only be filed once every eight years and a filing will stay on a credit report for 10 years.
15. Reaffirmation Agreement-if you want to retain an asset and money is owed to a creditor with respect to that property, you can file a form with the Bankruptcy Court and reaffirm the debt-which means that you agree to repay the debt as if you had not filed for bankruptcy. The Bankruptcy Judge will review the Reaffirmation Agreement to determine if the Debtor needs to retain or keep that asset (is there a business reason for the reaffirmation?). Example reaffirming a car lease or a car loan for a car that the Debtor needs for business reasons.
-You can keep a credit card with a zero balance.
16. Credit Rehabilitation-Earn as much as you can, save as much as you can, get a securitized credit card, charge on it, pay it down and then get the credit limit increased.
17. Adversary Proceeding-an action in your bankruptcy case by your creditors objecting to your discharge with respect to a debt-potential grounds include fraud, false financial statements or constructive fraud-when was last time the debtor took a cash advance or purchased luxury goods or services?
18. Fraudulent Conveyances and Preferences.
-A fraudulent conveyance is where you transfer property to a third party without fair consideration, and the statute of limitations under NYS law is six years.
-A preference is where one creditor is preferred over another similar creditor, and the key time periods are 90 days (for general creditors) and one year (for creditors that are “insiders” of the debtor-individuals or entities with close relationships to the debtor).
19. Fees and Getting Started-The filing fee for a chapter 7 bankruptcy is $335 and the filing fee for a chapter 13 bankruptcy is $310.
20. The Process:
-When a potential client contacts us, we schedule an hour-long meeting and ask for the following documents to be brought to the meeting: (1) a list of assets; (2) a list of liabilities; and (3) an after–tax monthly budget.
-At the meeting, we review the documents and discuss their finances, debtor and creditor law and pre–bankruptcy planning. Our goal in a chapter 7 filing is to discharge as much debt as possible (giving the client a “fresh start”) and exempting as many assets as possible from the bankruptcy estate that’s created when their petition is filed.
-When the client retains us, we send him or her a link to enter the financial data we need to prepare the bankruptcy petition and information about the mandatory credit counseling course.
-We draft the petition, review and review it with the client, and finally electronically file the petition and pay the filing fee.
-Shortly after the petition is filed, we receive notice of the § 341 meeting of creditors
-We attend the meeting with the client (who must bring an original Social Security card and a current photo ID) to the 341 meeting.
-Before the meeting, we prepare the client on how to dress and questions that he or she can expect from the chapter 7 bankruptcy trustee.
-Creditors may also attend the meeting and have 60 days from the date of the meeting to object to a discharge of their claim in bankruptcy or the debtor’s discharge. Our goal is to have the chapter 7 trustee close the case at the end of the meeting, which happens in about 90% of our cases. Within 60 days after the meeting, the debtor needs to take a post–bankruptcy debtor education course.
The process usually takes about two to six months from start to finish.
Other Bankruptcy Filing Requirements:
1. Have you filed for bankruptcy in the past? As stated above, a chapter 7 debtor can only file another chapter 7 case eight years after a prior chapter 7 case was filed and if your debts were discharged in a prior Chapter 13 case, you cannot receive a discharge in a subsequent Chapter 13 unless it is filed at least two years after the date the first case was filed. However, the issue of multiple filings is complex depending on chapters filed and sequencing, so each situation needs to be reviewed individually.
2. Have you resided in the district for the last 730 days?
Documents Needed:
i. Valid NYS Driver’s License or Photo ID with current address
ii. Original Social Security Card
iii. Tax Return (last year federal, but bankruptcy trustee may request additional returns)
iv. Real Estate-if you own real estate, you need a recent appraisal for the real estate and mortgage statement showing the mortgage balance.
v. Last 60 days of pay stubs or payment advices
JHS
Thursday, June 20, 2019
Student Loans and Bankruptcy Filings
According to a recent Business Insider article many bankruptcies are being driven by student loan debt. See the link below. Jim Shenwick
https://www.businessinsider.com/people-filing-for-personal-bankruptcy-carry-student-loan-debt-2019-6
https://www.businessinsider.com/people-filing-for-personal-bankruptcy-carry-student-loan-debt-2019-6
City council proposes overhaul of taxi medallion industry
To view an interesting article about proposed City council actions to overhaul the taxi medallion industry please see NY Post article below. Jim Shenwick
New York Post Article on City Council Proposed Overhaul of Taxi Medallion Industry
New York Post Article on City Council Proposed Overhaul of Taxi Medallion Industry
Student Loans in Bankruptcy: What’s on the Horizon?
An excellent article on student loans and bankruptcy. Please review below. Jim Shenwick
Student Loans in Bankruptcy: What’s on the Horizon?
Student Loans in Bankruptcy: What’s on the Horizon?
Taxi Drivers to get 10 Million Dollar Break-TOO LITTLE TOO LATE
Taxi Drivers to get 10 Million Dollar Break and Loan Safeguards, reported by New York Times on June 12, 2019-IS THIS RELIEF TOO LITTLE TOO LATE!
