Retirement Investing while Paying Off Student Loans


Why would I save for retirement when I am paying off my student loan debt?  This doesn’t make any sense!  Oh yes it does!!!!  While you might think it is better to pay off all of your debt before saving for retirement, think again.  Not only do you need to save regularly for retirement but you also need to keep your life moving forward in spite of your student loan debt.  Here’s how it’s done.  Every year, you have the opportunity to invest $5000 into a Roth IRA.  You might think that this is not a lot of money, but add it up over 40 years and you see the magic.  Bottom line, the most important aspect of this type of savings is that it is protected from bankruptcy. If you are self-employed and go bankruptcy 6 times during your life, ALL OF YOUR RETIREMENT SAVINGS ARE PROTECTED.    This means you can take lots of risks during your lifetime and even have good and bad years of income and file bankruptcy and then end up with a nice protected amount of retirement savings.  This is how smart entrepreneurs protect their family while trying to make a go of their business ideas, many of which fail, but if just one is successful even at the end of it all – it’s all worth it and you have retirement savings as well.

Pay off Students and Buy a House

What’s the number one way to pay off your student loans and buy a house?  Get on an income based payment plan for your student loans.  Whether you’ve got $15,000 or $300,000 in student loans, the income based plan counts as full payments that are not deferments.  Why is this important?  Because all student loans end and are discharged in their entirety twenty five years (25) after first repayment plus deferments.  What is this so important?  Think about it this way….if you were sued by your student loan servicer and a judgment was obtained, the servicer can garnish your wages for at least 15% of net income and sometimes even more.  Plus all of your tax refunds are seized until the loan is paid off.  Compare this to an income based program where you may pay 5% to 15% of your income voluntarily, without a judgment, garnishment or seizure of your tax refund.  Not only is your credit rating great but so are possibilities to move forward with your life, such as buying a house, starting a family and building wealth through home equity, retirement planning and paying off long term debt.

Disabled Can I File Chapter 7 with Equity in Home

Disabled with Equity in Home Can I file Chapter 7 Bankruptcy. Are you disabled? Have you applied for disability but are waiting for approval? Have you applied, been denied and have appealed disability? Do you have over $20,000 in credit card debt and can pay your credit cards? Have you owned your own home for many years and now have equity? You’re not alone. Many Americans are now seeing the value of their home rise, but are saddled with unsecured debt such as credit cards.

Recently, I had a similar situation. Debtor had $50,000 in unsecured debt i.e. credit cards. Debtor had applied for disability but was denied and had been working half shifts for the last several years pending approval of disability. Debtor did not qualify with his income to get a new home equity loan or refinance his home, but has $80,000 of non-exempt equity. What does debtor do?

1) Cannot file Chapter 7. This will result in the home being sold in the bankruptcy to pay off creditors at 100% which results in debtor losing home, not getting full value of home and debts are paid off in same fashion as outside of bankruptcy.
2) Debtor cannot refinance or get home equity loan even though he has $80,000 of free and clear equity. This is because debtor cannot prove adequate current income to be approved for refinance or new home equity loan.
3) Debtor cannot sell his home because an apartment that matches his current income would not provide enough space for his family.
4) Debtor cannot file Chapter 13 because his income is inadequate and even if he had full disability pay, this is not considered income under Chapter 13 and the case would be dismissed.

The only solution; add a credit worthy person to the title of the home and have them apply for home equity loan, hope that full disability is approved soon and then pay off loan as normal with additional person being primarily liable for the refinance or home equity loan. This type of application will typically only apply to individuals who have family units or friends who are comfortable with the risk associated with this type of arrange.

50 Cent Files for Chapter 11 Bankruptcy

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50 Cent Filed for Chapter 11 Bankruptcy today. But he’s not going under – in fact this is a good example of bankruptcy re-organization. In fact, he has adequate assets to pay creditors but is using Chapter 11 to give him time to restructure his assets to pay debt and also to get protection from creditors as he waits for an appeal ruling. Chapter 11 is a big bankruptcy that is essentially entirely “custom” and very expensive to file. But for large asset/debt people and corporations, it remains one of the best tools to re-organize debt and protect yourself from creditors.

