Bankruptcy to get rid of student loans?

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jurisx
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Re: Bankruptcy to get rid of student loans?

Postby jurisx » Thu Jun 07, 2012 9:09 pm

fatduck wrote:
niederbomb wrote:Forget credit cards and home equity. You can default on some private student loans, just not the government-backed ones. If you really wanted to plan for bankruptcy, just don't take government loans. Take a predatory private loan and then default on it. End of story.

but why doesn't everyone do this? it's almost like bankruptcy isn't a panacea!

Because the govt ones appear cheaper and most people don't start out planning to fail.

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Pate
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Re: Bankruptcy to get rid of student loans?

Postby Pate » Thu Jun 07, 2012 9:29 pm

You cannot bankrupt, or get hammered with a fraud charge when you are just starting out. It IS that simple.

jurisx
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Re: Bankruptcy to get rid of student loans?

Postby jurisx » Fri Jun 08, 2012 1:01 am

Pate wrote:You cannot bankrupt, or get hammered with a fraud charge when you are just starting out. It IS that simple.

So a bankrupt lawyer can't declare bankruptcy?

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sunynp
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Re: Bankruptcy to get rid of student loans?

Postby sunynp » Fri Jun 08, 2012 1:22 am

jurisx wrote:
Pate wrote:You cannot bankrupt, or get hammered with a fraud charge when you are just starting out. It IS that simple.

So a bankrupt lawyer can't declare bankruptcy?

You can declare bankruptcy but you can't discharge your student loans - outside of some very extreme circumstances. That isn't just lawyers, it is all student loans, so student loans for anything are not dischargable ( there is an exception if the school shuts down and some other extreme circumstances.)

Is this so hard to comprehend?

jurisx
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Re: Bankruptcy to get rid of student loans?

Postby jurisx » Fri Jun 08, 2012 11:15 am

sunynp wrote:
jurisx wrote:
Pate wrote:You cannot bankrupt, or get hammered with a fraud charge when you are just starting out. It IS that simple.

So a bankrupt lawyer can't declare bankruptcy?

You can declare bankruptcy but you can't discharge your student loans - outside of some very extreme circumstances. That isn't just lawyers, it is all student loans, so student loans for anything are not dischargable ( there is an exception if the school shuts down and some other extreme circumstances.)

Is this so hard to comprehend?


the way you word it yeah. "You cannot bankrupt, or get hammered with a fraud charge when you are just starting out".

Heck by your wording it means I can't do either. I'm superman, bring Kryptonite!!!!!

gm8888
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Re: Bankruptcy to get rid of student loans?

Postby gm8888 » Wed Nov 21, 2012 12:16 pm

I'm not an attorney and I've never tried this but I believe it will work. Transfer your student loan to a 0% credit card for 1 year. After the 1 year is up transfer it again to a different 0 percent credit card. There is no element of fraud here because you are transferring a loan that is in the 6-8% interest bracket to 0% and since you transferred the debt twice it puts some distance between the student loan and the first credit card.

I don't think Bankruptcy Code § 727(a) will apply here because it repeatedly references a 1-year time period of such things like concealment. Since you are transferring to a credit card at 0% (gaining an advantage) and then again to another card at 0% (maintain that advantage) you are demonstrating that you are trying to make it easier for you to pay off your loan. On the second card you will have to skip some payments, which, of course, will send the interest rate up to 30%. At that point you will declare bankruptcy and if asked about the transfer of student loans be truthful. § 727(a) should not apply because more than 1 year has passed and you made payments on the card during that one year period. Any attorneys care to shoot holes in this?......

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somewhatwayward
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Re: Bankruptcy to get rid of student loans?

Postby somewhatwayward » Wed Nov 21, 2012 12:28 pm

gm8888 wrote:I'm not an attorney and I've never tried this but I believe it will work. Transfer your student loan to a 0% credit card for 1 year. After the 1 year is up transfer it again to a different 0 percent credit card. There is no element of fraud here because you are transferring a loan that is in the 6-8% interest bracket to 0% and since you transferred the debt twice it puts some distance between the student loan and the first credit card.

I don't think Bankruptcy Code § 727(a) will apply here because it repeatedly references a 1-year time period of such things like concealment. Since you are transferring to a credit card at 0% (gaining an advantage) and then again to another card at 0% (maintain that advantage) you are demonstrating that you are trying to make it easier for you to pay off your loan. On the second card you will have to skip some payments, which, of course, will send the interest rate up to 30%. At that point you will declare bankruptcy and if asked about the transfer of student loans be truthful. § 727(a) should not apply because more than 1 year has passed and you made payments on the card during that one year period. Any attorneys care to shoot holes in this?......


student loans are not dischargeable in bankruptcy save for "hardship," a very high standard that most don't meet. even if you technically transform your student loan debt to credit card debt, i don't think the bankruptcy court judge will ignore the fact that it originated as student loan debt not to mention that several people have said you can't put student loan debt on a credit card anyway. plus if you don't mean the fairly stringent means test, you may be stuck in C13 having to pay most of the debt off anyway and destroying your credit along the way.

the short answer is just no, your plan is stupid and illegal.

