We knew this

[Blueboy]

http://www.usatoday.com/money/economy/2010-06-09-bankruptcy09_CV_N.htm

Hopefully the Student Loans can be included soon.

[hooferator]

I can see both sides of the student loan issue. On the one hand, they do charge ridiculous rates, and a lot of the technical schools use them to up their enrollment, but then the kids can't find a job with that useless piece of paper.

But the whole reason the law changed was so people wouldn't go to school and immediately file bankruptcy, knowing they'd spend twice as long paying off loans as they would waiting for the BK to fall off their record.

If this goes through, won't people just apply for private loans if they can and do the same thing?

[currerbell]

I don't understand all the people who think that going to school is some sort of funtastic extravaganza. A more sensible question would be why won't people go out and get a handful of credit cards then take a year's luxury vacation? Simple answer - most people just don't do that. And as to an education spree? Really?

Why *would* people rack up a bunch of debt to go to school, with the plan to BK immediately on graduation? Don't most people go to school so that they can eventually get better jobs? Why would you put that in jeopardy with a BK filing? If you get a professional degree (MD, JD, etc.) - good luck filing BK immediately and then getting a job. Seriously - there are many state bars that either have or are about to have rules that an attorney who defaults on a student loan will be suspended or disbarred.

Also, to correct some points, that is not "the reason" the law was changed. The law was changed as to federally guaranteed loans in the 70s because taxpayers' money was implicated AND there were numerous pro-consumer regulations in place on those loans.

The law was secretly changed (yes, it was a secret - the provision was slipped in and no one even knows which Congresscritter did it) in 2005 at the behest of the private student loan lenders (and yes, it was their lobby money that bought it). There are NONE of the same pro-consumer protections in place on private student loans.

Second, there is no "immediate" turn around. Both bills would require a "good faith" payment period of 5 - 7 years before one could file BK.

[MSbklawyer]

A Unique Student Loan Solution

I encountered a guy recently with a HUGE student loan problem. His wages were about to be garnished, so before they could get the garnishment in place, his wife sued him for child support for their 3 kids. The amount of child support he was required to pay exceeded 25% of his pay, which is the maximum garnishment amount under the FDCPA for non-support debt. So the student loan people tried to apply for an administrative garnishment, but he was already garnished to the max, so they were out of luck.

When his kids are grown, I'm sure they'll be there waiting for him, but he did manage to by 21 years of absolute immunity from any garnishment by having his child support garnished rather than just supporting his kids voluntarily.

Something to think about.