1. Borrow $17,000 2. Pay a little back over a few decades 3. File Chap 13 4. Profit!
Details: Debtor borrowed $16,900 twenty five years ago to attend Canisius College and made minimal payments over the years. Debtor is now 64 years old, making $11/hour and just received notice of an impending layoff. She previously received $25k from her parents but used money only for their support and did not pay off any debt. She was offered an income based repayment plan that would wipe out the balance at the end but she declined and filed BK (Chap13). Court said these facts satisfy the Brunner Test and discharged the student loan.
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stopmakingcents
Member
posted: Jul. 27, 2012 @ 11:17a
These student loan decisions often get overturned on appeal. Let's see what comes of this after a couple of appeals in a few years. To take this decision as applicable to everyone everywhere is extremely poor legal advice to say the least.
Kat009
Senior Member
posted: Jul. 27, 2012 @ 11:28a
1. Borrow $17k 2. Transfer $17k to credit card 3. File Chap 13 4. Profit!
No need to meet Brunner test.
Of course, this strategy is much harder if you have substantial student loan debt and/or don't want to ruin your credit for $17k.
ETA: I read the brief and she now has $56k in loans after interest and delinquencies have been included. Pretty interesting, actually; the brief provides a good history of student loan bankruptcy litigation. Its kind of shocking that the plaintiff in the case in which all SL bankruptcy litigation is based on (Brunner v. New York State Higher Education Services Corp., 831 F.2d 395 [2d Cir. 1987]), didn't even have a lawyer present to defend her.
LegalLurker
Dismembered Member
posted: Jul. 27, 2012 @ 11:31a
stopmakingcents said: These student loan decisions often get overturned on appeal. Let's see what comes of this after a couple of appeals in a few years. To take this decision as applicable to everyone everywhere is extremely poor legal advice to say the least. To the extent anyone was actually confused, this is not a serious post about how to discharge your student loans. It was merely an interesting decision where a normally conservative judge went to great lengths to avoid the inevitable outcome, perhaps illustrating a shift in society's beliefs as to student loan obligations as more and more people continue to struggle under their debt loads.
My fault for expecting a modicum of humor here.
mikef07
Senior Member - 4K
posted: Jul. 27, 2012 @ 11:36a
To me your better bet would be to do a balance transfer on a few 0% offers for a couple years prior. Stop paying and then settle with the CC for pennies on the dollar.
brettdoyle
Senior Member - 2K
posted: Jul. 27, 2012 @ 11:37a
Easier way is to just enroll in community college. My local CC charges $70 a credit hour... you could take courses that interest you or just repeatedly take the same online course over and over. You might even be able to find one or two credit hour courses. By doing this you can defer hundreds of thousands of debt indefinitely.
Rajjeq
Senior Member
posted: Jul. 27, 2012 @ 11:38a
Seems to me that being too broke for 25 years to pay off $17k is not an "easy step" to do anything.
stopmakingcents
Member
posted: Jul. 27, 2012 @ 11:51a
LegalLurker said: stopmakingcents said: These student loan decisions often get overturned on appeal. Let's see what comes of this after a couple of appeals in a few years. To take this decision as applicable to everyone everywhere is extremely poor legal advice to say the least. To the extent anyone was actually confused, this is not a serious post about how to discharge your student loans. It was merely an interesting decision where a normally conservative judge went to great lengths to avoid the inevitable outcome, perhaps illustrating a shift in society's beliefs as to student loan obligations as more and more people continue to struggle under their debt loads.
My fault for expecting a modicum of humor here.
How are we supposed to know if this is a 'normally conservative' judge or not?
