Forum Post: The 2005 Bankruptcy Law, 1998 student loan law
Posted 12 years ago on Oct. 22, 2011, 1:05 p.m. EST by galaxygrrrl
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I have noticed many things being discussed here, a great deal of anger. Some of which is properly directed, but some of which is not.
But one of the things I noticed is the lack of discussion of things which used to protect people, which is bankruptcy.
http://manvsdebt.com/why-student-loans-suck/
In general the changes to the 2005 bankruptcy law were absolutely horrid. I think many of the problems we have now originated with that law. In the past it would be unheard of for people to have high debt burdens with the inability to pay them, because they would declare bankruptcy. The bankruptcy law was the way people handled high levels of debt. It was the reset valve on their lives. People used to get bailouts, it was called personal bankruptcy. Bankruptcy helped people out a great deal. When the law was changed nobody noticed, largely because it was changed when there was not a recession. Bankruptcy has always been one of the safety valves during times of crisis, and what has kept Americans bouncing back.
And we altered it in a way that is destroying us as a country.
When people are asking "were is my bailout" it used to exist. It was called bankruptcy, but it was practically eliminated in 2005.
You are absolutely correct. Many people here are not well informed- but you are. That law (back in 1998 & 2005) was changed due to LOBBYISTS in Washington- most of these lobbyists were from large, predatory, private lenders- they convinced congress to change the law.
Now, many people are drowning in student loan debt. And, private loans have these huge percent rates and fees. Anyone who has private loans definitely knows- these loans ballooned. We need help from congress. Something has to be done.
I am in this high student loan debt situation right now. Was thinking like these people. http://debtprison.net/wordpress/247/will-debt-follow-you-abroad/ Plenty of stories discussing this exact issue. Every debt other than student loans can be bankrupted out of and has a statute of limitations, most serious crimes besides murder even have statutes of limitation. (I know a person bankrupted out of $130k in credit card debt, seriously, and was able to keep everything he bought with it except his fancy speed boat. Kept his house, Craftsmen tools, etc. etc. NO idea how he pulled that off) Congress feared people would abuse it (though no empirical evidence supported it, and it protected Sallie Mae) not use it as a safety net, well I need a net, I couldn't even begin to deal with student loans for many years, had child support problems and trying to stay out of jail and stay alive. By the time, now, that i can finally start on it, a $35k loan, with fees and collection costs, has ballooned to over $50k, almost half the original loan amount in just fees. That's where i say wtf. I feel responsible for my loan, and am willing to pay on it for the rest of my life, or the 25 year limit, but all the extra fees seem unfair, even though, admittedly it was my fault. I had my son very early, my poor judgement, and created the mess, however, I guess I was naive to the real cost of college. Figured, oh I will get a good job and pay it back later. Now, no higher paying job, huge debt, lifetime of servitude to the banks.
Again, the Federal Reserve saw this coming, and they took action ahead of the curve
The road to hell is paved with good intentions. That happened to the bankruptcy laws. The laws got abused by people scamming it. Some would run their credit cards and bills to the roof then claim bankruptcy. Only to be rewarded with a now good creidt rating because they now couldn't go bankrupt for 7 years. Then the cycle would start again and again.
Yepper that was a very small minority who abused the laws in such a way. It also does not excuse eliminating student loans from the bankruptcy laws.
If student loans could be written off via bankruptcy, the interests rates would skyrocket and the availability would plummet. Student loans are unlike other loans because they are unbelievably easy to get and millions of people get them every year who probably shouldn't. They are extremely risky and allowing them to be excused in bankruptcy would make them even riskier.
I think it was more than a small minority, I have to agree the gov screwed people with the student loan /bankruptcy laws. Bankrucptcy is a last resort. Every loamn app and jon application always asks "Have you ever filed for personal or business bankruptcy? It stays with you forever.