Student Loans: GREAT strategy or STUPID idea???

[SUB]

......but I can almost guarantee that an account a one-time $10K cash advance that files BK will trigger the creditor's flagging system for further inquiry .

Regardless of when?

[hckyfn80]

I don't mean this in a bad way, but $17 an hour with a Masters?!?! I think you could help her get a better job hckeyfn. Get a professional resume, take classes on interviewing, and be willing to commute to the city. Just what is her masters in?

No offense taken, but a Master's degree is not a "golden ticket." Her Master's is in comparative pathology. Unfortunately, the world of scientific research is all about academia...and if you don't have a Ph.D. then your options can be quite limited.

Another issue is that science related companies (biotech, pharma, etc.) are regionalized in the US (SF bay area, northeast US, san diego, etc). Where we live, there simply aren't many science research based companies. She did an extensive job search, and in the end pretty much had to settle for an entry level job...at what was $16/hr (she managed to get a small $1/hr bump up after a couple of months). Relocating isn't really an options. Anyway, I just wanted to clarify her job situation is not for lack of effort...or a poor resume, lack of interview skills, etc.

[FreshLikeADaisy]

I think what many people may not realize is that the trustee isn't looking at one financial document, or even one point in time. He will have your credit bureau open next to the checks you've written in the last year next to the bank statements you had to submit to him next to anything else he would like to ask of you. People keep talking about the lookback available to trustees as though it's a hard and fast rule, but it absolutely is not. A trustee can ask of you whatever he likes, for as many years back as he likes, and each trustee is different as far as what documentation he asks for up front.

My trustee wanted everything: every check I'd written in the last year (the actual register), taxes going back several years, bank statements, running balances, a signed release allowing him to go directly to my bank, creditors, etc for more information...

...and that was BEFORE he even cracked open my file. It was his form letter. Many of these documents requested up front had no time limits at all: if I had EVER been married, EVER been divorced, EVER been responsible for child support, etc. and all agreements, settlements, and documents pertaining thereto. I could have done a 48-hour Britney Spears style marriage at 18, and now in my 40's had to disclose it to the trustee.

Keep in mind that the trustee is the guy who gets paid out of whatever assets he can seize from your Ch7 bk estate. It is in large part a "commissions" sort of income. They are not salaried. And so these guys are not lazy, or stupid, or disinterested. They are basically highly trained forensic accountants who have seen pretty much every scheme and know how to spot them. If your paycheck rode on what you could sniff out of someone else's finances, you'd ask for whatever docs you wanted as well. Your own hunger for a good living, like theirs, would ensure that you looked at every available fact before granting a declaration of no assets in a Ch7.

Also keep in mind that your eventual goal is to have your debts discharged in a successful bk: if you don't like what a trustee is asking and so try to withhold or even hide your documentation, or you can't provide reasonably available documentation (such as bank statements from years past that would require only a request to the bank from you to get) it's no big deal for him to declare you an "asset" case or even dismiss your case altogether. Even if there's no fraud and no criminal charges, you just get dismissed and you still have this big honking load of debt to carry, whether it was "strategically acquired" or not. And now your creditors have every piece of information you ever included in your filing to use to find you and make your life a living hell until you pay up. If your bk is dismissed, that's the end of the automatic stay, and you have to wait at least 6 months to refile.

So for anyone who thinks there's some actual limit as to how far a trustee can go back, think again. There are *guidelines*, and I doubt one would go back farther than 10 years on anything, but the fact is that if you raise a question in his mind he can ask you for anything... and the law requires that you give him your full cooperation.

I am pro se, and looked into this VERY carefully because I do not have an attorney to shield me from any intrusive requests, and found out that he can ask pretty much whatever he likes. If some transaction of mine seems rooted to him in something I did five years ago, yeah, he can ask me for the original docs without hesitation, even though to me they may not seem relevant to my situation today. If he suspected fraud and got the UST involved, well, I can withhold documentation, but they can dismiss my bk case and charge me with fraud too.

(SUB, I'm not taking off on you specifically so please don't take it that way but rather multiple posts on this thread that seem to assume there are limits on what a trustee can ask or require in the way of documentation: there are actually few to none. But that misconception seems to be rampant so I thought I'd post. )

[HHM]

That goes for the US trustee as well.

[hckyfn80]

I understand that but correct me if Im wrong, but what triggers the investigation of a credit card charge is NOT the trustee, but the credit card companies who decide the BT's were too close to the BK for their amounts. My lawyer has been a lawyer for over 30 years and is a local judge and he said in his entire career he has only had an objection 3 times from credit card companies. All of them were large cash advances done within 3 months of filing or made cash advances after consulting with a BK attorney..

