Northridge was once known as the “Horse Capital of the West.” Today, it is an affluent, diverse neighborhood of Los Angeles that has been home to many notable people including Barbara Stanwyck, Matt Cassel, Casey Matthews, Jeff Weaver, and Jered Weaver. A large percentage of military veterans also live in Northridge. The percentage of residents 25 or older with both a bachelor’s degree and a master’s degree is high in comparison with the rest of the county.
People often think that well-educated, affluent populations don’t have the same degree of debt as the less well-off. The truth is that student loan debt can be hefty, and paying off both undergraduate and graduate school loans can impact anybody’s ability to make timely mortgage, car loan, and other payments. Northridge sees its shares of bankruptcies and foreclosures. If you are struggling to make mortgage or car payments, an experienced Northridge bankruptcy attorney can help.
The Undue Hardship Exception
A university education has gotten increasingly expensive. Because of the recent recession, many workers returned to school for a graduate degree or even a second graduate degree. The economy has bounced back, but not as strongly as many people hoped it would. High paying jobs are difficult to come by even for those with a graduate degree. Unfortunately, most debtors cannot discharge student loan debt through bankruptcy. The only way to have these debts wiped out is to show undue hardship.
There are two tests used by the courts to determine undue hardship. One test, the Brunner test, requires that you show poverty, persistence of a difficult financial situation, and good faith efforts to repay the loans at issue. The other test, a “totality of the circumstances” test, may be more applicable to residents of Northridge. Courts sometimes look at all factors in your particular case to determine whether it is an undue hardship for you to pay off your student loan debt.
Eliminating Second, Third, and Fourth Mortgages
Most people cannot meet the undue hardship exception, but there are many other tools afforded by the bankruptcy process that can help you improve your financial situation, particularly if you file for Chapter 13 bankruptcy. Under Chapter 13, you may be able to eliminate a second or third mortgage through a bankruptcy process called lien stripping.
During the recession many property values dipped, leaving many people “upside down” on their houses. This means that their mortgages exceeded the value of their houses. If the entirety of your house is not fully secured by your first mortgage, you can ask the bankruptcy court to convert any junior mortgages to unsecured debt. That debt is then eliminated after you successfully complete your Chapter 13 repayment plan.
This concept is easier to understand with a concrete example. Suppose you have a $300,000 first mortgage, a $50,000 second mortgage and a $30,000 third mortgage. If your house is worth less than $300,000, the other two mortgages can be stripped. If your house is worth less than $350,000, you can strip the third mortgage, but you must keep the second mortgage, because it is also secured.
Another useful tool in Chapter 13 bankruptcy is the “cramdown.” Many items like loans for cars or boats are secured debts, in which your lender retains a security interest until all loan payments are made. A lender can repossess the property if you miss payments. These items also tend to lose value rapidly after they are purchased.
In a Chapter 13 bankruptcy, if you own a car currently worth $7,000, but you still owe $10,000 on the original car loan, you may be able to cram down the loan to $7,000. The remaining $3,000 becomes an unsecured debt, similar to medical bills or credit cards. You may have to pay a percentage of the unsecured debt, but the rest will be wiped out after you complete your Chapter 13 debt repayment plan. You will own your car or boat outright after you are done with the plan.
If you are having trouble making mortgage or car payments, or are otherwise feeling overwhelmed by debt, bankruptcy may present some viable options for improving your situation. Contact the knowledgeable Northridge bankruptcy lawyer Devin Sawdayi at 310-475-9399 or via our online form to set up your free consultation.
Having been referred to you by my cousin, I wish to thank you for the extremely seamless handling of my Bankruptcy. You answered all my questions professionally and I really appreciate the understanding and care taken with my case. I would definitely refer you to anyone asking me for a good bankruptcy lawyer.
I just want to thank you for the great job that you did helping me get my life back together! I’m not sure what I would have done had I not been given your contact! Not only did you make it possible for me to start fresh but you took care of all the details! And if that wasn’t enough you followed up with me when I needed your help after the fact. Please feel free to post this message as I never miss a chance to say what a great job you have done and are still doing! Thanks Devin for helping me start over!