Chapter 13 is the less expensive, very common personal reorganization used by ordinary consumers to get caught up on house and car payments. It typically costs $4000 in legal fees and the fees are part of the reorganization. Typically, it costs as little as $310 to file a Chapter 13 and get immediate protection from credit card.

Can you Discharge Tax Debt in Chapter 7

Can you Discharge Tax Debt in Chapter 7?  Yes.  Tax debt which is over 3 years old can be discharged.   Payroll Tax Debt from the operation of a business is not discharged.  Sales Tax Debt from the operation of a business is not discharged.  To properly determine with accuracy whether your tax debt is discharged in Chapter 7, you should order tax account transcripts for all years that you wish to discharge tax debt.  You can order tax account transcripts at no cost at by clicking here.

At NLO Nelson Law Office, we can help you determine whether your tax debt is discharged.  Do you have income tax debt that is 6 years old, but you had an offer in compromise or your filed your taxes late or you amended your taxes.  Using specialized software and our experience we can determine with accuracy the optimized date to file your Chapter 7 bankruptcy to maximize your tax discharge.

Did you run a business that failed?  Did the business owe sales tax?  Has the State Sales Tax Authority assessed tax liability against your personally as the President of the Company or as a responsible person?  If so, you may need help in paying this non-discharged tax liability back.  Typically a Chapter 13 bankruptcy is good option for forcing a reasonable repayment plan as well as eliminating other types of debt to allow you more ability to repay this debt back.

Did you run a business and no properly pay your employees payroll tax?  Payroll tax deducted from employees is the employees property held in trust by the employer as a fiduciary who is responsible for then paying these funds to the government as payroll tax.  If the taxes are not paid, the President of the Company, Managing Member of the LLC or the Sole Proprietor of a business is held personally liable for this debt.  Use a Chapter 13 to force a reasonable payment plan and reorganize and minimize your other debts.

When should I convert my chapter 13 bankruptcy to a chapter 7

When should I convert my chapter 13 bankruptcy to a chapter 7?  Loss of employment loss of income plan is no longer feasible. You no longer need save your home or cars.

Section 348 of the bankruptcy code says that the qualification for a chapter 7 discharge is the petition date and not the conversion date. Therefore if you didn’t qualify for a chapter 7 filing on the date your chapter 13 is filed you cannot convert to a 7

However if it has been at least 8 years since you filed your prior chapter 7 you can dismiss your chapter 13 and then filed a brand new chapter 7


Mindy filed a chapter 7 bankruptcy on August 1 2007.  The case was discharged on February 1 2008 and was closed the same day.  Mindy filed her present chapter 13 case on August 5, 2011.  On August 2 2013 Mindy filed a motion to convert her case to a chapter 7.  The case cannot be converted to a chapter 7 because Mindy did not qualify for a chapter 7 discharge on the date of her chapter 13 filing.  Mindy can however dismiss her chapter 13 on August 2 2013 and filed a new chapter 7 on August 3 2013.

Tax Refund Language Chapter 13 Plan Comparing Trustee Requirements

Tom Vaughn Language

Debtor(s) shall submit a copy of their tax returns to the Trustee each year no later than June 30th.  The debtor(s) shall tender to the Trustee the amount of the any tax refund in excess of $1200.00 each year within 7 days of receipt of the tax refund.  Refunds must be received by the Trustee by June 30th of each year.

Marilyn O. Marshall Language

The Debtor’s Plan is hereby amended to provide that all unsecured claims filed after the applicable claim bar date are classified to be paid a dividend of 0%.

