Hello, everyone. Thank you so much for joining us as we file for bankruptcy with attorney Christine Kingston. She not only does bankruptcy, but she has mastered helping people get free from their student loans. Welcome back, Christine. Thank you so much for being here with us on This Needs to be Said.
Katherine, always great to talk to you, so excited to share information about student loans, which seems to be a big problem these days.
Yeah. Seems to be the biggest.
Yeah, $1.3 trillion. I’m contributing. I’m paying mine still, so yeah, we’re fantastic.
Oh, wow. Absolutely. Paying your own student loans, and if you have children, paying their student loans or helping them to pay those because we want them to get an education and be the best that they can be in this world. There was something in the news not too long ago about a technical school, ITT Tech.
Now, I’m driving along in the car and I hear that people have student loans, that triggered my ears, and something went wrong with this school. Now, I would be heartbroken to think I owe money to a school that I wasn’t supposed to be in or doesn’t have accreditation or it shuts down. What would even be more heartbreaking is if I’m currently a student at that school when something happens and derails me, so what do I do?
I wanted to ask your point of view, being that student loans is one of your specialties and then this situation with ITT Tech. What are your thoughts about that and where does that leave those people, those students?
Oh, that’s a great question, Katherine. When a school shuts down and you’re an existing student with that school, there are some remedies. For federal student loans, the remedy is a closed school administrative discharge. It’s called an administrative discharge because it’s voluntary and it’s done basically just between the borrower and the federal government. It’s only available for the federal government student loans.
I want to give your listeners a website to go to today, anything with regards to student loans, the best website that I have is put on by the National Consumer Law Center, consumer advocates, like myself. The website is studentloanborrowerassistance.org, all one word. I know, they could have made it longer, but they didn’t. That’s a great resource for educating on the different payment plans that are available, the payment plans that are available for federal loans, the fact that there’s very little options available for private loans. It’s all great information for the general public and for the consumers, and it’s driven directly to help the consumers.
There’s links on there with all the forms they need to apply for those administrative discharge options, like the closed school. For the people that were not in attendance at ITT at the time that it closed, and it’s funny that you mentioned that because I just consulted with a perspective client the other day about that, I am looking at the possibility of bringing some of those cases into the bankruptcy court on the grounds that it’s not a qualified education loan for the private student loans and even some of the federal student loans.
If they’re not able to get them discharged on the administrative side, they could explore a bankruptcy option. It’s a little bit more challenging because, I think part of it nation-wide is there’s some difficulty in finding attorneys to do this work. If they’re in California, I’m more than happy to consult on student loans here in California, with the possibility of whether or not they could be discharged at bankruptcy.
I’m listening to you, I’m not an attorney, I don’t want anybody to think I play one on radio, I do not, but it sounds logical to me that it should be discharged you said through administration or administratively. Who’s collecting this money if the school doesn’t exist? That is my question. Who could possibly be collecting money if the school doesn’t exist?
Sure. Well, these are student loans. Now, remember, when we initially borrow money to go to school, what happens is you register for school, you take out the student loan, the lender sends the money to the school, and then you get your education. In this particular instance, the school has already been paid. See, now that the students are out, they owe the lenders money for those student loans.
Here we have a debunked school, and you have now a borrower and a lender, and the lender wants their money and the borrowers says, “But I got a bad education.” The lender says, “Well, that’s not my fault you went to a bad school.” It’s between these two and here you have a third party. Well, if ITT shuts down, there’s no funds there, we can’t sue them. I think there might be a couple class actions pending, too.
People can research on the internet with regards to class action lawsuits against ITT. If there’s any money there, they might get something in the settlement. With the student loans, they’ve got to deal with it a little bit differently. You can’t just say, “Well, this school shut down on me. Well, I graduated five years ago but I’m still not doing so well.” It kind of changes those legal issues depending upon the facts and circumstances. That’s why it’s probably a good idea to get a consultation with an attorney and do some research with regards to any class actions with regards to ITT Tech to see what rights they might have with regards to any student loans or what’s going on with the school right now being closed.
Yeah, I just think that’s crazy. Now, you know that creditors check your background and they have you jump through hoops in order to get money from them on your own behalf one-on-one, but the school that you put on the paperwork, I guess it’s not their responsibility to determine if the school is a good school or not? Like who would have known there’s a red flag, “Hey, don’t lend money to a student going to this school,” or, “Don’t have this school down as one that you can give money to.” I don’t even know if I’m formulating the right question, like who could know? Like me, the consumer going to college, how would I know that this school is not going to be around long enough? How can I know that?
That it’s going to all work out? You don’t. The best thing to do is go back to basics. Let’s go old school. Traditional universities. Traditional colleges. Go to your local community college to get a local community college education, and then if you want a four year degree, go to your local four-year university, public or private, whatever is more affordable. Stay out of the student loans if at all possible. I would avoid private student loans like the plague. I would only borrow student loan money and also try for grants and scholarships.
I mean, that’s the best I can do for the advice for the people before they even get into debt and borrow the money, is you pick the traditional route and get a traditional education. I think the other thing that’s most important for people listening that are thinking about going to college, because the American dream is based on what? We get an education, we get smart, we get a great job, we buy the house with the picket fence and life is great.
Well, our economy is not supporting that vision right now. There’s some jobs that don’t require a college education. I mean, do you even realize that my garbage collector is probably making $100,000 a year picking up my trash?
Wow, no, I did not.
