NeilSader

Really good question . . . . having lived through the so called Bankruptcy Reform efforts in the late 1990's and early 2000's which resulted in the Bankruptcy Reform changes in 2005, that took years and was a terrible process. The politics of the "reform" was from a conservative point of view and I believe very detrimental to consumers and ultimately to our economy. However, I do believe there will be some type of student loan reform in the coming years . . . it is politically inevitable. Given the impact of compound interest, I will soon be seeing clients with $1 million student loan balances which are not payable in any scenario. The question is whether the existing bankruptcy laws will be used to help allow these debts to be discharged or will there be other programs initiated. I do not think drastic action will be anytime soon . . . but give it another 3 to 4 years and I think the overwhelming debt many will fact will force the issue.

There we go . . . right to the heart of the issue! That is a great question. The fact is that if one were to do that without the faintest notion that you were converting debt from non-dischargeable to dischargeable . . .it would work! Now, if that is all part of a diabolical plan to discharge what is generally a non-dischargeable debt . . . it could be seen as fraud and non-dischargeable. I would suggest to anyone considering that course of conduct that things like how long have you had the card, is the amount being charged different than past usage and is there other, non-student loan debt, would help determine if such an action could survive a bankruptcy challenge.

I have always divided things up as follows: about 50% due to a circumstance such as a job loss, divorce or medical situation; 20% due to a business failure such as trying to flip houses or a failed business or lawsuit; 25% just due to poor financial decisions on credit cards or getting too expensive a mortgage; and the remaining 5% or so are an assortment of schemers who probably know how to work the system.

OK . . . great question. First though . . . nice screen name, I am sure there is quite a story there! Here is the bottom line, you ought to race to sign up for an income based repayment plan. The less you make right now, the less you will pay and that will start the clock running as those repayment plans end usually after 20 years and whatever is left due is forgiven. So, you are better off starting paying when you are at the beginning of your career. Additionally, if you work for a non-profit or public entity, your repayment plan could end after only 10 years.

Bankruptcy is for the honest debtor . . . what that means is if you incurred debt with the thought you would discharge it through bankruptcy, that would be seen as bankruptcy fraud. I tell clients the court wants to know when you took out debts because the Judge wants to make sure you did not run up a debt and three days later file for bankruptcy. That would be bankruptcy fraud.