I understand paper trail, but you keep forgetting what triggers an investigation. Do you realize how many people do cash advances prior to filing and never see the light of day of an objection? You yourself on here have said objections are rare. If someone BT"s $10k to their checking account on one card a year before filing they are hardly going to see an objection.
People have larger credit lines than you realize in this country and utilize them frequently, yet objections are very low.

Objections based on BT's are not made by the trustee they are made by the credit card companies if they are ever made at all.

OP here...once again, my original post was theory based. I have a basic understanding of the general concepts of BK, but don't know much about the actual proceedings. That's why I posted - to get feedback and it seems the general consensus is that my idea was awful...or as HHM stated, "delusional."

Butterflywings and HHM have sort of delved off my original idea of getting signature loans and transitioned into obtaining credit cards and balance transferring the student loans over. This seems like the same exact idea to me, except that the medium is just a different form of dischargeable debt. Based on my following of the posts, it seems like the credit card idea holds a little more "merit" (used in quotes because the idea seemingly still gets the fraud stamp).

I guess I'm confused as to why the credit card method would have a greater chance of success.

I am also not understanding the difference between a creditor's objection and what the trustee would be looking for. It seems butterflywings is saying that if the creditor doesn't object, then the trustee wouldn't look into it.

What if my gf is able to get several credit card offers where there is a 0% APR on the transfers? That's better than the 7-9% she could get by re-financing her student loans. She could potentially be saving about $7-8k in interest...EACH YEAR! Would that be frowned upon by a trustee if she later declared bankruptcy (and I'm not talking about exactly 90 days later...but perhaps 1 to 1.5 years from now)?

[HHM]

The issue was never really signature loans vs credit cards, the main problem is timing and amount. (and of course, that she REALLY would be committing BK fraud). My issue with the Signature loans was merely practical in that I doubt she could get $90K worth of signatures, and even if she could, since the interest rates and terms would not be better than the student loans, that is just one more fact that makes an objection more likely.

But you really need to run the numbers, could she PAY the minimum payments for 1-1.5 years. Let's just assume she DOES NOT get the zero percent offers (most of those offers are now highly limited to 2-6 months). So assuming a standard 2.5% minimum payment, at 11% apr (a fairly standard credit card rate) her minimum payment would start at $2250 per month. (hmm, at $17 per hour, her GROSS income is only $2856.00 per month), even at 8% APR with a 2% minimum, that is a $1,800 monthly minimum.

I certainly understand about the job issue, a Masters is not a golden ticket to a job, and especially in the sciences, all the career, good paying jobs, require a Ph.D.

[stephanie4686]

Hckyfn, the fact that you live in the San Diego area makes $17 an hour even worse lol!!! I mean I live in Georgia and $17 would be possible to live on, but in CA dollars its like the equivalent of $8 in other states with lower living expenses.

I have the most useless degree ever, and I manage to make more than that. I'm sure she is a hard worker, but she has an education that she worked very hard for I'm sure, and she should make the most of it. I have a BS in chem, and I work at the career center in a technical college, so I know what it's like to have a degree that won't get you anywhere in the field. She is definitely selling herself short. Anyways, I didn't mean anything negative. All the best!

[FreshLikeADaisy]

I am also not understanding the difference between a creditor's objection and what the trustee would be looking for. It seems butterflywings is saying that if the creditor doesn't object, then the trustee wouldn't look into it.

A creditor has the legal right to object to his debt being discharged by the bankruptcy court. The most common objection is fraud, but as Diviaruba pointed out, there's a LOT more to it. In any case, a creditor objection is something that is completely up to a creditor to make or not as they please. It is not initiated by the court.

Very separately, the U.S. Trustee Program has oversight of the entire bankruptcy process in this country, even though it is a function of the federal court system. Judges don't process every detail of every case: trustees do so on behalf of the courts and the government. Their job is not only to prevent "fraud" -- whatever that means to you, and I'm not real sure you get it, sorry -- but to ensure that anyone who can possibly pay back their creditor, even if only partially, does so to the extent of their ability to pay.

When you receive good or services or money from a creditor and know that you have very little intention of paying it ALL back, that is theft. If you were a lender, and someone was jockeying to get out of repaying you, you'd call it theft too. The bankruptcy court calls it fraud.