------------------
The New York Times reported on June 12th 2019, that's facing ruin, taxi drivers to get 10 million dollar break and lone safeguards.
While 10 million dollars sounds like a lot of money, in this author's opinion, that 10 million dollar break and loan safeguard will have little impact or benefit to the average Taxi Medallion owner, who owns an “under water” taxi medallion.
The article further stated that Mayor Bill de Blasio announced a separate set of initiatives: The city is eliminating as much as $10 million in fees to taxi medallion owners, and drivers will be able to obtain financial counseling from a new “driver assistance center.”
The mayor said that he would extend the city moratorium on
approving additional vehicles from ride-hailing services such as Uber and Lyft for another year.
The fee waiver would aid all owners of the city’s 13,500 taxi
medallions, including large fleets, which operate about half of cabs. It would exempt them from paying $1,100 renewal fees due this year or next.
While any waiver of fees would be appreciated by the beleaguered taxi medallion owners, it is this authors opinion that the waiver of $1,100 renewal fees for this year and next year is a drop in the bucket compared to the financial problems facing under water taxi medallion owners.
It is this author's experience, that the average taxi medallion owner
owes approximately $500,00 to $600,000 in loans, on a medallion
that is now worth approximately $165,000, based on the latest TLC data, so the savings of $1,100 in renewal fees will have little to no financial impact on the troubled taxi medallion owner.
Additionally, the ability to obtain financial counseling from a new
driver Assistance Center, while admirable is too little and too late for most taxi medallion owners, who owned under water taxi medallions.
Moreover, extending the city moratorium on proving additional
vehicles for ride-hailing services has not helped increase the value of existing taxi medallions. Taxi medallions are either continuing to fall or have stabilized at an extremely low price, so the city moratorium has had and will have little impact in increasing taxi medallion values and will provide little relief to taxi medallion owners.
These benefits, while providing good PR for the Mayor and good
sound bites will have little impact on under water taxi medallion
owners-too little, too late! Jim Shenwick
------------------
The New York Times reported on June 12th 2019, that's facing ruin, taxi drivers to get 10 million dollar break and lone safeguards.
While 10 million dollars sounds like a lot of money, in this author's opinion, that 10 million dollar break and loan safeguard will have little impact or benefit to the average Taxi Medallion owner, who owns an “under water” taxi medallion.
The article further stated that Mayor Bill de Blasio announced a separate set of initiatives: The city is eliminating as much as $10 million in fees to taxi medallion owners, and drivers will be able to obtain financial counseling from a new “driver assistance center.”
The mayor said that he would extend the city moratorium on
approving additional vehicles from ride-hailing services such as Uber and Lyft for another year.
The fee waiver would aid all owners of the city’s 13,500 taxi
medallions, including large fleets, which operate about half of cabs. It would exempt them from paying $1,100 renewal fees due this year or next.
While any waiver of fees would be appreciated by the beleaguered taxi medallion owners, it is this authors opinion that the waiver of $1,100 renewal fees for this year and next year is a drop in the bucket compared to the financial problems facing under water taxi medallion owners.
It is this author's experience, that the average taxi medallion owner
owes approximately $500,00 to $600,000 in loans, on a medallion
that is now worth approximately $165,000, based on the latest TLC data, so the savings of $1,100 in renewal fees will have little to no financial impact on the troubled taxi medallion owner.
Additionally, the ability to obtain financial counseling from a new
driver Assistance Center, while admirable is too little and too late for most taxi medallion owners, who owned under water taxi medallions.
Moreover, extending the city moratorium on proving additional
vehicles for ride-hailing services has not helped increase the value of existing taxi medallions. Taxi medallions are either continuing to fall or have stabilized at an extremely low price, so the city moratorium has had and will have little impact in increasing taxi medallion values and will provide little relief to taxi medallion owners.
These benefits, while providing good PR for the Mayor and good
sound bites will have little impact on under water taxi medallion
owners-too little, too late! Jim Shenwick
Tuesday, June 04, 2019
Crain's New York Business: The real killers of taxi medallions
By Sergio Cabrera and Carolyn Protz
The real scandal, however, is not just that regulators turned a blind eye to predatory lending, but how the Taxi and Limousine Commission, as well as elected officials, played a pivotal role in taxis’
demise. And it was no accident.
In 2010, the TLC had in hand an internal report predicting the collapse of the lending market because loans were unsustainable. But the agency—even though it knew how fragile the situation was—ignored its own rules, flooded the streets with additional vehicles and streamlined the processing of new drivers, cars and bases competing with taxis.
Lest we forget, the TLC—according to former Chairman Chris Lynn—has the final say over all medallion transactions, and Joshi was its general counsel when the 2014 minimum auction bid of
$850,000 for a medallion was established.
Some examples stand out. In April, 2017, the TLC held a hearing on industry economics that went on for six hours with medallion owners telling TLC commissioners how horrific their lives had become.
Yet all that came out of it was an option for tipping of app drivers.