 The Debtor’s Plan is amended to add the following language to Paragraph D1: On or before April 20th of the year following the filing of the case and each year thereafter, the Debtor(s) shall submit a copy of the prior year’s filed federal tax return to the Chapter 13 Trustee.  The Debtor(s) shall also tender the full amount of each year’s federal tax refund, received while the case is pending to the Chapter 13 Trustee.  The tax refunds shall be treated as additional payments into the plan and must be submitted within 7 days of receipt of each of such refunds by the Debtor(s)

 Glenn Sterns Language

Section D 1 of debtor’s plan is hereby modified as follows:  In addition to making the regular monthly plan payments required under section D 1, debtor shall submit their tax refunds each year as additional plan payments.  Tax refunds submitted by the debtor increase the amount the debtor is required to pay into the plan dollar for dollar.  Debtor shall provide copies of their tax returns to the trustee no later than April 30 each year and shall submit their tax refund to the trustee within fifteen days of receipt.

 Lydia S. Meyer Language

The debtor(s) shall file with the Trustee a copy of his/her/their  complete tax return on or before May 15 of each year.  Notwithstanding any provisions of the debtor(s)’ Chapter 13 Plan to the contrary, the
debtor(s) shall pay all tax refunds above $2,000 per year into the plan in addition to the base. The base shall be automatically increased by said amount without motion, hearing or court order after the Trustee’s office has received a copy of the debtor(s)’ tax return.  The Chapter 13 Plan is hereby deemed amended accordingly.

Does Automatic Stay Stop Eviction

Does Automatic Stay Stop Eviction.  YES  Can a Landlord evict his tenant after the tenant files a Bankruptcy.  YES.  However, the Landlord needs be exceptionally careful.   Under Section 362 of the Bankruptcy Code, the Tenant’s lease of the premises is cover by the Bankruptcy Automatic Stay.  This is a global stay on all activity of the Bankruptcy Debtor (our tenant).  To get relief from the automatic stay and be able to proceed with the eviction requires the landlord to either wait for the debtor file his statement of intention of either assuming or rejecting the lease.  The  Debtor (tenant) has 30 days from the filing of the petition to file his statement of intention.  To obtain this statement of intention soon and force the debtor (tenant) to either assume or reject the tenancy, the landlord should proceed with a motion under Section 365(d) of the bankruptcy code to obtain an order of the court requiring debtor to file his statement of intention by a certain date.  If the lease is rejected under Section 365(a), it is no longer part of the bankruptcy estate and landlord can immediately start eviction process.  The eviction should seek past due rent and money damages from the date of bankruptcy filing forward into the future along with expenses post petition.  The past due rent and expenses incurred prior to the petition date should be either a claim in that bankruptcy or if a no-asset case, these claims will be discharged in the bankruptcy.

What to do if the debtor has assumed the lease but is not paying.  At this point, this would require a motion for relief from the stay for inadequate protection.

A landlord of the debtor is attempting to terminate debtor’s leasehold for nonpayment of rent but has failed to do so at the time of filing. The automatic stay of section 362(a)(3) applies either on the theory that the leasehold interest is property of the estate or on the theory that the leased premises are property in the possession of the estate. The landlord should proceed under section 365(d)(2) by asking the court to order the debtor to assume or reject the lease within a specific period of time. If the property is nonresidential real estate as to which the debtor is the lessee, section 365(d)(4) will apply rather than section 365(d)(2). Colliers Section 38.02[2] …

Obviously, when a lease is rejected under section 365(a), the landlord should not be put to the additional expense of then seeking relief under section 362(d) to be able to re-enter the premises. Colliers 38.02 [3]

Chapter 7 debtor needs to file statement of intention under Section 521 of the code within 30 days of filing the petition, Bankruptcy Code Section 521.


Debtor must file statement of intention with regard to the lease within 30 days of the filing of the Chapter 7 Petition, Section 521 Bankruptcy Code. If debtor does not file statement of intention with regard to the lease within 30 days, The landlord should proceed under section 365(d)(2) by asking the court to order the debtor to assume or reject the lease within a specific period of time. As a practical matter, this motion should be filed immediately after the filing of the petition to ensure that an order of the court is issued requesting dismissal of the Chapter 7 case if this statement of intention isn’t filed timely or requesting that debtor assume or reject sooner than 30 days.