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XxSpyKEx
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Re: Bankruptcy to get rid of student loans?

Postby XxSpyKEx » Wed Nov 21, 2012 10:00 pm

Anonymous User wrote:Why not just default on the student loan? Your credit is ruined either way.
In the unlikely event you actually have the credit worthiness to get a credit card(s) that has a high enough limit to allow you to pay off your debt, if you don't pay the credit card you will ruin your credit. If it's in bankruptcy that's a minimum of 7 years. Ironically, you will have to find the money to pay the bankruptcy attorney.

But you would do better just calling the student loan lender and telling them you don't have a job or any way to pay them and attempt to have the loan placed in forbearance or have the payments set up so that you're only paying the interest, or even only paying a small percentage of whatever salary you may come by.


You can only seek forbearance for a set amount of time, and, I believe, wage garnishments are 15% for the rest of your life (not really a solution to the debt).

buckilaw wrote:Even if this works you could run into character and fitness issues.


It wouldn't work, but if it did, you can't be disbarred for failing to pay your loans (obviously, the smart way of doing this would be to get sworn into the state bar prior to filing bankruptcy, if it were to work).


Basically, there's no way around paying student loans, except the possibility of fleeing the country. But even in that situation, it's not that clear that would solve the problem because the government might be able to seize assets and money you have invested over here (not sure).

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dr123
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Re: Bankruptcy to get rid of student loans?

Postby dr123 » Wed Nov 21, 2012 10:12 pm

I don't understand why there are always a shit ton of people on TLS complaining about student loan debt they havent accumulated yet. There's an easy solution: don't take out loans.

cynthiad
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Re: Bankruptcy to get rid of student loans?

Postby cynthiad » Wed Nov 21, 2012 10:20 pm

MrPapagiorgio wrote:There was a thread on here not too long ago where a guy was considering taking the equity out of his house, paying for law school with said equity and thus circumventing the non-dischargeable nature of student debt. Can't find the thread, but I don't think there was a consensus. I suppose it could work if you paid tuition in one lump sum because you would then be paying back a home equity loan and not student loans. I dunno.


That would work because there wouldn't be any student loans in the first place. If he took out an equity loan (or any other kind of dischargeable loan) to pay off student loans then the judge would see through it and he'd be in big trouble.

cynthiad
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Re: Bankruptcy to get rid of student loans?

Postby cynthiad » Wed Nov 21, 2012 10:30 pm

RedBirds2011 wrote:
jurisx wrote:All I know is all 3 credit reports have me doing better than 90% of the nation right now. You pay your credit cards and other bills, and it goes up. Not hard. Pretty easy really. Most can pull it off.



As someone mentioned above, it's evident you have no idea how credit reporting works. Nobody starts out with perfect credit. NO credit does not equal good credit.


Someone in college shouldn't have no credit. It's pretty easy to build good credit (score above 700) in college if you don't have financial problems. Just take out a credit card, pay on time and in full every month, after a while get the limit raised, keep paying on time, and so on. If you don't have any negative issues on your credit report, you can build good credit fairly quickly.

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alwayssunnyinfl
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Re: Bankruptcy to get rid of student loans?

Postby alwayssunnyinfl » Wed Nov 21, 2012 10:33 pm

"Hi, I'd like to open up a credit card. Why yes, I have four other credit cards with cash advance allowances I've already maxed out. You'll still give me a card with a ridiculously high cash advance allowance and/or let me transfer existing debt to the card!? Great! I knew I could count on you."

If you had any sizable amount of student loan debt, at 5-10K MAX per card, you'd have to have this conversation with way more credit card companies than is realistically feasible.

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hichvichwoh
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Re: Bankruptcy to get rid of student loans?

Postby hichvichwoh » Wed Nov 21, 2012 10:34 pm

dr123 wrote:I don't understand why there are always a shit ton of people on TLS complaining about student loan debt they havent accumulated yet. There's an easy solution: don't take out loans.


yeah, just go get that 250k from your bank account, jeez

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alwayssunnyinfl
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Re: Bankruptcy to get rid of student loans?