The following year, amid owner and driver suicides, the willfully blind TLC commissioned a study of driver income. Yet the academics tasked with the study were explicitly told to exclude the yellow-cab industry and to not consider a cap on for-hire vehicles. The study led the city to establish a minimum wage for drivers of for-hire vehicles.
Perhaps the most egregious display of favoritism was how the mayor and the City Council mishandled Uber and Lyft’s resistance to meeting the wheelchair-accessibility requirements mandated for taxis. When push came to shove, the city caved and allowed a company-sponsored plan with no accessible-vehicle mandate.
The tragic bankruptcies and foreclosures being highlighted today were unknown prior to the influx of Ubers. The Ubers’ catalytic role, and the subsequent shameful enabling of the city, is unmistakable.
In 1971 taxis were making 500,000 daily trips. Today they are doing 250,000 while the invaders are doing 769,000. Uber itself has lost billions of dollars undercutting competitors through predatory pricing to capture market share. This cannot be airbrushed out of the picture.
The public sector needs to be held to account for its part in the threatened demise of taxis and the wanton harm done to thousands of defrauded immigrants who came to this country in search of a better life.
The real scandal, however, is not just that regulators turned a blind eye to predatory lending, but how the Taxi and Limousine Commission, as well as elected officials, played a pivotal role in taxis’
demise. And it was no accident.
In 2010, the TLC had in hand an internal report predicting the collapse of the lending market because loans were unsustainable. But the agency—even though it knew how fragile the situation was—ignored its own rules, flooded the streets with additional vehicles and streamlined the processing of new drivers, cars and bases competing with taxis.
Lest we forget, the TLC—according to former Chairman Chris Lynn—has the final say over all medallion transactions, and Joshi was its general counsel when the 2014 minimum auction bid of
$850,000 for a medallion was established.
Some examples stand out. In April, 2017, the TLC held a hearing on industry economics that went on for six hours with medallion owners telling TLC commissioners how horrific their lives had become.
Yet all that came out of it was an option for tipping of app drivers.
The following year, amid owner and driver suicides, the willfully blind TLC commissioned a study of driver income. Yet the academics tasked with the study were explicitly told to exclude the yellow-cab industry and to not consider a cap on for-hire vehicles. The study led the city to establish a minimum wage for drivers of for-hire vehicles.
Perhaps the most egregious display of favoritism was how the mayor and the City Council mishandled Uber and Lyft’s resistance to meeting the wheelchair-accessibility requirements mandated for taxis. When push came to shove, the city caved and allowed a company-sponsored plan with no accessible-vehicle mandate.
The tragic bankruptcies and foreclosures being highlighted today were unknown prior to the influx of Ubers. The Ubers’ catalytic role, and the subsequent shameful enabling of the city, is unmistakable.
In 1971 taxis were making 500,000 daily trips. Today they are doing 250,000 while the invaders are doing 769,000. Uber itself has lost billions of dollars undercutting competitors through predatory pricing to capture market share. This cannot be airbrushed out of the picture.
The public sector needs to be held to account for its part in the threatened demise of taxis and the wanton harm done to thousands of defrauded immigrants who came to this country in search of a better life.
ZeroHedge: Debt-Laden Americans Flee Country To Escape Crushing Student Loans
By
Tyler Durden
Faced with crushing student loans and little ability to repay them, some Americans have taken to fleeing the country in order to escape their debt, according to CNBC's Annie Nova.
"It’s kind of like, if a tree falls in the woods and no one hears it, does it really exist?" said 29-year-old Chad Haag, who relocated from Colorado to a jungle in India to avoid paying his $20,000 loan balance. "I've put America behind me," said Haag - 9,000 miles away from home.
"If you’re not making a living wage, $20,000 in debt is devastating," said Haag, who struggled to come up with the $300 a month he owed upon graduating from the University of Northern Colorado in 2011. Hagg's first postgraduate job was working on-again, off-again hours unloading trucks and constructing toy rockets on an assembly line.
While there is no official data on how many people have fled the United States to get out of student debt, there's ample evidence that people are heading for the hills based on Reddit posts, Facebook groups, and financial advice doled out on various websites.
"It may be an issue we see an uptick in if the trends keep up," said Barmak Nassirian, director of federal relations at the American Association of State Colleges and Universities.
With outstanding student debt projected to exceed $2 billion by 2022, the average graduate owes around $30,000, up from an inflation-adjusted $16,000 in the 1990s. As CNBC notes, salaries for those with new bachelor degrees have remained virtually flat over the last several decades.
In Hagg's case, after his stints at the toy factory and loading trucks, he went back to school to pursue a master's degree in comparative literature at the University of Colorado Boulder, after which he tried his hand at being a low-paid adjunct professor.
Not so fast?
While the Department of Education typically can't garnish someone's wages if they work for a company outside of the United States, they can take up to 15% of Social Security benefits when they start collecting.
"The loans do not disappear when you become an expat," said student loan expert Mark Kantrowitz.
