🚀 go-pugleaf

alchemy@interlog.com (Morton M. Goldmacher) wrote:


>If debts resulting from student loans were to survive bankruptcy they
>will affect the way they are treated by the student debtor.  When
>arranging matters with several creditors, a former student will always
>be wiser to trade off student debt for ordinary secured or unsecured
>debt.  

I don't agree. If he has the ability to pay the installments as they
fall due, there is no reason to pay the loan out by replacing it with
another loan, unless current interest rates are considerably lower
than those charged on the CSL.

If the debtor is refinancing the loan for the purpose of ensuring its
demise under the bankruptcy proceedings, he is defrauding the
commercial creditor. To take out credit in contemplation of bankruptcy
cannot be called anything but fraud.  I just can't believe you wrote
this, Morton.

>An individual struggling for solvency will be strongly
>motivated to pay down their student loan by borrowing elsewhere if
>bankruptcy is drawing imminent.  

Maybe governments can borrow their way out of a bankruptcy, consumers
cannot.  One of the sure ways to ensure that you will be denied
discharge and/or have the commercial loan survive discharge is
"trading while knowing himself to be insolvent".  And that is exactly
what you are suggesting the debtor should do.  In this instance, I
think it is very bad advice.

This is not just playing games with a few words.  I've seen a number
of bankrupt debtors who were denied discharge for those reasons (at my
request) or who continued to be liable for some of their debts after
they were discharged from bankruptcy.

>Giving any creditor an advantage in
>the bankruptcy process affects all other creditors.  

Correction:  "Giving a creditor a preference over other creditors of
the same class" affects other creditors of the same class.

The bankruptcy laws recognize that not all creditors have the same
claims. Essentially, you have 3 classes: Preferred, Secured and
Unsecured.  The law has always recognized that secured creditors take
what ever security interests they have in the property of the bankrupt
and go on their merry way regardless of what's left over for the other
2 classes.  Then the Preferred creditors go to town and take what's
left, till their claims are satisfied in full.  Then, and only then,
comes the unsecured creditors to take whatever they can get.  Usually
it amounts Zip-O.

Since CSL are an investment in the future earnings of the borrower, it
appears to me quite justifiable that the loan shold survive until
those future earnings are realized.

>Making student
>debts endure bankruptcy will cause them to be preferred as a result of
>the manner in which they will be treated, even though in law they have
>no preference over other non-secured debt.

True, at present they have no such precedence.  But we are discussing
wether or not the statute should be changed to provide for such
preference.

>There are many ways of improving access to education and the quality
>of education.  Unfortunately, universities in Canada have become many
>things other than repositories of academic excellence.  

That is part of the problem with education. Since the politicians
started BSing the voters about "sacred trusts" and "universal rights
of access to education", we have transformed our universities into
social agencies instead of institutions of learning. 

>A university
>degree today is the equivalent of a high school diploma of fifty years
>ago.

In quality or stature?  :-)
Karl Pollak <kpollak@portal.ca>
Richmond, British Columbia