No college degree necessary for a dirty job. They pay very well, they get pension and benefits when they work for the government. It’s fantastic. It’s counterintuitive. If we really think about our careers first as young people and then say, “Do I need a degree for what I want to do in my life? Yes or no?” I mean, my hairdresser’s fantastic. She’s all but 24 years old, and she never went to college and she just went straight in to become a hairdresser because she knew what she wanted to be. I applaud that. She saved her money, she saved her time, and now she’s building her career at 24.
I mean, again, that’s, I think, the best advice I can give young people as they’re thinking about their college degree. I generally deal with them after they’ve already made the mess.
Right. You know, it’s interesting. I would almost say almost everyone that comes to me comes to me last. They’ve exhausted all other remedies before seeing me. For example, they might do debt settlement or these debt consolidation companies. I’m not sure exactly what they do, but they don’t generally do what they say they’re going to do, and they end up in my office anyway.
All those non-bankruptcy options like doing nothing, it depends, if you’re doing nothing, then you probably should be judgement proof if you’re not going to take any action. Sometimes you might want to do nothing and hope the statute of limitations runs, which would make the debt otherwise uncollectible. That’s not always the safest route as creditors get more and more aggressive and file their lawsuits to collect on debts. It’s not going to always work out.
Then people will struggle with wanting to repay their debts or borrow money from their 401k. Let’s just take money out of our retirement plan, rob from our future, to get rid of some debt today. There’s a price to pay for that when we pull the money out of the 401k. You pay the early withdraw penalties, you pay taxes on that money unless you pay the loan back, and besides that, you’re losing the time value of money and the compound interest on that 401k, so you’re really borrowing more than just the actual, let’s say, $5,000. You’re actually losing more money because that $5,000 over time could have been $50,000 in retirement. You just spend $50,000 to pay $5,000 worth of debt.
Yeah. Katherine, I will walk them through a cost benefit analysis. When I get down to the bottom line and I say, “Why would you want to spend more money to get out of debt? Why would you want to do it?” When the people say the moral and ethical and pride and all of that, that’s when it gets expensive because your pride will cost you more money.
Wow. I was just saying that the person that’s taking this morally ethical person for a ride is not being moral or ethical, but they’re okay because it’s not on them. Am I explaining myself clearly? If you give me $5,000 and I have to pay you ten times more back just for me to keep my pride, are you robbing me? I’m going to say yeah, but I guess I feel better about you robbing me versus me filing bankruptcy and hitting the reset button. It sounds like robbery to me for someone to do that, especially the way you broke it down.
Yeah. If they’re willing to pay that price and they understand that that’s the price they’re paying, then they’ve got the right answer for themselves, but bankruptcy can save them time, it saves them money. We think about the case where the debtor has $30,000 in debt. If he files bankruptcy, we get two choices in bankruptcy.
There’s two chapters of bankruptcy for the average consumer, and I call them one is a payment plan, and that’s under Chapter 13 of the Bankruptcy Code, which is a reorganization bankruptcy where they make payments over time on their debt, and then there’s Chapter 7, which is the liquidation bankruptcy. If they don’t have any money in their budget at all to afford it and they don’t have enough income to support a payment plan, then they can file bankruptcy under Chapter 7, get rid of their debts without paying a dime towards them. The only cost is to hire an attorney to get you through that process and the filing fees of the court.
Once I get them to the land of logic and reasoning and we look at the numbers and we analyze the cost benefit analysis, and the best part about it, Katherine, I hope you’re sitting down for this, bankruptcy improves your credit. Bankruptcy improves your credit.
Yeah. That amazed me the first time.
It’s because all the credit card companies are advertising, “What’s in your wallet? Let’s have a credit card in there.” Your credit score is the most important thing you’re ever going to need. It’s going to go down on your permanent record. “Oh, you can’t just do that with your credit.” What people don’t understand is all your credit says is how well you manage debt. If you don’t have any debt, you don’t need a credit score. It’s beautiful and simple.
Well, I’m sure once you are done breaking this down for them so that they’re saying, “Okay, why haven’t I done this sooner?” Am I right?
Exactly. I get that all the time after we’re finished working together. They feel better each step of the way, and then obviously, I think the last step usually is the meeting of creditors, the scary meeting in front of the trustee. After that, you just see the stress just wash off of them. They walk out of the hearing room, they’re ecstatic, they can’t thank me enough.
I’m one of the types of attorneys that I like to make sure that my clients understand what’s going on, because if I were in their shoes and I was not a lawyer, I would want to have a general understanding of what’s happening to me. Somebody speaking in a legal-ease foreign language. I always make sure that my clients have an understanding of what’s going on and what the process is and what I’m doing and how I’m going to get them to their goals and help the achieve that.
Wow. Well, I’m sure they appreciate you. Last time we talked, we talked about the cute and cuddly attorney and helping you get over the scary stuff as you do, because I can imagine, you don’t want to say to somebody that you didn’t pay back, because you feel like maybe you maliciously didn’t do it and you feel guilty about it. There is a reset button. Sometimes you just can’t. You just can’t and you’re going deeper and deeper.
Someone like you would be who they need to talk to.
Before we get out of here, I’m going to say thank you again for stopping by This Needs to be Said, sharing with us, educating with us on bankruptcy talk. Tell people how they can get in touch with you themselves outside of this interview.
Oh, thank you, Katherine. Christine Kingston, I’m here in Huntington Beach, California. I can be reached at 714-533-9210 or on the web at www.attorneychristine.com, my name is spelled C-H-R-I-S-T-I-N-E, so it’s www.attorneychristine.com. Thank you, Katherine.
Until next time. You’re welcome. Bye now.