Also of note, in February of 2018 the IRS began alerting the US State Department of extremely delinquent debtors, while the State Department has warned those with "seriously delinquent tax debt" that their passports may be revoked.
Other tales of bailing out
39-year-old Chad Albright graduated from Millersville University in Pennsylvania in 2007 after studying communications and history, and somehow couldn't find a job.
"I went to interview after interview after interview," said Albright.
"I am much happier in Ukraine," says Albright, who has no plans to return to the United States and
hasn't checked his student loan account in almost eight years.
Another student-loan escapee, Katrina Williams, couldn't find a job after graduating from the University of South Alabama in 2013 with a $700 per month loan bill.
"I had to take whatever I could so I could pay on the loans," said Williams, who took on jobs as a Starbucks Barista, a substitute teacher, a USPS delivery woman, and a Sears call center employee.
"I was working every day," said Williams. "I had enough money left over to put gas in the car."
At the end of the day, perhaps Student Loan Justice founder Alan Collinge has a point when he said that "Any rational person who learns that people are fleeing the country as a result of their student loan debt will conclude that something has gone horribly awry with this lending system."
Copyright ©2009-2019 ZeroHedge.com/ABC Media, LTD
Faced with crushing student loans and little ability to repay them, some Americans have taken to fleeing the country in order to escape their debt, according to CNBC's Annie Nova.
"It’s kind of like, if a tree falls in the woods and no one hears it, does it really exist?" said 29-year-old Chad Haag, who relocated from Colorado to a jungle in India to avoid paying his $20,000 loan balance. "I've put America behind me," said Haag - 9,000 miles away from home.
Today he lives in a concrete house in the village of Uchakkada for $50 a month. His backyard is filled with coconut trees and chickens. “I saw four elephants just yesterday,” he said, adding that he hopes never to set foot in a Walmart again. -CNBCThat said, it hasn't all been smooth sailing - including finding acceptable loos to poo in. "Some toilets here are holes in the ground you squat over," said Hagg, who added that he recently ate spoiled goat meat at a local restaurant, landing him in the emergency room. Still, he insists "I have a higher standard of living in a Third World country than I would in America, because of my student loans."
"If you’re not making a living wage, $20,000 in debt is devastating," said Haag, who struggled to come up with the $300 a month he owed upon graduating from the University of Northern Colorado in 2011. Hagg's first postgraduate job was working on-again, off-again hours unloading trucks and constructing toy rockets on an assembly line.
While there is no official data on how many people have fled the United States to get out of student debt, there's ample evidence that people are heading for the hills based on Reddit posts, Facebook groups, and financial advice doled out on various websites.
"It may be an issue we see an uptick in if the trends keep up," said Barmak Nassirian, director of federal relations at the American Association of State Colleges and Universities.
With outstanding student debt projected to exceed $2 billion by 2022, the average graduate owes around $30,000, up from an inflation-adjusted $16,000 in the 1990s. As CNBC notes, salaries for those with new bachelor degrees have remained virtually flat over the last several decades.
In Hagg's case, after his stints at the toy factory and loading trucks, he went back to school to pursue a master's degree in comparative literature at the University of Colorado Boulder, after which he tried his hand at being a low-paid adjunct professor.
Haag had some hope restored when he landed full-time work as a medical courier in Denver, delivering urine and blood samples to hospitals. However, he was disappointed to find that he brought home just $1,700 a month. He had little money left over after he paid his student loan bill. He couldn’t afford an apartment in the city, where rents have been rising sharply. He lived with his mother and rarely went out with friends.Last year, Hagg married an Indian citizen who teaches at a local college. He is currently living on a five-year spousal visa.
“I couldn’t make the math work in America,” Haag said. -CNBC
Not so fast?
While the Department of Education typically can't garnish someone's wages if they work for a company outside of the United States, they can take up to 15% of Social Security benefits when they start collecting.
"The loans do not disappear when you become an expat," said student loan expert Mark Kantrowitz.
Also of note, in February of 2018 the IRS began alerting the US State Department of extremely delinquent debtors, while the State Department has warned those with "seriously delinquent tax debt" that their passports may be revoked.
Other tales of bailing out
39-year-old Chad Albright graduated from Millersville University in Pennsylvania in 2007 after studying communications and history, and somehow couldn't find a job.
"I went to interview after interview after interview," said Albright.
Still, he had $30,000 in student loans and was soon faced with a monthly bill of around $400. Unable to support himself, he moved in with his parents in Lancaster and worked as a pizza deliveryman. “There was anger,” Albright said. “I couldn’t believe I couldn’t find a job in America.”A few years after moving to China to earn $1,000 a month, Albright moved to Ukraine, where he is now a permanent resident. He has taught in Kiev and now Odessa, a port city on the Black Sea.
He fell behind on his student loans and feared the Education Department would garnish his wages.
Albright’s credit score tanked as a result of his repayment troubles, making it difficult for him to buy a car and to land certain jobs, since some employers now pull credit reports. “I feel that college ruined my life,” Albright said.