In a very basic sense, if you CAN pay back some part of your debts but don't, using the bk system to shield you from rightful consequences of your choices, and your intent is not to be relieved of overwhelming debt nearly so much as it is to have a more comfortable financial picture, that is fraud. You will see, not only in the law itself but in case law that has arisen out of bankruptcy practice in this country, that INTENT has everything to do with it. For all intents and purposes, trying to evade the requirements of bk law while concurrently trying to avail oneself of the benefits of bk is fraud.

This determination is in the hands of the trustee in every bankruptcy case filed in this country. That's why the trustees are there, that's why the Chapter 7 trustees are paid out of recovered assets, that's why they have the latitude to go back as far and as thoroughly as they like. It is not in this country's best interest to allow people to shrug off unwanted debt except in the direst of circumstances. It is assumed that if you are looking into Ch7, you literally have no other options.

What if my gf is able to get several credit card offers where there is a 0% APR on the transfers? That's better than the 7-9% she could get by re-financing her student loans. She could potentially be saving about $7-8k in interest...EACH YEAR! Would that be frowned upon by a trustee if she later declared bankruptcy (and I'm not talking about exactly 90 days later...but perhaps 1 to 1.5 years from now)?

I sympathize with your gf, I honestly do. $17/hr is not fun at all. But you simply can't entertain the idea of obtaining credit to pay off debt at the same time you are considering bankruptcy, no matter how remote. This kind of dishonest scheme you keep coming back to is NOT her only option, and she'd be a damn fool to let you manipulate her credit -- whether credit card, signature loans, convenience check, doesn't matter -- in this way. At the very least, she could try to put her loans into forebearance while she explored other options.

Dude, I know you're trying to make the system work for you, and I don't blame you, but the bottom line is that obtaining credit when you know for a fact you can't pay it ALL back according to the terms of the loan is FRAUD as far as bankruptcy is concerned. Whether a creditor thinks so is irrelevant. Butterflywings' attorney may have only seen 3 creditor objections in the last 30 years, but I am absolutely certain he's seen a great many more bk cases that were a) audited randomly or on suspicion of fraud; b) steered into a 13 instead; c) converted to asset cases by the trustee after reviewing the case, and d) outright dismissed.

I don't want to be rude, please forgive me if I am coming off that way, but I honestly don't know why it would matter to you whether it's credit cards or signature loans, if you already know you can't pay it back. You seem a great deal more concerned with what you will be caught doing than with what is good and honest and right.

Quite frankly, if you and your gf go here and actually do obtain additional credit in order to try to illicitly "convert" her unwanted student loans and then try to declare bankruptcy, I hope they catch you. Your gf has options other than the dishonest ones you are thinking of. Please explore them.

[hckyfn80]

Hckyfn, the fact that you live in the San Diego area makes $17 an hour even worse lol!!! I mean I live in Georgia and $17 would be possible to live on, but in CA dollars its like the equivalent of $8 in other states with lower living expenses.

I have the most useless degree ever, and I manage to make more than that. I'm sure she is a hard worker, but she has an education that she worked very hard for I'm sure, and she should make the most of it. I have a BS in chem, and I work at the career center in a technical college, so I know what it's like to have a degree that won't get you anywhere in the field. She is definitely selling herself short. Anyways, I didn't mean anything negative. All the best!

We don't live in the San Diego area. I mentioned San Diego along with the San Francisco Bay area and the Northeast US because that's where most of the big science companies are (biotech, pharma, etc.) and, consquently, that's where the high(er) paying jobs are. We do live in California though, and you are correct, $17 barely makes a dent in normal living expenses here...yet alone huge student loan payments. She is NOT selling herself short...a college grad with limited experience in a city that doesn't have much in the way of science related companies doesn't have much to choose from. It's like getting a degree in marine biology and looking for work in Oklahoma...not many opportunities!!

[hckyfn80]

A creditor has the legal right to object to his debt being discharged by the bankruptcy court. The most common objection is fraud, but as Diviaruba pointed out, there's a LOT more to it. In any case, a creditor objection is something that is completely up to a creditor to make or not as they please. It is not initiated by the court.

Very separately, the U.S. Trustee Program has oversight of the entire bankruptcy process in this country, even though it is a function of the federal court system. Judges don't process every detail of every case: trustees do so on behalf of the courts and the government. Their job is not only to prevent "fraud" -- whatever that means to you, and I'm not real sure you get it, sorry -- but to ensure that anyone who can possibly pay back their creditor, even if only partially, does so to the extent of their ability to pay.

When you receive good or services or money from a creditor and know that you have very little intention of paying it ALL back, that is theft. If you were a lender, and someone was jockeying to get out of repaying you, you'd call it theft too. The bankruptcy court calls it fraud.

