“Occupy Chicago” wants to forgive student loans. Your student loan bailout should be through bankruptcy!

The “Occupy Wall Street” movement has created many spinoff movements all over the country like the one here in San Diego.  After hearing criticism for their lack of coherent demands, the “Occupy Chicago” chapter came out with a list of demands on Monday.  Among other things, like taxing the wealthy and attacking Wall Street, they want student loans forgiven.  I argued in a blog that I posted Sunday on the Occupy San Diego movement that student loans should be dischargeable in bankruptcy.

In the face of the bailouts that Wall Street firms and banks received more and more people are asking “where is our bailout”?  Regular people have a tremendous amount of debt which they cannot afford and they believe that justice demands that they need some consideration from government.  It is true that almost 50% of people pay no income taxes but should we bailout the 99% with massive wealth transfers?

I say no.   Most people in this country will not go for that.  I have argued for years on my blog that a bailout plan already exists for the 99% of us that are neither rich nor giant corporations.  It’s called bankruptcy and bankruptcy allows you to legally walk away from your debts and have them discharged so you no longer owe them.  You can then get a fresh start debt free and keep what money you earn from employment.  Everyone can avail themselves of bankruptcy.  You don’t have to be a privileged person or corporation to get it.  In fact if you make too much money you will be means tested out of a chapter 7.

So bankruptcy is available for regular people but there is a problem.  Student loans cannot be included in bankruptcy.  Student loans currently are not dischargeable in bankruptcy.   They do therefore indeed last forever or until you allege “undue hardship” which is very hard to prove.  If these student loans were to be included in the lists of debts that people could discharge in bankruptcy then regular people would not be saddled with them forever.  They could escape them and move on in life with their student loans forgiven.

This could be done so much more easily and fairly in the context of bankruptcy than through some government blanket forgiveness.  Bankruptcy has been around for hundreds of years and the systems are in place to handle forgiveness of debt through the filing of bankruptcy.  There are trustees and judges to oversee each individual to make sure that the people asking for forgiveness really can’t afford to pay these debts back because the have neither the income or assets to do so.

In bankruptcy there are even proscribed exemptions that allow each person to keep a certain amount of property.  For most of the 99% this would amount to people keeping all of their property because most people don’t have more than these allowed exemption amounts.

This solution will also be so much more palatable to the American public.  It allows the forgiveness of the student loan debt but within the confines of the bankruptcy system.  Each individual would have to file for bankruptcy to get his student loan debt forgiveness.  He would then be examined by a Trustee and he would face a judge if fraud or other problems came up.   His income and expenses would be looked at to determine that he could not pay his debts with his current income and thus he is formally bankrupt. Those who could afford to pay the loans would then have to do so in some form but many many student loan debtors would be able to escape these loans if they were dischargeable in bankruptcy.  Bankruptcy is no blanket gift.

And it would be fair.  Many people with student loans cannot afford to pay these loans and they have very little hope of paying them back.  They are under employed or more likely unemployed and they cannot afford their living expenses let alone these student loans that have not even landed them a job.  It is simply not fair that a person who used their credit cards to excess can discharge those debts but the person trying to get an education and a job can never escape them even if they have no money and no job.

But many people will say that if we make student loans dischargeable in bankruptcy then student loans will be harder to get.   Maybe that is a good thing and people won’t borrow money for degrees that won’t lead to a job.  But I also believe that as credit cards are still obtainable by most people today and they are dischargeable in bankruptcy.  Bankruptcy has not stopped that industry and dischargeable student loans will not stop lenders from lending money for these loans either.

It also should not matter whether the loans are government or private.  If  they are private then the loans should be treated like credit cards and if government loans are owed then forgiveness of these loans is only fair in light of the bailouts given by the government to the financial industry.  Whether government or private though the effect is the same on people.  They can’t afford to pay them back in many cases.  (Remember also that IRS tax debt is dischargeable after only 3 years and the IRS still continues to operate).

And for further fairness you could make student loans dischargeable after a period of time say 10 or even 20 years.  If the student has not paid them back by that time then they are certainly having a problem and they probably can’t pay them back.  It is only fair to allow people to escape them in time.

I am a bankruptcy attorney practicing bankruptcy law in San Diego, CA.   For further information please visit my website at www.farquharlaw.com or www.freshsatartsandiego.com.   Or call my office for a free consultation at (619) 702-5015.  If you or someone you know are considering bankruptcy then get my Free e-book “13 THINGS YOU SHOULD DO TO PREPARE FOR YOUR BANKRUPCTY FILING” by e-mailing me at farquharesq@yahoo.com.