Postby alwayssunnyinfl » Wed Nov 21, 2012 10:35 pm

hichvichwoh wrote:
dr123 wrote:I don't understand why there are always a shit ton of people on TLS complaining about student loan debt they havent accumulated yet. There's an easy solution: don't take out loans.


yeah, just go get that 250k from your bank account, jeez

Or, I don't know, secure some kind of funding that isn't student loans? Out of all of the professional schools, law schools seem to be the most generous with scholly money. Retake if you can't get money or get into a school worth going to at sticker, or don't go.

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dingbat
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Re: Bankruptcy to get rid of student loans?

Postby dingbat » Wed Nov 21, 2012 10:35 pm

tl:dr

best case scenario you get disbarred (wouldn't be the first). Worst case scenario you go to jail
Last edited by dingbat on Wed Nov 21, 2012 10:36 pm, edited 1 time in total.

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dr123
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Re: Bankruptcy to get rid of student loans?

Postby dr123 » Wed Nov 21, 2012 10:35 pm

hichvichwoh wrote:
dr123 wrote:I don't understand why there are always a shit ton of people on TLS complaining about student loan debt they havent accumulated yet. There's an easy solution: don't take out loans.


yeah, just go get that 250k from your bank account, jeez


I meant dont go to law school or go to a school on a scholly.

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paratactical
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Re: Bankruptcy to get rid of student loans?

Postby paratactical » Wed Nov 21, 2012 10:36 pm

gm8888 wrote:I'm not an attorney and I've never tried this but I believe it will work. Transfer your student loan to a 0% credit card for 1 year. After the 1 year is up transfer it again to a different 0 percent credit card. There is no element of fraud here because you are transferring a loan that is in the 6-8% interest bracket to 0% and since you transferred the debt twice it puts some distance between the student loan and the first credit card.

I don't think Bankruptcy Code § 727(a) will apply here because it repeatedly references a 1-year time period of such things like concealment. Since you are transferring to a credit card at 0% (gaining an advantage) and then again to another card at 0% (maintain that advantage) you are demonstrating that you are trying to make it easier for you to pay off your loan. On the second card you will have to skip some payments, which, of course, will send the interest rate up to 30%. At that point you will declare bankruptcy and if asked about the transfer of student loans be truthful. § 727(a) should not apply because more than 1 year has passed and you made payments on the card during that one year period. Any attorneys care to shoot holes in this?......


There are large percentage fees to transfer balances to the vast majority of 0% introductory rate cards. Occasionally a card will waive part of the transfer fee or lower the percentage, but no one will let you move 10k from one credit card to another without paying for it.

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alwayssunnyinfl
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Re: Bankruptcy to get rid of student loans?

Postby alwayssunnyinfl » Wed Nov 21, 2012 10:38 pm

I still contend this whole hypothetical is stupid. Even if you could transfer 10, 20, or 30k to credit cards before the banks smell the shit you're cooking, you're never going to get a sizable chunk of that soul-crushing 200k+ debt converted into dischargeable debt.

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I.P. Daly
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Re: Bankruptcy to get rid of student loans?

Postby I.P. Daly » Wed Nov 21, 2012 10:52 pm

Look up "tracing" in a legal dictionary...

http://legal-dictionary.thefreedictionary.com/tracing

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3|ink
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Re: Bankruptcy to get rid of student loans?

Postby 3|ink » Thu Nov 22, 2012 12:49 am

This probably wouldn't work. Your discharge would be challenged. A judge would probably look at the transactions and reject form for substance.

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XxSpyKEx
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Re: Bankruptcy to get rid of student loans?

Postby XxSpyKEx » Thu Nov 22, 2012 4:28 pm

cynthiad wrote:
MrPapagiorgio wrote:There was a thread on here not too long ago where a guy was considering taking the equity out of his house, paying for law school with said equity and thus circumventing the non-dischargeable nature of student debt. Can't find the thread, but I don't think there was a consensus. I suppose it could work if you paid tuition in one lump sum because you would then be paying back a home equity loan and not student loans. I dunno.


That would work because there wouldn't be any student loans in the first place. If he took out an equity loan (or any other kind of dischargeable loan) to pay off student loans then the judge would see through it and he'd be in big trouble.


Not really. A home equity loan is basically taking out a second mortgage on your home. You can use that money for whatever you want, including paying for school. But if you go bankrupt, the bank gets it's collateral (your house) and a deficiency claim for whatever else you owe them (which may or may not get paid, depending on whether you have sufficient assets to pay all or part of your unsecured creditors). There's really nothing fraudulent about taking a home equity loan on your home to pay for law school-- it's really not much different than selling your house and using the equity to pay for law school, except that you get to keep your house assuming you don't default on the loan. A home equity loan actually kind of makes sense in the current economy, if you have the assets and credit rating to secure one (and the ability to make payments towards it while in law school), because the fixed interest rates are a ton lower than with student loans (you can get a fixed 30 year mortgage for under 3% interest--so basically free money (it's even under the average rate of inflation!)--versus the 8% for student loans). With that said, I don't think the average incoming law student has this type of money/assets to make that work (if they did, then they wouldn't have to fear taking out student loans in the first place because they would just know that they were going to lose a portion of their assets/savings if law school turns out to be a bad investment).

bartleby
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Re: Bankruptcy to get rid of student loans?