Seeing no future for himself in the United States, he decided to move to China in 2011. In the city of Zhongshan, he discovered he loved teaching students English. Unlike when he was delivering greasy boxes of pizza, he found his work meaningful and fulfilling. -CNBC
"I am much happier in Ukraine," says Albright, who has no plans to return to the United States and
hasn't checked his student loan account in almost eight years.
Another student-loan escapee, Katrina Williams, couldn't find a job after graduating from the University of South Alabama in 2013 with a $700 per month loan bill.
"I had to take whatever I could so I could pay on the loans," said Williams, who took on jobs as a Starbucks Barista, a substitute teacher, a USPS delivery woman, and a Sears call center employee.
"I was working every day," said Williams. "I had enough money left over to put gas in the car."
Williams had a friend who had moved to Japan, and the idea of leaving the United States grew on her. In 2015, she moved to Chiba, also to teach English to students. “I love my work,” she said. Her job sponsors her visa.According to Nassirian, there are far more reasonable ways of dealing with student debt - including entering into the government's income-based repayment plans.
She has her own apartment now and doesn’t have to work seven days a week anymore. Yet Williams misses her relationships back home; she hasn’t been able to make many friends in Japan.
She thinks about returning to the U.S., but knows she will be welcomed back by wage garnishments and endless calls from collection agencies. Her student debt has ballooned to well over $100,000.
“I wish I could come back to America and not be scared,” she said. -CNBC
At the end of the day, perhaps Student Loan Justice founder Alan Collinge has a point when he said that "Any rational person who learns that people are fleeing the country as a result of their student loan debt will conclude that something has gone horribly awry with this lending system."
Copyright ©2009-2019 ZeroHedge.com/ABC Media, LTD
Wednesday, May 22, 2019
New York Times: Can Data Ward Off College Debt? New Strategy Focuses on Results
By Kevin Carey
Copyright 2019 The New York Times Company. All rights reserved.
The Department of Education on Tuesday released a trove
of information that shows the average amount of debt incurred by
graduates of different academic programs at each college and university
in America. This focus on discrete programs, rather than institutions as
a whole, is gaining favor among political leaders and could have
far-reaching effects.
With anxiety
about student debt soaring — the billionaire Robert F. Smith made
headlines last weekend with his surprise promise to pay off the debts of
Morehouse College’s 2019 graduating class — the program-level
information has the potential to alter how colleges are funded,
regulated and understood by consumers in the marketplace.
Everyone
knows that different majors have different economic payoffs. Social
workers earn less than chemical engineers. But federal laws that
regulate college success don’t account for that. Instead, they average
results across the university. People don’t have a good way of seeing
how big those differences are within a particular university, let alone
comparing programs across universities.
The new, more detailed debt information was created in response to an executive order issued in March by President Trump.
Other
lawmakers have called for similar approaches. In February, Senator
Lamar Alexander of Tennessee, chairman of the Senate Education Committee
and a former university president, gave a speech
outlining his plans to revise the federal Higher Education Act.
Currently the federal government measures the percentage of borrowers at
a given college who pay their loans back. If too many students fail to
repay, colleges are barred from receiving federal funds.
Mr.
Alexander proposed a “new accountability system” based on loan
repayment rates for individual programs within colleges. This, said Mr.
Alexander, “should provide colleges with an incentive to lower tuition
and help their students finish their degrees and find jobs so they can
repay their loans.”
Both Mr. Trump
and Mr. Alexander, despite their strong criticism of President Obama on
education, are following in the footsteps of his regulatory crackdown on
for-profit colleges and short-term certificate programs. Rather than
evaluate sprawling educational conglomerates based on the average
results of hundreds of programs, the Obama rules disqualified specific
programs whose graduates didn’t earn enough money to pay back their
loans.
Mr. Alexander wants to extend
scrutiny and accountability to all colleges, but using different
measures. The Trump administration wants to replace the Obama rules and
penalties with simple transparency of outcomes by program.
In
addition, a bipartisan congressional coalition that includes Senators
Joni Ernst and Elizabeth Warren has sponsored the College Transparency
Act, which would create more comprehensive program-level data.
The
debt information released by the Department of Education is still
preliminary, so students should be cautious when using it to choose
programs and colleges. But there are other examples of how program-level
data could change how we look at higher education. The University of
Virginia, for instance, is the one of the most prestigious and selective
public universities in the nation, with an average freshman SAT score
around 1400 and barely a quarter of applicants admitted. But data
published by the state’s higher education coordinating body reveals
large differences within the university. Some University of Virginia
majors earn more than $70,000 or $80,000 three years after graduating,
while others are in the $35,000 to $50,000 range. University of Virginia
systems engineers, for example, make almost double what environmental
science majors earn.
George Mason
University, in Fairfax, Va., is less prestigious. A former commuter
school, it has a typical freshman SAT score under 1200 and accepts about
80 percent of applicants. On average, George Mason graduates earn less
than University of Virginia graduates. But as with Virginia, there are
large differences between majors within George Mason, to the point that
earnings results at the two universities greatly overlap.
