Author Topic: Waiting For Bankruptcy Reform?  (Read 2070 times)

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NYCBroke

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Waiting For Bankruptcy Reform?
« on: May 16, 2016 08:26:42 AM »
My credit is a mess. Several judgements and likely more coming. I have close to six figures in student loans also. I haven't defaulted on any of them and right now I am in a forbearance. I have been putting off bankruptcy filing for years waiting for some kind of reform. I can't see filing BK to wipe out 80K in credit card debt, while I have more then that in federally guaranteed student loans. Of course I haven't had a garnishment yet. If that should happen then most likely I would be forced to file.

I keep hearing about the student loan bubble and possible bankruptcy reform to allow inclusion of those debts. Anyone think this will ever become a reality?

Bobby12

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Re: Waiting For Bankruptcy Reform?
« Reply #1 on: May 16, 2016 12:24:52 PM »
There has been talk for years about modifying the BK code regarding private student loans. Sen. Dick Durbin has been pushing this since 2005 (when qualified private loans were made non-dischargeable). Personally, I don't think it looks promising. It doesn't matter which party controls congress or who is in the Whitehouse. There have been several bills brought up to do something with student loans, but they never make it out of committee. There's just too much lobbying (money) coming in from Navient, etc.

Bruno the JDB Killer

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Re: Waiting For Bankruptcy Reform?
« Reply #2 on: May 16, 2016 01:05:16 PM »
https://www.congress.gov/bill/113th-congress/house-bill/532

No action in 3 years. Your congress hard at work.
I am not an attorney. Any information I post is strictly my opinion and should be treated as such.

CleaningUp

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Re: Waiting For Bankruptcy Reform?
« Reply #3 on: May 16, 2016 03:06:46 PM »

I have been putting off bankruptcy filing for years waiting for some kind of reform.



Ain't gonna happen in the next decade or so.

And if it does, it is unlikely that defaulted student loans will be given a free pass.  There is just not the political will for The People to pick up your tab on your degree in a subject that has no use to the economy.

Also, the arguments as to why student loans are not dischargable have not yet been overcome...The BEST you can expect out of any BK reform in the future will be to have your payment schedules extended and the interest rates reduced.  There may even be some trade made for you doing something like teaching in an inner-city school in exchange for a cut in the amount owed or a refund, but it WILL require you to uproot your current life to meet the new schedules for write-down or write-off.

Best that you stop praying for future relief and start figuring out how you will meet the current obligation now with your current resources...The obligations are going to be around for a long, long time and they will affect your abilities to gain employment and repair your credit until you do address them.

Time to stop whining and start using the mechanisms already in place to help. Things are not going to change materially until you take action to change them.

You're wasting time and energy trying to say that reality isn't really reality.

ironfist

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Re: Waiting For Bankruptcy Reform?
« Reply #4 on: May 27, 2016 01:09:30 AM »
I agree that it's not a good strategy. There's a small chance that private student loans may be dischargeable in the future if they roll back the 2005 reforms (my wife is currently $60k in debt with all private SLs), but I just can't see a situation where they expand BK protection for federally guaranteed loans. You can get them discharged in rare cases where the repayment burden causes an undue hardship, but that's an extremely high bar and only applicable in extreme scenarios (eg, married couple in their 50s, both still with massive student loans and no career prospects, one spouse becomes disabled and requires care from the other spouse).

On a side note, I wonder what would happen to BK in general if the next administration passed a law that simply repealed the 2005 bankruptcy reforms and implemented the law as it stood before those changes. I'm guessing there would be a major slowdown in filings after the law passed, then a massive flood of filings as soon as the law took effect.

kevinmanheim

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Re: Waiting For Bankruptcy Reform?
« Reply #5 on: May 27, 2016 01:03:21 PM »
Billions of dollars are at stake.

That means millions of dollars in lobbying money.

Guess who will prevail?

Student loans keep people indebted to corporations and the govt. Why would those parties let go of such a powerful control tool?


trueq

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Re: Waiting For Bankruptcy Reform?
« Reply #6 on: May 27, 2016 02:32:19 PM »
I'd be bankrupting the CC debt.

Wipe it clean if you can get a Ch.7

If it ends up being a Ch. 13 forget it.

I'd stop paying on all credit card debt and put EVERYTHING toward student loan payoff.

The real problem in your situation is letting some of debt go to judgment, that is a much longer problem when it gets that far.

What the macro societal problem is:   Letting kids take out these insane amount of student loans.   I worked my way through college full time (while attending full time).   I did not take time to party or do usual college time wasting things.    I had one loan.   I put my last semester tuition on a credit card at 0%, which I paid off 6 months after graduation.

While at college, I saw a lot of students taking out loans for everything, tuition, books, board, meals, etc.   Had no job while in school, just kept piling on, to six figures.   They did little study.  Did a lot of protesting, partying, and "clubing" though.   Some of them did not even graduate or earn degree to make it somewhat worthwhile.   Some of them earned worthless degrees with no earning power.    We did an expose' in student newspaper on this problem of (ir)responsible use of student loans when I was Editor-in-chief...got crucified by administration for it as "hateful" toward students seeking opportunity.

Student loans are an absolute no-no in my book.   Better to put it all on credit cards.

(When I was 22, in my last year of college, I did have capacity to borrow $252,000 on my credit cards at time.   that was my student loan option, if I needed it at the time.)
My free speech is not legal advice.  If you need legal advice, you need to talk to a lawyer.

Litigation Defense record
Arbitration record:   9 wins * 0 loses
Court Record:         2 wins * 2 judgments (1 of the 2 judgments has been vacated, other judgment upheld on appeal, marked "satisfied", because I wrote a check.)