Glitch99
Senior Member - 10K
posted: Jul. 27, 2012 @ 12:08p
They need one of those Men in Black mind-erasing flashy-thingys, so lenders can "repossess" the knowledge asset gained by the borrower that is supposedly securing the student loans (thus why they're typically not dischargable in bankruptcy).
soundtechie
Pickle King
posted: Jul. 27, 2012 @ 12:39p
He's 64 an making $11 and hour? did he actually *get* a degree?
watchtower77
Member
posted: Jul. 27, 2012 @ 1:16p
soundtechie said: He's 64 an making $11 and hour? did he actually *get* a degree? Enjoy the new world of no retirement-hope you don't have to face it.
kamalktk
Dwayne Elizondo Mountain Dew Herbert Camacho
posted: Jul. 27, 2012 @ 1:31p
Step 1: get debt Step 2: move to Poland
TravelerMSY
Senior Member - 1K
posted: Jul. 27, 2012 @ 1:36p
it seems if you were truly looking to game the system you could payoff non-dischargable debt with dischargeable debt and just wait to file after the look back period expires. Of course, anyone with access to enough unsecured credit to refinance large student loans would be in a position to pay their bills in the first place.
makinbutter
Nerdy Member
posted: Jul. 27, 2012 @ 1:40p
i'm pretty sure it's not worth waiting 25 years at an $11/hr to discharge $17k worth of debt.
TravelerMSY
Senior Member - 1K
posted: Jul. 27, 2012 @ 1:45p
Lawyers speak up, but isn't the look back period for fraudulent conveyances 2 years? Unless of course, you posted a confession of your intent to defraud on Fatwallet a week before you did it.
LegalLurker
Dismembered Member
posted: Jul. 27, 2012 @ 1:59p
stopmakingcents said: How are we supposed to know if this is a 'normally conservative' judge or not? Oh, I dunno. Maybe try reading the decision itself (try page 2)? The link is right there in the original post.
Dawgswin
Serene Member
posted: Jul. 27, 2012 @ 2:10p
So what you're saying is the steps are:
1) Post topic 2) Admonish responding parties for not responding how you wanted them to?
LegalLurker
Dismembered Member
posted: Jul. 27, 2012 @ 3:15p
Dawgswin said: So what you're saying is the steps are:
1) Post topic 2) Admonish responding parties for not responding how you wanted them to? Yes, that is precisely correct. My first post was, in fact, intended to be 100% accurate and good "legal advice". But you were all too clever and figured out my elaborate ruse (the same ruse where I posed the actual decision for people to read and form their own judgments). It was completely my fault for not spoon feeding the information to you.
My humblest apologies.
RedCelicaGT
1/2 + 1/4 + 1/8 + 1/16 + 1/32 + 1/64
posted: Jul. 27, 2012 @ 3:49p
I can do it on one easy step!
1) die
Kentucky7887
Member
posted: Jul. 27, 2012 @ 10:34p
If you let your loans default they will be sold to a collection agency. If you can afford to you can settle with the collection agency for less than what you paid. I defaulted on 50k bought 5 cheap rental homes 5k each. I have a cash flow of 1500 a month. I took out a mort on the 5 house for 25k and settled my loans with them for 25k. Have a cheap payment now, was 650 and I saved 25k. It only hurt my credit for 6 months.
Kentucky7887
Member
posted: Jul. 27, 2012 @ 10:37p
Also when you are that old you can have your loans discharged through bankruptcy. Its called a hardship clause. You have to prove that they are unpayable. For him he would not live long enough to pay them off and made to little money. Or you need to be disabled or unemployable in some way. I knew of a lady that was 65 and went to law school. She had 180k in debt, and failed the bar 5 times. She was making 13hr and had her loans discharged.
It is near impossible to discharge your loans through bankruptcy.
scottxmso
Senior Member - 4K
posted: Jul. 27, 2012 @ 11:59p
TravelerMSY said: Of course, anyone with access to enough unsecured credit to refinance large student loans would be in a position to pay their bills in the first place.
It is/was possible; I managed to get >$60k in unsecured CC limits in my name while I was in college (across 10 cards or so). The biggest factor was probably including my parents' income as household income on CC applications, as I was indeed a member of the household. And of course, I managed to obtain a good credit record through my first cards and continue to do so. Maybe having myself added as an authorized user on parent's card (soon after I turned 18) helped, but I was pretty sure that most credit issuers don't consider accounts where you are an AU.
Nonetheless, it looks like this wouldn't be possible anymore per the CARD Act regulations which requires the application to be considered on basis of the applicant's personal income, not HHI.
BitemeIamtoxic
Non-toxic
posted: Jul. 28, 2012 @ 1:23a
Beeg YMMV folks. A+ for effort.