Accountants
and civil engineers who graduate from George Mason earn over $60,000
per year. Psychology and architecture majors who graduate from Virginia
earn less than $45,000.
Mark
Schneider, a higher education scholar, helped the state of Virginia
gather earnings information for each university program. He is now the
director of the federal Department of Education’s institute of education
sciences, guiding collection of the program-level data called for in
Mr. Trump’s executive order. The key insight, Mr. Schneider says, is
that there is usually more variation in earnings results between
programs within colleges than between colleges.
If
Congress adopts Mr. Alexander’s plan, colleges will need to give much
closer scrutiny to programs where students borrow large amounts of money
and then struggle to land well-paying jobs. Such programs are often
overlooked, as Harvard discovered
when its graduate theater program ran afoul of the Obama regulations.
This could be a sea change in campus administrative culture, which is
typically so hands-off that the University of North Carolina at Chapel
Hill had no idea (this is the most charitable explanation) that one of
its departments ran a huge academic fraud operation for 18 years.
The
shift to programs could also begin to change the dynamics of the higher
education market, which is currently dominated by institutional
reputations, to the point that wealthy families are willing to pay enormous bribes for admission on the strength of brand names alone.
There
are still many disagreements and details to resolve. The Trump approach
relies on the idea that if students have better information, choices in
the higher education market will be enough to ensure quality. But there
is little evidence to support this view. Even with program data,
students will still be vulnerable to the deceptive marketing and
aggressive sales tactics that remain widespread in the for-profit
college industry.
The measures
matter, too. Mr. Alexander’s plan is to evaluate programs based on loan
repayment rates. But it isn’t known whether those rates are a good
measure of program quality. The Obama method of comparing debt levels to
student earnings, by contrast, was so accurate that many colleges pre-emptively shut down
their low-performing programs before the sanctions were even applied.
Education Secretary Betsy DeVos is now working to repeal those
regulations.
Policymakers will have
to guard against institutional gamesmanship. Poorly performing programs
could simply be relabeled. At-risk students could be pushed to not
declare a major at all. Program-level regulations probably work best if
accompanied by standards that apply to the college as a whole.
Time
frames are also important. It makes sense to judge a nine-month-long
medical assisting program on whether graduates find jobs as medical
assistants. The payoff for bachelor’s degrees, particularly in the
liberal arts and humanities, can take longer to manifest. And, of
course, higher learning isn’t just a way to get a job. It should guide
people toward more enlightened, fulfilling lives.
But
while college is about more than money, it can be paid for only with
money. With student debt at a record high and with one million people
defaulting on their college loans every year, it’s not surprising that
politicians across the political spectrum want to give students and
parents more information about how different programs pay off. When that
happens, higher education may never be quite the same.
Copyright 2019 The New York Times Company. All rights reserved.
New York Times: Inquiries Into Reckless Loans to Taxi Drivers Ordered by State Attorney General and Mayor
By Brian M. Rosenthal
Copyright 2019 The New York Times Company. All rights reserved.
The
New York attorney general’s office said Monday it had opened an inquiry
into more than a decade of lending practices that left thousands of
immigrant taxi drivers in crushing debt, while
Mayor Bill de Blasio
ordered a separate investigation into the brokers who helped arrange the
loans.
The efforts marked the
government’s first steps toward addressing a crisis that has engulfed
the city’s yellow cab industry. They came a day after The New York Times
published a two-part investigation
revealing that a handful of taxi industry leaders artificially inflated
the price of a medallion — the coveted permit that allows a driver to
own and operate a cab — and made hundreds of millions of dollars by
issuing reckless loans to low-income buyers.
The
investigation also found that regulators at every level of government
ignored warning signs, and the city fed the frenzy by selling medallions
and promoting them in ads as being “better than the stock market.”
The
price of a medallion rose to more than $1 million before crashing in
late 2014, which left borrowers with debt they had little hope of
repaying. More than 950 medallion owners have filed for bankruptcy, and
thousands more are struggling to stay afloat.
The
findings also drew a quick response from other elected officials. The
chairman of the Assembly’s banking committee, Kenneth Zebrowski, a
Democrat, said his committee would hold a hearing on the issue; the City
Council speaker, Corey Johnson, said he was drafting legislation; and
several other officials in New York and Albany called for the government
to pressure lenders to soften loan terms.
The
biggest threat to the industry leaders appeared to be the inquiry by
the attorney general, Letitia James, which will aim to determine if the
lenders engaged in any illegal activity.
“Our
office is beginning an inquiry into the disturbing reports regarding
the lending and business practices that may have created the taxi
medallion crisis,” an office spokeswoman said in a statement.
“These
allegations are serious and must be thoroughly scrutinized.”
Gov.
Andrew M. Cuomo said through a spokesman that he supported the inquiry.
“If any of these businesses or lenders did something wrong, they
deserve to be held fully accountable,” the spokesman said in a
statement.
Lenders
did not respond to requests for comment. Previously, they denied
wrongdoing, saying regulators had approved all of their practices and
some borrowers had made poor decisions and assumed too much debt.