In a very basic sense, if you CAN pay back some part of your debts but don't, using the bk system to shield you from rightful consequences of your choices, and your intent is not to be relieved of overwhelming debt nearly so much as it is to have a more comfortable financial picture, that is fraud. You will see, not only in the law itself but in case law that has arisen out of bankruptcy practice in this country, that INTENT has everything to do with it. For all intents and purposes, trying to evade the requirements of bk law while concurrently trying to avail oneself of the benefits of bk is fraud.

This determination is in the hands of the trustee in every bankruptcy case filed in this country. That's why the trustees are there, that's why the Chapter 7 trustees are paid out of recovered assets, that's why they have the latitude to go back as far and as thoroughly as they like. It is not in this country's best interest to allow people to shrug off unwanted debt except in the direst of circumstances. It is assumed that if you are looking into Ch7, you literally have no other options.



I sympathize with your gf, I honestly do. $17/hr is not fun at all. But you simply can't entertain the idea of obtaining credit to pay off debt at the same time you are considering bankruptcy, no matter how remote. This kind of dishonest scheme you keep coming back to is NOT her only option, and she'd be a damn fool to let you manipulate her credit -- whether credit card, signature loans, convenience check, doesn't matter -- in this way. At the very least, she could try to put her loans into forebearance while she explored other options.

Dude, I know you're trying to make the system work for you, and I don't blame you, but the bottom line is that obtaining credit when you know for a fact you can't pay it ALL back according to the terms of the loan is FRAUD as far as bankruptcy is concerned. Whether a creditor thinks so is irrelevant. Butterflywings' attorney may have only seen 3 creditor objections in the last 30 years, but I am absolutely certain he's seen a great many more bk cases that were a) audited randomly or on suspicion of fraud; b) steered into a 13 instead; c) converted to asset cases by the trustee after reviewing the case, and d) outright dismissed.

I don't want to be rude, please forgive me if I am coming off that way, but I honestly don't know why it would matter to you whether it's credit cards or signature loans, if you already know you can't pay it back. You seem a great deal more concerned with what you will be caught doing than with what is good and honest and right.

Quite frankly, if you and your gf go here and actually do obtain additional credit in order to try to illicitly "convert" her unwanted student loans and then try to declare bankruptcy, I hope they catch you. Your gf has options other than the dishonest ones you are thinking of. Please explore them.

Harsh, but fair...I guess. I appreciate your thorough response. As I've stated repeatedly, my intent is not and never was to commit or even conspire to commit fraud. There is a fine line between savvy, outside of the box thinking and fraud. My original and subsequent posts were to throw the ideas out there - for discussion. While I am admittedly unfamiliar with the full gamut of bankruptcy laws and procedures, I do understand what constitutes fraud. I think you are overinterpreting my zealousness to take action. You make it sound like I've got my gf ready to pull the trigger and all I was doing was looking for a last minute confirmation from the BK forum. This is simply not so.

[CindyLou]

I do think your gf should explore job options a little more..... I live in southern calif. and my Admin. Assistant makes $20.00/hr....that's with an associates degree!

As far as posting this subject for discussion. That's what this forum is for! You asked for opinions and got them......so anytime you have any questions, we are happy to help out.

[FreshLikeADaisy]

Harsh, but fair...I guess. I appreciate your thorough response. As I've stated repeatedly, my intent is not and never was to commit or even conspire to commit fraud. There is a fine line between savvy, outside of the box thinking and fraud. My original and subsequent posts were to throw the ideas out there - for discussion. While I am admittedly unfamiliar with the full gamut of bankruptcy laws and procedures, I do understand what constitutes fraud. I think you are overinterpreting my zealousness to take action. You make it sound like I've got my gf ready to pull the trigger and all I was doing was looking for a last minute confirmation from the BK forum. This is simply not so.

Thanks for your response; I'm glad you clarified that! Forgive me for overestimating your, uh, zeal. It's just that you kept coming back with the same thing, slightly repackaged. Sometimes people do that here; it wouldn't be the first time someone used this board to hone their thoughts on gaming the system.

But as I said more than once, I don't blame you at all for trying to make the system work for you, or for trying to be creative in problemsolving. It's just that for your gf to acquire new debt to pay off old debt that she (or you) is thinking of bk'ing anyway is wrong from the get go, simply because you already know she won't be able to pay it off in full and will likely bk it as soon as she is able.