Pre-Petition Eviction Case is stayed as a practical matter until the statement of intention is filed. If Debtor does not vacate the premises after statement of intention is filed timely or pursuant to order, nothing should stop the state court proceeding for forcible entry and detainer for possession only. There can be no money damages for past due rent or expenses prior to the date of filing of the bankruptcy. However, a claim for past due rent and other damages can be made for post-petition rent and expenses.

Parking Tickets Dischargeable Bankruptcy

Parking Tickets Dischargeable Bankruptcy

Parking Tickets are a crime, fine or penalty as defined under the bankruptcy code.  They are not dischargeable in a Chapter 7 Bankruptcy.  Usually the filing of a Chapter 7 Bankruptcy forces the City of Chicago or other Illinois Municipality to offer a payment plan.  What is less clear is whether the suspended license will be immediately  re-instated based upon the Chapter 7 Filing.  Usually, the re-instated driver’s license is only allowed after the discharge is granted, the payment plan is in effect and payments are being made or the entire balance of the parking tickets is paid. Therefore, Chapter 7 is a great way to get rid of debt without any repayment, but not such a great way to deal with a parking ticket problem and absolutely not a great way to get your license back quickly.

Parking Tickets are dischargeable in Chapter 13 Bankruptcy.  Typically debtors will pay back as little as 10% of the total balance.  This is not always the case, but is true in a large portion of cases.  Upon the filing of the Chapter 13 Bankruptcy, the debtor with a suspended driver’s license can immediately apply for re-instatement of the suspended driver’s license and can expect to be behind the wheel in as little as a week.  Chapter 13 is also popular for people who only have enough money for the filing fee ($281) and need to stop garnishments, home foreclosure and car repossessions.

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Chapter 7 versus Chapter 13 Bankruptcy 2014

Chapter 7 Versus Chapter 13 Bankruptcy 2014

During Tax Season 2014 (2013 Taxes); many people consider a Chapter 7 Bankruptcy because they hope they will have enough money from their tax refund to afford the filing of the Chapter 7.  The assumption is that all of the debt will be wiped out and their family will have a much better future with lower expenses.  This is generally true.  However, the farther you move away from simple credit card debt and add in the issues of car loans, home mortgages and unpaid taxes and the answer is less clear.

First the up front costs – since the Chapter 13 Code allows attorney fees to be awarded through the Chapter 13 case, there is very little up front cost – usually the filing fee ($281).  Second, Chapter 13 allows a debtor to not only keep their car, but get caught up on past due payments.  Thirdly  Chapter 13 is the original way to get caught up on a home mortgage.  Lastly,  if you have parking ticket, fines or unpaid tax issues, Chapter 13 provides a smooth way to fix these issues.

Chapter 7 is often preferred because no debt is paid back.  This is often most helpful where the debt is primarily credit cards and types of unsecured debt.  Chapter 7 also is a simpler process and generally takes only 5 months to administer from filing to finish.  All attorney fees and filing fees must be paid prior to filing – this is one of the biggest challenges to filers.  Occasionally, debtors are allowed to pay their fees one or two months after filing using a special client representation agreement – however, this agreement has a dark side – if you do not pay, your attorney does not need to represent you after the case is filed oftentimes resulting in your case being dismissed.

Below is a quick summary of the differences between Chapter 7 and Chapter 13.

Bankruptcy Action Chapter 7 Chapter 13
Can Get Caught Up on Car Payments x
Can Get Caught Up on Home Mortgage Payments x
Can Lower Car Loan Interest Rate x
Can Lengthen Car Loan Term x
Can Discharge Parking Tickets x
Can Keep Car Through Reaffirmation x
Can Keep Home Through Reaffirmation x
Retirement Assets are Exempt x x
No Repayment of Any Unsecured Debt x
Takes 5 months to complete bankruptcy x
Tax Liability Can be Discharged x x
Priority Taxes (Non- [Read more…]
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