Will the Build America Bonds Push Cities into Bankruptcy?

On behalf of Debt Advisors, S.C.

Build America Bonds were created in 2009 as part of the American Recovery and Reinvestment Act. The federal government offered state and local issuers a 35 percent subsidy on interest costs if they sold the bonds on a taxable basis. Now the Treasury says it will reduce the subsidy by any amount the state or municipality owes the federal government.

This will force states and cities to come up with cash to pay the government at the same time that they are faced with severe budget deficits. As revenue declines faster than expenses in the recession, debt-laden cities are considering filing for Chapter 9 bankruptcy.

Chapter 9 bankruptcy was created in the wake of the Great Depression to give municipalities protection from creditors while developing a plan to pay off their debts. It is generally considered a last resort because it creates uncertainty for everyone from city employees to bondholders. By compromising the security of bonds, a traditionally low-risk investment, municipalities considering bankruptcy make it harder to raise money from investors, slowing economic recovery even more.

Detroit, Los Angeles and Miami have discussed Chapter 9 bankruptcy this year. They also have sold a combined $4.5 billion in Build America Bonds. If they lose a portion of their government subsidy, bankruptcy may become a reality for these cities. Some municipalities have raised taxes to help relieve the problem, but experts say a surge in municipality bankruptcy filings is inevitable, especially with the change to the Build America Bonds program.

Options for College Graduates Drowning in Student-Loan Debt

On behalf of Debt Advisors, S.C.

The number of college graduates with student-loan debt is increasing dramatically. The Project on Student Debt, a nonprofit research and advocacy organization, estimates that the number of college graduates with student-loan debt has increased by nine times since 1996. According to the College Board’s Trends in Student Aid study, the median debt amount for bachelor’s-degree recipients who borrowed while attending private, nonprofit colleges was $22,380.

Many student-loan borrowers find themselves in a position similar to subprime borrowers who assumed the value of their houses would always increase. Like subprime lenders, some universities enroll students without asking many questions about whether they can afford to pay the bill. If the students cannot afford the tuition, universities direct students to private, for-profit lenders who have no idea what the student might earn after graduation, just like mortgage lenders who did not verify borrowers’ incomes.

It is almost impossible to discharge student-loan debt in bankruptcy, but bills in the U.S. Senate and House of Representatives might help graduates who are drowning in student-loan debt. Under proposed changes, rules on the discharge of private loans would be less stringent than current laws, which require the debtor to prove “undue hardship.”

However, borrowers could not discharge their federal loans such as Stafford and Perkins loans because the federal government and ultimately taxpayers stand behind the loans. Also, federal loans offer various payment plans and forgiveness programs, which are generally not available from private lenders.

There are also options other than bankruptcy for people who are struggling with their student-loan debt obligations. Underemployed graduates may be able to find a flexible second job to supplement their income. Others who live in cities with a high cost of living may find some relief by moving to a cheaper area. Finally, borrowers might be able to work out a flexible or short-term payment plan by contacting their lenders directly.

Welcome to Our Wisconsin Bankruptcy Blog

On behalf of Debt Advisors, S.C.

Throughout the state of Wisconsin, the experienced bankruptcy attorneys at Debt Advisors, S.C., have helped thousands of people find debt relief. If you are faced with financial difficulties, whatever the reason for your debt, you should know that you have options for relief that include Chapter 7 and Chapter 13 bankruptcy protection. From our offices in Milwaukee, Madison, Green Bay, Oshkosh, Kenosha and Sheboygan, we can help you through this challenging time.

This Blog page is dedicated to issues concerning our clients, their injuries and how the law may impact their ability to obtain the compensation they deserve. Check back at this Blog from time-to-time to read periodic updates, posts and comments from our attorneys. Learning more about your rights can help to make important decisions about your case.

Talk with an attorney at Debt Advisors, S.C., by calling us toll free to schedule an appointment for a free initial consultation at 888-222-5615. Learn more information about bankruptcy, how it can protect you and what life will look like after your bankruptcy is over.

We are a debt relief agency. We help people file for bankruptcy relief under the bankruptcy code.