Lenders blamed the crisis on the city for allowing ride-hailing
companies like Uber and Lyft to enter without regulation, which they
said led medallion values to plummet.
Mr.
de Blasio said the city’s investigation will focus on the brokers who
arranged the loans for drivers and sometimes lent money themselves.
“The
45-day review will identify and penalize brokers who have taken
advantage of buyers and misled city authorities,” the mayor said in a
statement. “The review will set down strict new rules that prevent
broker practices that hurt hard-working drivers.”
Four of the city’s biggest taxi brokers did not respond to requests for comment.
Bhairavi
Desai, founder of the Taxi Workers Alliance, which represents drivers
and independent owners, said the city should not get to investigate the
business practices because it was complicit in many of them.
The
government has already closed or merged all of the nonprofit credit
unions that were involved in the industry, saying they participated in
“unsafe and unsound banking practices.” At least one credit union
leader, Alan Kaufman, the former chief executive of Melrose Credit
Union, a major medallion lender, is facing civil charges.
The
other lenders in the industry include Medallion Financial, a specialty
finance company; some major banks, including Capital One and Signature
Bank; and several loosely regulated taxi fleet owners and brokers who
entered the lending business.
At City
Hall, officials said Monday they were focused on how to help the
roughly 4,000 drivers who bought medallions during the bubble, as well
as thousands of longtime owners who were encouraged to refinance their
loans to take out more money during that period.
One
city councilman, Mark Levine, said he was drafting a bill that would
allow the city to buy medallion loans from lenders and then forgive much
of the debt owed by the borrowers. He said lenders likely would agree
because they are eager to exit the business. But he added that his bill
would force lenders to sell at discounted prices.
“The
city made hundreds of millions by pumping up sales of wildly overpriced
medallions — as late as 2014 when it was clear that these assets were
poised to decline,” said Mr. Levine, a Democrat. “We have an obligation
now to find some way to offer relief to the driver-owners whose lives
have been ruined.”
Scott M. Stringer,
the city comptroller, proposed a similar solution in a letter to the
mayor. He said the city should convene the lenders and pressure them to
partially forgive loans.
“These
lenders too often dealt in bad faith with a group of hard-working,
unsuspecting workers who deserved much better and have yet to receive
any measure of justice,” wrote Mr. Stringer, who added that the state
should close a loophole that allowed the lenders to classify their loans
as business deals, which have looser regulations.
Last November, amid a spate of suicides by taxi drivers, including three medallion owners with overwhelming debt, the Council created a task force to study the taxi industry.
On
Monday, a spokesman for the speaker, Mr. Johnson, said that members of
the task force would be appointed very soon. He also criticized the Taxi
and Limousine Commission, the city agency that sold the medallions.
“We
will explore every tool we have to ensure that moving forward, the
T.L.C. protects medallion owners and drivers from predatory actors
including lenders, medallion brokers, and fleet managers,” Mr. Johnson
said in a statement.
Another
councilman, Ritchie Torres, who heads the Council’s oversight
committee, disclosed Monday for the first time that he had been trying
to launch his own probe since last year, but had been stymied by the
taxi commission. “The T.L.C. hasn’t just been asleep at the wheel, they
have been actively stonewalling,” he said.
A T.L.C. spokesman declined to comment.
In Albany, several lawmakers also said they were researching potential bills.
One
of them, Assemblywoman Yuh-Line Niou of Manhattan, a member of the
committee on banks, said she hoped to pass legislation before the end of
the year. She said the state agencies involved in the crisis, including
the Department of Financial Services, should be examined.
“My world has been shaken right now, to be honest,” Ms. Niou said.
Copyright 2019 The New York Times Company. All rights reserved.
Monday, May 20, 2019
New York Times: ‘They Were Conned’: How Reckless Loans Devastated a Generation of Taxi Drivers
Yesterday, the New York Times published the first part of a devastating investigation into taxi medallion loans. We highly recommend the article and will post further parts as soon as they become available.
Thursday, May 16, 2019
Washington Post: One way to tackle the student loan crisis: bankruptcy court
Last month Sen. Elizabeth Warren (D-Mass.) debuted a proposal
that would wipe away the majority of student debt through a generous
forgiveness program. It may have been controversial among pundits, but
it was popular with the public. Now there’s another plan
out there that offers help too — and Warren, along with fellow
presidential candidates Sens. Bernie Sanders (I-Vt.), Kamala Harris
(D-Calif.), Amy Klobuchar (D-Minn.) and Rep. Eric Swallwell (D-Calif.)
are all co-sponsoring it.
Let’s talk about bankruptcy. Americans owe a collective $1.5 trillion in student loan debt, an amount that’s increased from $90 billion over the past two decades. In 2018, more than two-thirds
of college graduates graduated with student loans. The average amount
borrowed (from all sources) by a 2018 graduate is just under $30,000.
The burden is impacting people from early adulthood to those in
retirement: Some senior citizens
are using their Social Security checks to pay back student loan bills.