Crazytree
Senior Member - 9K
posted: Jul. 28, 2012 @ 1:26a
I know someone who filed (probably) false tax returns his entire life and paid minimal payments on his loans his whole life.
Died and $60k in loans ended up closer to $500k.
flypaper
Senior Member - 1K
posted: Jul. 28, 2012 @ 1:41a
RedCelicaGT said: I can do it on one easy step!
1) die
1) fake your own death
In fact, this is a good way to discharge all debts in one fell swoop.
EndlessKnight
Senior Member
posted: Jul. 28, 2012 @ 1:47a
brettdoyle said: Easier way is to just enroll in community college. My local CC charges $70 a credit hour... you could take courses that interest you or just repeatedly take the same online course over and over. You might even be able to find one or two credit hour coursesText. By doing this you can defer hundreds of thousands of debt indefinitely.
Pretty sure you need to take at least 6 credits for loan deferment.
TravelerMSY
Senior Member - 1K
posted: Jul. 28, 2012 @ 2:00p
Kentucky7887 said: If you let your loans default they will be sold to a collection agency. If you can afford to you can settle with the collection agency for less than what you paid. I defaulted on 50k bought 5 cheap rental homes 5k each. I have a cash flow of 1500 a month. I took out a mort on the 5 house for 25k and settled my loans with them for 25k. Have a cheap payment now, was 650 and I saved 25k. It only hurt my credit for 6 months.
Why would they accept anything less than full payment since they're not dischargeable in BK?
BEEFjerKAY
Pics?
posted: Jul. 28, 2012 @ 6:31p
Because people sorely dislikes messy discharges?
cartledge
Member
posted: Jul. 28, 2012 @ 7:44p
Yes, it is 6 every other semester.
All my loans were subsidized so interest wasn't building (at my expense). All my classes were paid for by my employer. Once my MBA was complete I took community college classes for a while to defer repayment and pursue some passive interests (philosophy, political theory). These were not payed for by my company. However, the rate of the classes was cheaper than the interest that would have been accrued.
I wrote my congressman about the abuse of an already overgenerous program and told him what I was doing should be a crime. No response.
I did get tired of it eventually and after a bonus from work I just paid the whole thing off at once.
Kentucky7887
Member
posted: Jul. 28, 2012 @ 7:55p
TravelerMSY said: Kentucky7887 said: If you let your loans default they will be sold to a collection agency. If you can afford to you can settle with the collection agency for less than what you paid. I defaulted on 50k bought 5 cheap rental homes 5k each. I have a cash flow of 1500 a month. I took out a mort on the 5 house for 25k and settled my loans with them for 25k. Have a cheap payment now, was 650 and I saved 25k. It only hurt my credit for 6 months.
Why would they accept anything less than full payment since they're not dischargeable in BK?
Would you rather have 25k today or 500 a month for the next 20 yrs with the chance that someone might die and you would get nothing?
Kentucky7887
Member
posted: Jul. 28, 2012 @ 7:57p
Plus the loans are insured by the governemnt. They bought the 50k for pennies on the dollar.
stanolshefski
Addicted Member
posted: Jul. 28, 2012 @ 10:46p
kamalktk said: Step 1: get debt Step 2: move to Poland
It wasn't Poland, but I know someone I went to college with who did that -- he's lived in about 3 to 5 countries but won't come back to the U.S.
tolamapS
Senior Member - 3K
posted: Jul. 29, 2012 @ 10:01p
Kat009 said: 1. Borrow $17k 2. Transfer $17k to credit card 3. File Chap 13 4. Profit!
No need to meet Brunner test.
Of course, this strategy is much harder if you have substantial student loan debt and/or don't want to ruin your credit for $17k.
ETA: I read the brief and she now has $56k in loans after interest and delinquencies have been included. Pretty interesting, actually; the brief provides a good history of student loan bankruptcy litigation. Its kind of shocking that the plaintiff in the case in which all SL bankruptcy litigation is based on (Brunner v. New York State Higher Education Services Corp., 831 F.2d 395 [2d Cir. 1987]), didn't even have a lawyer present to defend her.
Hmm. Interesting rationale. So you would want to BK and ruin your credit over $17K of student debt, but ruining your credit over $17K of credit card debt is not worth it? What's the difference?
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