Would you be willing to do some light reading? Here's an eyeopener on the U.S. Trustee Program by the U.S. House of Representatives Judiciary Committee; it was an oversight hearing from October of 2007 that talks about how some trustees go after even perceived fraud with a vengeance, making a big deal out of even minor errors. If you click on the witness list to the right, of special interest is the testimony of a former U.S. Trustee Program trial attorney, Mary Powers. It's a quick and interesting read, and I think it will help you understand much better not only the role of the UST, but the direction they are going in terms of fraud and even just perceived fraud: according to these witnesses, their zeal sometimes borders on persecution. Please don't set yourself up for that. Here it is: http://judiciary.house.gov/Oversight.aspx?ID=376

My apologies if I have misjudged you, seriously. But you gotta drop this idea altogether, for your own sake. I wish you and your gf the very best.

[SUB]

(SUB, I'm not taking off on you specifically so please don't take it that way but rather multiple posts on this thread that seem to assume there are limits on what a trustee can ask or require in the way of documentation: there are actually few to none. But that misconception seems to be rampant so I thought I'd post. )

I don't think there's a misconception. These suggested waiting times seem to be a guide to lessen the chances of certain objection, nothing more.

Attorneys essentially agree, one pointed out "it's not set in stone, but a good rule of thumb".

Now in the past 10 years I've made dozens of BTs. Amounts ranging from 1K to over 20, adding up to roughly a 70k total CC debt. Mostly paid back by '04 except for a couple of very low interest balances totalling around 12k. In the past few years I've had to resort to using them in smaller 1 and 2k amounts to stay afloat. That along with regular charges, and balances have crept back up to where I have no choice but to file.

The cards have all been put on ice, minimums will be paid for as long as I can, should be into the fall, then it's off to the races.

[FreshLikeADaisy]

Actually, SUB, I almost think that your regular history of balance transfers that were routinely taken out and paid off would *help*, not harm you. Creeping balances are not going to speak badly of you at all, and you decreased your spending when your income decreased, just spending enough to stay afloat. I think this would be immediately apparent to anyone who looked at your records, to be honest.

I had cash advances that were just over a year old when I filed, and I got the impression that that was the least of this trustee's concerns. He wasn't looking for a specific type of transaction, or the age of any given one (like a creditor might) he really intensely wanted to know how I lived my financial life in general and how I had done so for years, and he was all over THAT, not the specific transactions, in tremendous detail. He was very specifically looking for anything that showed intent on my part: not the fact of fraud, but the intent of it. Anything that said I had incurred debt I knew I would be unable to repay would have been more than enough for him to dismiss me.

One of the reasons I posted about this is because what I experienced as my trustee's norm was nothing like I had ever heard or read about. Guidelines, rules of thumb, all that is fine, but if *your* trustee sets his own (as mine did, and more are doing) then none of that matters: he just set his own and your "guidelines" are out the window. I know that what you are saying is true, that it is what attorneys essentially agree on, but I would not want to be their client when they find out differently, as I did, and actually had something to be concerned about.

Keep in mind that these were this trustee's standard documentation requests and that I was not being audited or singled out in any way. He also, in the phone call I had prior to the 341 and in the 341 itself, asked me sort of trick questions about various details of my filing that were no problem for me, but for someone who had skewed their presentation in any way it would have caught them totally off guard.

I never got the sense that he was looking for the *fact* of fraud as much as I got the sense that he was going to use anything he found as evidence of my intent, and was going to make *damn* sure I had dotted every i and crossed every t. From what I am hearing anecdotally, and reading (definitely see the link I posted for Hckyfn80 above) this is becoming the norm and not the exception. Not only because the pressure from the UST higher ups is increasing for the field offices to be heroes and document more fraud, but because it's getting harder and harder to recover assets in a Ch7: if these guys want the same income this year as they had last year, they're going to have to dig deeper. The assets just aren't out there to recover in this growing tidal wave of consumer no-asset Chapter 7s.

Feel free to disagree, though. I appreciate your point of view. I just don't want anyone to get blindsided by wrongly set expectations when they hit the reality of the UST Program. Hckyfn80 said it was a "fine line" between creative thinking and fraud; I don't think they see it that way at all. I think there's a line for every trustee that, once a debtor gets his toe over it, there is mighty little grace or understanding going to be shown to that debtor.

[SUB]

....... (definitely see the link I posted for Hckyfn80 above) this is becoming the norm and not the exception. Not only because the pressure from the UST higher ups is increasing for the field offices to be heroes and document more fraud, but because it's getting harder and harder to recover assets in a Ch7...

I read it, and some of the other witness entries as well.

As your link attests, righteousness is no guarantee a BK filing will be met with any less possibility of persecution. I appreciate that possible outcome, but I have to focus on the probable.