If all these people were facing unsupportable housing, credit card debt,
medical or auto loan bills they could turn to a bankruptcy court for
help. But short of something called “undue hardship,” an extremely
difficult standard to meet, it’s essentially impossible to receive
court-ordered relief from college loans.
The
legislation, which debuted last week, would seek to fix this. It’s
bipartisan, attracting two Republican co-sponsors in the House,
including Rep. John Katko
(R-N.Y.), who introduced a similar bill in the last session of
Congress. It would, as sponsor House Judiciary Chair Jerrold Nadler
(D-N.Y.) put it in a statement, "ensure student loan debt is treated
like almost every other form of consumer debt."
The
issue goes back to the 1970s, when the banks and media outlets began
pushing the narrative there was an explosion in new graduates declaring
bankruptcy to unload their student loans. The Government Accountability Office (then the General Accounting Office) found that such acts were extremely rare. But little matter: In 1976, Congress passed legislation
that banned students from receiving relief for their student debts for a
period of five years. Over the next several decades, they would extend
that period to seven years, and then in 1998 they shut the door almost
entirely on relief for federally issued loans. In 2005, as part of
controversial “bankruptcy reform” legislation, that stricture was
extended to privately issued loans as well. One man who supported all of
this: Joe Biden, then a senator from Delaware. He championed the multiple changes that made it harder for people to declare bankruptcy and receive relief for their student debt.
Over
that same period, student loan debt ballooned. That’s likely not a
coincidence. Many things factored into the rise of debt financing of
education, including the decreasing rates at which many states supported
their public colleges and, most prominently, the growth of for-profit
colleges. But the usual risk associated with loaning money is that the
person might not pay it back; common sense says banning that outcome
would lead to an exploding student loan market. When you can get blood
from a stone, someone — the government, a bank or a financial
institution specializing in refinancing student debt — will lend the
rock money.
Restoring bankruptcy could protect
borrowers in another way too, by potentially acting as a check on the
careless treatment of debtors by the student loan servicers. In 2017,
the Consumer Financial Protection Bureau sued Navient,
claiming the student loan giant repeatedly did not tell borrowers
experiencing financial difficulties about income-based repayment
options, and instead pushed them into forbearance, a strategy that
resulted in further interest charges and increased the amount borrowers
owed.
At the same time, Education Secretary Betsy DeVos is slow-walking
promised debt forgiveness to students defrauded by sketchy and
predatory for-profit colleges. Meaningful bankruptcy reform would give
these victims another option, as well as expand the potential for relief
to former debt-encumbered students who also need the help but are
outside of the relatively narrow eligibility groups to apply for relief.
Yes, there are other things we could do as well. A beefed up, income-based repayment program,
with automatic enrollment and a more realistic assessment of the earned
income needed for people to begin the process of paying back their
loans, would make a significant difference. But that won’t help
everyone, especially those whose loans did not originate with or are no
longer held by the government. It’s also worth noting that the students
most likely to fall into default — that is, cease paying their student
loans entirely — are those who attend for-profit colleges, who are
disproportionately likely to be older, and come from a more economically
disadvantaged background,than the traditional college student.
There
is little evidence that people frivolously file for bankruptcy. If
anything, it’s the opposite; many put off seeking help. There’s no
reason to believe things would be different when it comes to student
debt. Restoring the right to declare bankruptcy when one can’t
financially handle paying for one’s education is a change that should be
supported even by those who believe Warren’s debt forgiveness plan is
too generous — or a giveaway to the wealthy.
The
right to declare bankruptcy is fundamental to a capitalist economic
system. We believe that people who make economic mistakes deserve a
second chance. Think about it this way: Donald Trump has taken his
businesses to bankruptcy court and excised many of his debts a half a dozen
times, while people whose only mistake was doing their best to get
ahead find it almost impossible to receive similar relief. That’s not
right. We should fix that.
The Student Borrower Bankruptcy Relief Act of 2019
Here at Shenwick & Associates, one of the most difficult issues for our clients (especially younger ones) is student loan debt, which is now over $1.5 trillion (that’s not a typo), far eclipsing other types of consumer debt. As we’ve discussed many times in our posts, most courts follow the “undue hardship” Brunner test, which makes it almost impossible to discharge student loan debts in bankruptcy.
However, relief may be on the horizon, as more opinion leaders and courts express opposition to the Brunner factors. Earlier this month, members of Congress (including Sens. Elizabeth Warren (D-Mass.) and Dick Durbin (D-Ill.), along with Reps. Jerrold Nadler (D-N.Y.), John Katko (R-N.Y.) and Joe Neguse (D-Colo.)) introduced the Student Borrower Bankruptcy Relief Act of 2019, which would eliminate the section of the bankruptcy code (523(a)(8)) that makes private and federal student loans nondischargeable, allowing these loans to be treated like nearly all other forms of consumer debt.
The bill should easily pass the House. No bill text is available yet, but we’re sure we’ll be writing about this vexing issue again soon. For trusted bankruptcy advice on all types of debt, please contact Jim Shenwick.
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