Government needs new revised BK laws due to Covid

[alaska708]

This government needs to revamp the bk code due to this Covid virus and waive the ability to file another ch 7 without waiting 8 years! It’s ridiculous that with the amount of loss, including job loss, home loss that new laws have yet to be enacted!

I filed a ch 7 in Texas almost 3+ years ago, have fallen on hard times ever since and refuse to file a ch 13 payment plan and be a slave to the court for the next 2-5 years! I’m planning on just paying nothing other than for housing and not paying any credit cards until I can refile another ch 7!

[justbroke]

This government needs to revamp the bk code due to this Covid virus and waive the ability to file another ch 7 without waiting 8 years! It’s ridiculous that with the amount of loss, including job loss, home loss that new laws have yet to be enacted!

Well, they did modify some of the bankruptcy code in the CARES Act to deal with certain issues. They are not going to modify the bankruptcy code waiving 8 years between a Chapter 7. You can always file a Chapter 13 with or without a discharge after a Chapter 7 bankruptcy. (Even though there's the 2-4-6-8 rule, you can always file a Chapter 13 without a discharge if you just need to reorganize and take time to reapy creditors.)

I filed a ch 7 in Texas almost 3+ years ago, have fallen on hard times ever since and refuse to file a ch 13 payment plan and be a slave to the court for the next 2-5 years! I’m planning on just paying nothing other than for housing and not paying any credit cards until I can refile another ch 7!

Refusal to file a voluntary Chapter 13 is not a reason to waive the period of time to file between Chapter 7 cases. Even though I write that, I can sympathize; I do sympathize.

[JellyBeany]

It does seem outrageous that the federal government can essentially strip away a person's ability to earn a living with COVID lockdowns and restrictions, and then not allow that person to file Ch 7.

Another change in BK rules I would like to see: ability to discharge student loans in BK.

[justbroke]

It does seem outrageous that the federal government can essentially strip away a person's ability to earn a living with COVID lockdowns and restrictions, and then not allow that person to file Ch 7.

But they don't strip away the ability, if you can't afford to pay. Nothing stops anyone from filing a Chapter 7 bankruptcy. Whether you are allowed to proceed under Chapter 7 will be based upon ability to pay.

Another change in BK rules I would like to see: ability to discharge student loans in BK.

You can if you can prove hardship, but it's very difficult to prove. They may make it a little easier, but they are not going to blanket allow discharge of any student loan in a BK. Think about it... go to Harvard or <insert college here>, get a $250K education, then just file bankruptcy at age 22. Voila! It's just not going to happen in the way that people would like for student loan debt to be discharged. Even at 22, it's too early to tell if you'll never have the earning potential unless there are extenuating circumstances such as a disability.

I don't believe that BK is the solution to student loan debt. I believe the answer lies in affordable tuition (which we have in Florida and why we're #1 in post-secondary education) while providing a good education. Spending $65K a year for non-professional degrees is just... ridiculous.

[shipo]

justbroke, I couldn't agree more. Fortunately my kids took different paths; my son went to a JUCO for one year and said, "To heck with this" and joined the Navy. He got his education there, became one of the Navy's top mechanics on the GE F414 engine which powers the Super Hornets, and along the way rose to the point where he was managing/mentoring a maintenance operation with 60 mechanics. Yeah, his skills are in high demand now; total educational costs to him and us for his one year at the JUCO; $12,000, including room and board.

Our daughter took a different path, she went to a JUCO in Boston part-time for three years, got her Associates degree, transferred to UMass Boston, where she got a huge break on tuition due to transferring from the JUCO, and then proceeded to graduate Magna Cum Laude with a double major in two cream-puff subjects, Political Science and Economics. The school is now paying her to work as a TA while at the same time as paying for her Masters in Economics. The only annoying thing she's needing to put up with is their constant pressure to stay in school and get her Doctorate. Total cost to her and us; about $30,000 over five years.