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“Occupy San Diego” has begun! But if you want a bailout like the banks then try bankruptcy. (But let’s add student loans to the list of dischargeable debts)

The “Occupy San Diego” movement is currently in full swing in our city.  Protestors have marched through San Diego and occupied a park in downtown.  It remains unclear just what they are protesting though.  Some in the movement say it’s “corporate greed”.  According to an article in Sign on San Diego the protestors are not just angry about corporate greed but they also object to the money flowing into the political system from the financial industry and the banks.  According to the “Occupy San Diego” website those in the movement say they are for “social and economic justice” and they are protesting “global financial corruption” and the financial influence that has infiltrated everything and led to the current economic crisis.

On the “Occupy San Diego” website they also have a list of items they recommend people bring to the protest, along with their tents, much like the lists for camping trips.  They tell you where the bathrooms are and whether the are 24 hour or not.  They talk about first aid, entertainment, as well as security.  Mostly they seem to be ready to stay and occupy these parks in San Diego for a long time as they prepare their list of demands.

Apparently the movement is being advertised and spread rapidly by social media and it is gaining steam.  Where it goes and when it ends is anyone’s guess.  I must admit that this thing is somewhat fascinating as I can’t remember another movement like this even though I don’t necessarily agree with some of the premises like the anti-capitalist, pro-government emphasis.  I personally prefer small government libertarian ideas that emphasize personal freedom.  But the movement is certainly interesting and I intend to drive by and maybe mingle as I work downtown.

We who practice bankruptcy law though do believe in our cause too.  We believe that we bring freedom from the terrible burdens of debt to average people who are 99%ers.  We regulary help free people from this debt but we also bring equality too.  We bankruptcy attorneys can take you down the same road as one of these corporations that regularly file for bankruptcy and shed their debt.  Any one individual person (or couple) can file and be just like a corporation.

We in bankruptcy believe he average person’s bailout is a bankruptcy.  What is a bailout after all except a forgiveness of your debt?  You don’t have to wait for the government to give you something that only big financial institutions have.  The 99% already have the power to get their debts forgiven.  You can get your debts forgiven tomorrow.  The legal framework already has been in place for hundreds of years. Average people just have to avail themselves of the bankruptcy process.

And if you are unemployed and have no income to pay those debts then bankruptcy makes even more sense.  Imagine waking up tomorrow debt free.  How would that feel?  You could get your bailout just like big financial corporations did if you file for bankruptcy.  It’s a wonderful thing for sure.

It is also true that many people around the country have massive student loans left over from their education. Many people had to borrow heavily to originally fund their education so they could get a job.  Many of those people cannot get a job now in this economy and they have no money to pay those loans back.

It is also true that these debts are not currently dischargeable in bankruptcy.  In fact Obama’s latest spending bill would allow private collectors for these loans robocall your cell phone to harass you into paying these loans.  He is making the situation therefore worse by allowing these companies to go after you for debts which you probably cannot pay.

If this movement wants to put in a demand that these debts should be dischargeable in bankruptcy then the movement would gain the support of mostly all those who work in bankruptcy because we believe that these debts should be dischargeable.  There is no reason why students should be saddled with these debts forever but someone who over-used their credit cards can get rid of those debts.

A stipulation could be put in the new law that the student loan debt would not be dischargeable until they are 10 or even 20 years old.  This would give collectors time to collect these debts and if they can’t collect in this time then they would have to forgo collection if the person filed bankruptcy.  I believe that it’s fair to say that f the collectors can’t collect within 10 or 20 years then the debtor probably will not ever be able to pay.  Those debts are probably uncollectable and debtors should be freed from having to pay them the way financial institutions have been given infusions of cash so they can continue to operate their businesses.

How about including that demand that in this protest?  If this happens then more people will obtain financial freedom and greater parity with corporations.  Student loans can be onerous for people who have no way to pay them in this economy.  How about a student loan bailout?  Make these loans dischargeable in bankruptcy and that is all you would have to do.

As for the protest I will continue to watch with great interest as I want to see where it goes and how it ends up.  Will these people ever go home?  Will hey set up tent cities?  Will violence occur or will they be peaceful?  Will police make arrests?  How many will join those already there?  Then where will they all go?  Will they shut down operations in this city?  What will happen nationwide?

I will continue to follow and blog about this movement.

I am a bankruptcy attorney practicing bankruptcy law in San Diego, CA.  For more information please visit my website at www.farquharlaw.com or www.freshstartsandiego.com.  Or call my office for a free consultation at (619) 702-5015.  Call now for free credit report and analysis! 

If you or someone you know is considering bankruptcy then get my FREE E-BOOK; “13 THINGS YOU SHOULD DO TO PREPARE FOR YOUR BANKRUPTCY FILING” by e-mailing me at farquharesq@yahoo.com.