🚀 go-pugleaf

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

>The bankruptcy process exists to allow individuals who are saddled
>with extremely high debt to assign all of their assets to be
>distributed among their creditors and begin life anew.  

Yes, well, sort of.  The amount of the debts is nor really all that
relevant as is their relation to the amount of assets of the debtor.
If I own $3 million worth of assets and have $2 million worth of
debts, bankruptcy would not be much of a treat.  The general idea is
that the debtor 

1,  has assets worth less than half of his liabilities
2,  the above is not of his own willful doing or extravagance, and
3,  he is unable to meet his current obligations as they fall due

>There is no
>logical reason why student debt ought to be treated differently than
>any other type of debt.  

Yes there is.  For two reasons:  it is a debt to the Crown and the
assets bought with the proceeds cannot be accurately financially
gauged, or converted.  Education is a very special kind of asset and I
see no reason why it should not be treated as such.

>The federal government stands in a privileged position with respect to 
>student debt, because they also legislate bankruptcy.  

Not so. AFAIK, the Crown no longer has preference, and since it has no
security for its loan, it ranks with all the other unsecured
creditors.  In vast majority of the cases the distinction is purely
academic since almost no such bankrupt has any exigible assets at all,
anyway.

>Normally, at common law, jumping the queue to short
>circuit a bankruptcy is an offence.  If the government believes that
>it is to be preferred among creditors it should argue the case with
>the banks, mortgage companies and other institutional creditors before
>enacting legislation.

Well, uhm, yeah, but ... we're not dealing with common law, this is an
issue that has been dealt with in statutes for some 150 years.  And
the preferred position of the Crown has only been eliminated in the
last 5 or so years.  Until then it was quite clearly understood by all
other creditors that the Crown stands in a preferred position and why
it is. In fact, it was not only the Crown itself, but other public
bodies such as municipalities whose claims were not extinguished by
bankruptcy or who stood at the top of the cue in distribution of
proceeds. Claims of employees for wages stood as preferred (up to a
limit) along with them, as did LAWYER'S FEES. :-)  I have worked in
that business for well over 15 years and not once have I heard any
arguments to the contrary.  Not that they would have achieved
anything.

Going back to the idea of exempting student loans from bankruptcy
altogether, that in itself is not a new idea, either. There are
several different reasons already on the books why a particular debt
is not discharged by the bankruptcy. The reasons included loans that
were used of "necessaries of life".  Fraudulent misrepresentation,
extravagant living, etc. were other reasons why some debts were not
discharged.

That particular clause meant that you could not borrow money for your
everyday living expenses and then claim bankruptcy.  Sears had been
using that clause for years to exempt their unsecured credit card
accounts from bankruptcies quite routinely, even if the items
purchased were for fancy furniture or mink coats.

I think that politically there are very good reasons why student loans
should not be subject to discharge in bankruptcy.  Just take a survey
of what it is that our Universities teach nowadays and the great
numbers of garbage study programs we are offering to students for no
better reason that to keep them out of the labour market for a few
years, imparting no tangible skills to them. 

Of course there are a lot of practical courses of study on offer.  But
there is no denying that to a large extent, institutes of "higher
learning" are also being abused to simply park the young folks for a
few years to keep them off welfare.


Karl Pollak <kpollak@portal.ca>
Richmond, British Columbia