[bcohen]

You can if you can prove hardship, but it's very difficult to prove. They may make it a little easier, but they are not going to blanket allow discharge of any student loan in a BK. Think about it... go to Harvard or <insert college here>, get a $250K education, then just file bankruptcy at age 22. Voila! It's just not going to happen in the way that people would like for student loan debt to be discharged. Even at 22, it's too early to tell if you'll never have the earning potential unless there are extenuating circumstances such as a disability.

I don't believe that BK is the solution to student loan debt. I believe the answer lies in affordable tuition (which we have in Florida and why we're #1 in post-secondary education) while providing a good education. Spending $65K a year for non-professional degrees is just... ridiculous.

As the saying goes, one hand washes the other. In other words, the reason why education costs are so high is because students are able to borrow the money to attend. If the supply of money dries up, because student loans become difficult to qualify for, then suddenly colleges and universities will find ways to rein in costs to stay in business. Education may be rationed as a result, which is not necessarily a bad thing. A lot of money and resources are wasted trying to educate people who lack the intelligence and/or discipline to benefit from the education, and this drives up costs for everyone to attend.

The same thing is happening with the housing market right now. Lackluster houses are selling for crazy, stupid money because mortgage rates are at historic lows, and banks are willing to lend the money to buy the homes for their current prices. If banks refuse to lend the money to support these prices, or if interest rates rise to a reasonable level, house "values" would be pushed down. At least mortgage debt is subject to bankruptcy protection, if a borrower ends up over their head.

And therein lies the crux of the problem. Student loans are handed out like candy, with little regard to (prospective) borrower outcomes, because it is so excruciatingly difficult to discharge this type of debt in bankruptcy. Restoring bankruptcy protection for student loan debt does not require that recent graduates be allowed to declare bankruptcy, discharge their student loan debt, and then accept a high paying job, while laughing all the way to the bank. This is a fallacy, known as the false dichotomy--forcing people to choose from two bad options, without telling them that other better options exist.

All that is required is that student loan debt become eligible for discharge after some "reasonable waiting period" has elapsed from the date of graduation or withdrawal from the educational institution. What this "reasonable waiting period" should be is subject to debate, but I would argue that 8 years is reasonable. No one is going to deliberately remain poor and underemployed for this much time in order to discharge student loans which they could have otherwise afforded to repay. And anyone who is so poor that they need Chapter 7 bankruptcy after this much time has passed from graduation/withdrawal is likely never going to be able to afford to repay their student loans while still enjoying even a very basic standard of living. Allowing them to discharge the debt would allow these people to salvage what's left of their life, without "costing" the taxpayer much money, because few of them would ever repay the debt anyways.

[justbroke]

I think we could attack this on two fronts;

• I mentioned a reasonable waiting period to determine if the debtor (student loan recipient) is able to make a career and a reasonable attempt at repayment. It's probably not 8 years, but probably closer to 10 years.
• fixing the cost of education with the caveat that should a person choose to go to a private school and rack up debt, that could be dispositive.

No one is going to Harvard just on Federal loans. Federal loans are limited to $150K for undergrad. If Harvard is $85K/year or more (total cost of attendance), it's not the Federal loans that are the problem. People are borrowing student loans form private creditors, and they don't just hand those our without excellent credit and repayment ability (hence parents usually pay for these).

I don't believe that education costs are so high because you can borrow. Look no further than State colleges and universities in most States. Attend Florida University System schools (USF, UCF, UF, etc) for $6,350 a year (tuition). Live at home with your parents and the total cost is $11.5K/year (books, fees, transportation, food, clothing, personal). Get a Pell Grant, and that cuts out $6.5K of that and you're down to $5K/year (which is really just your personal things like transportation, food, etc).

I'll keep saying this... it's not the loans driving the costs. It's the choice of where someone attends. Private schools sell prestige, exclusivity, and opportunity. I think they'll always be private school demanding top dollar, but there is an entirely massive public university and college system which gives similar education for 1/12th the cost (compare Harvard to University of Florida).

For what it's worth, UF is ranked #28 and Harvard #2 (tie)... both out of 392 "national" universities/colleges.