Postby bartleby » Sat Nov 24, 2012 12:59 pm

If you have massive credit though, and balance transferred / wrote multiple 0% APR checks for like $9,000 -- what's the problem? Assuming your CC lets it slide. I wrote myself a check for $8500 at 2% one-time fee and 0% APR for a little over a year. Used part of it to pay my tuition. Obviously I don't plan on buying a house or applying for a car loan or something any time soon cause carrying a $8500 balance probably sucks.

cynthiad
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Re: Bankruptcy to get rid of student loans?

Postby cynthiad » Sat Nov 24, 2012 7:52 pm

XxSpyKEx wrote:
cynthiad wrote:
MrPapagiorgio wrote:There was a thread on here not too long ago where a guy was considering taking the equity out of his house, paying for law school with said equity and thus circumventing the non-dischargeable nature of student debt. Can't find the thread, but I don't think there was a consensus. I suppose it could work if you paid tuition in one lump sum because you would then be paying back a home equity loan and not student loans. I dunno.


That would work because there wouldn't be any student loans in the first place. If he took out an equity loan (or any other kind of dischargeable loan) to pay off student loans then the judge would see through it and he'd be in big trouble.


Not really. A home equity loan is basically taking out a second mortgage on your home. You can use that money for whatever you want, including paying for school. But if you go bankrupt, the bank gets it's collateral (your house) and a deficiency claim for whatever else you owe them (which may or may not get paid, depending on whether you have sufficient assets to pay all or part of your unsecured creditors). There's really nothing fraudulent about taking a home equity loan on your home to pay for law school-- it's really not much different than selling your house and using the equity to pay for law school, except that you get to keep your house assuming you don't default on the loan. A home equity loan actually kind of makes sense in the current economy, if you have the assets and credit rating to secure one (and the ability to make payments towards it while in law school), because the fixed interest rates are a ton lower than with student loans (you can get a fixed 30 year mortgage for under 3% interest--so basically free money (it's even under the average rate of inflation!)--versus the 8% for student loans). With that said, I don't think the average incoming law student has this type of money/assets to make that work (if they did, then they wouldn't have to fear taking out student loans in the first place because they would just know that they were going to lose a portion of their assets/savings if law school turns out to be a bad investment).


I think you misunderstood my post. I was saying it's fine to take out a home equity loan to pay for law school directly. That's distinct from taking out regular student loans to pay for law school, and then taking out an equity loan to repay those student loans with the intent of defaulting on the home equity loan. It honestly doesn't even make sense to do that, though, because if you're in such big financial trouble that you have to resort to these schemes to get out of paying your student loans, how could you afford to buy a house and pay enough toward it that you have equity?

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vanwinkle
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Re: Bankruptcy to get rid of student loans?

Postby vanwinkle » Sat Nov 24, 2012 8:02 pm

alwayssunnyinfl wrote:I still contend this whole hypothetical is stupid. Even if you could transfer 10, 20, or 30k to credit cards before the banks smell the shit you're cooking, you're never going to get a sizable chunk of that soul-crushing 200k+ debt converted into dischargeable debt.

This. For this hypothetical to even be plausible, the person involved would 1) have to already have such stellar credit that they can collect a credit limit over over $200K across their credit cards, and 2) be willing to throw away all that good credit by charging $200K and then defaulting on it.

The only kind of person who would have access to that kind of credit line would have such substantial assets that paying down their student loans wouldn't be a problem, making this entire line of inquiry ridiculously stupid.

philrozzi
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Re: Bankruptcy to get rid of student loans?

Postby philrozzi » Sat Nov 24, 2012 8:59 pm

This may or may not work, it's not as straight forward as yes or no because laws as very malleable. Basically it's up to each individual judge. I had a co worker who was caught snorting coke at work, was fired and eventually was granted unemployment. Just recently my bosses hired a kid straight out of the marines who was offered full time work but he was able to only work part time because of school. My boss found out he was drawing unemployment from the military and to make a long story short he is having to repay 10 grand of unemployment for refusing the full time work. He fought it in court but to no avail.

Anyways as for the college thing, the best bet would be to charge/cash advance college to your credit card from the beginning that way you are not committing fraud by paying off non dischargeable debt with the intent of bankruptcy. And if someone is real serious about these kinds of things there are companies online that will sort of "wash" your money. They charge your credit card under different business names each time and send a payment to you or to whom ever, for a percentage.




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