The one bank that beat me in court, I now have a $2200 limit credit card from them again.
Redemption is always possible.

aintgonnapay

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Re: Waiting For Bankruptcy Reform?
« Reply #7 on: March 18, 2017 03:34:12 PM »
The bubble is going to burst at some point. There is over $1.3 trillion in student loan debt which is an amount that far exceeds credit card and auto debt. A recent Wall Street Journal article reported that some 40% of people are not paying back their loans.
Student loan indentured servant in $100,000+ debt to private lender Sallie Mae. 100% unable to pay even close to the minimum monthly payment.

moondog

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Re: Waiting For Bankruptcy Reform?
« Reply #8 on: March 18, 2017 05:57:43 PM »
I think it is starting to burst. At end of 2016, 4.2m borrowers in default, 17% higher than previous year.

I agree with cleaning/kevin, reform will never happen. Lobby dollars too big.

Bruno the JDB Killer

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Re: Waiting For Bankruptcy Reform?
« Reply #9 on: March 18, 2017 08:45:04 PM »
Look up HR 532, a house bill to include SLs in BK. Died a slow death in 20213, hasn't been heard from since.
I am not an attorney. Any information I post is strictly my opinion and should be treated as such.

BrokeBob

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Re: Waiting For Bankruptcy Reform?
« Reply #10 on: March 18, 2017 09:37:45 PM »
In the past few decades, every time there has been bankruptcy "reform", the "reforms" have been to make BK much harder, and to heck with the consumer. 

Given the current makeup of the federal government, a reversal of that trend is unlikely.  Note that I am not singling out any one political party.  For example, former VP Joe Biden was the best friend the banks ever had. 

I have also noticed -- whenever they make BK tougher, the loans get a LOT riskier.  The banks claim that making BK hard protects the economy from mass defaults, and thus makes the economy stronger.  However, many of us noticed that within a few years after the last "reform", the banks went nuts giving out loans to anyone with a pulse, which destroyed the economy. 

I personally believe that easier BK laws and stronger consumer laws would actually help most lenders in the long run, by forcing them to abandon the predatory practices that eventually come back to bite them. 

trueq

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Re: Waiting For Bankruptcy Reform?
« Reply #11 on: March 18, 2017 10:23:47 PM »
In the past few decades, every time there has been bankruptcy "reform", the "reforms" have been to make BK much harder, and to heck with the consumer. 

Given the current makeup of the federal government, a reversal of that trend is unlikely.  Note that I am not singling out any one political party.  For example, former VP Joe Biden was the best friend the banks ever had. 

I have also noticed -- whenever they make BK tougher, the loans get a LOT riskier.  The banks claim that making BK hard protects the economy from mass defaults, and thus makes the economy stronger.  However, many of us noticed that within a few years after the last "reform", the banks went nuts giving out loans to anyone with a pulse, which destroyed the economy. 

I personally believe that easier BK laws and stronger consumer laws would actually help most lenders in the long run, by forcing them to abandon the predatory practices that eventually come back to bite them.

+1.    You are not going to see bankruptcy reform for at least four years and it is likely this president will be re-elected....that has been the pattern the last 3 presidents.  So BK reform is unlikely inside of 10 years.   Read the presentation attached to this post....this is the way to get rid of student loan debt....but is probably going to need a lawyer.
My free speech is not legal advice.  If you need legal advice, you need to talk to a lawyer.

Litigation Defense record
Arbitration record:   9 wins * 0 loses
Court Record:         2 wins * 2 judgments (1 of the 2 judgments has been vacated, other judgment upheld on appeal, marked "satisfied", because I wrote a check.)

The one bank that beat me in court, I now have a $2200 limit credit card from them again.
Redemption is always possible.

flaccito

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Re: Waiting For Bankruptcy Reform?
« Reply #12 on: March 19, 2017 05:23:17 AM »
If the student loan debt is say, under $50k, it should be survivable. It will still take a long time to escape, but it's at least doable.

Unfortunately, if the debt is over say, $100k or into the multiple 6-figures, it's unlikely it'll ever get paid off. Personally if I was one of these hapless kids who is fresh out of school with a worthless degree and $150-$200k or more in student loan debt I would SERIOUSLY consider just up and leaving the country. That's the only practical solution it seems, because with a worthless degree you will quite frankly NEVER pay off 6-figures student loans, it's simply impossible with the low-paying jobs out there (for worthless degrees and unskilleds).

Of course, there's no LEGAL way out, so starting over completely in another country would start to look like a rather attractive option.
« Last Edit: March 19, 2017 05:27:29 AM by flaccito »

Bruno the JDB Killer

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Re: Waiting For Bankruptcy Reform?
« Reply #13 on: March 19, 2017 01:06:44 PM »
Run up hundreds of thousands in debt for a worthless degree, burn the taxpayers, and skip the country. Nice career choice. I don't know about this myself, but what do you want to bet if you owe Uncle Sam a few hundred K, they won't give you a passport? Technically, SL defaults  are not grounds for denial, but you know how it works. They'll find some other reason to deny you.

The IRS can also revoke or stop a passport under the FAST Act if you owe 50K or more in taxes.
I am not an attorney. Any information I post is strictly my opinion and should be treated as such.

kevinmanheim

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Re: Waiting For Bankruptcy Reform?
« Reply #14 on: March 19, 2017 06:54:52 PM »
(Most) Student debtors don't yet realize they are being led into a trap.

Money isn't the only way to repay debt to a government.