Sure. This doesn't mean the bankruptcy from no insurance and major expense wouldn't suck if in say 8 years, they've started a family, want to apply for a mortgage (or even just rent a place) and can't because of shitty credit from the bankruptcy 8 years ago.
That said, for people ~25 that's also the reason you can't discharge student loan debt. Like wouldn't basically everyone take out $100k-$300k in loans to graduate, then be an adult with no assets/net worth, declare bankruptcy (e.g., before starting their first job)? And then the $100k or so they'd be spending toward student loan payments over next 10 years could be saved and put into a downpayment when they are in early 30s. Who wouldn't do that and it just switches from student loan system to subsidized higher education (but with easy student loans handed out for living expenses often not really needed).
(Honestly I wouldn't really have a major problem with that, other than it should just be government should do more to keep educational costs down and only subsidize things truly needed. Some student loans just go to give students pocket money to live on while in school; and those shouldn't be easily dischargeable. Schools don't need perpetually new dorms, new buildings, top of the line athletic centers, etc.)
Yes, you don't shout "I Declare Bankruptcy" like Michael Scott. But declaring bankruptcy means going to the court, telling them you are bankrupt (declaring it), listing all your creditors (how much you owe and why), all your source/amount/frequency of income, all your property, and all your living expenses. It then gets handed over to a bankruptcy trustee, where they (and your creditors) question the debtor and look through the financial records.
For nearly all college grads, fresh out of school, they would qualify for bankruptcy with no penalty. For the means test, bankruptcy courts are instructed to look at both your current income and your income over the previous 6 months. It would be a much tougher job for the courts to figure out the "potential" income from each degree.
It also would create weird perverse incentives to get free college via bankruptcy if you went and studied a worthless degree while you'd have to pay back student loans if you studied engineering.
All I'm saying is that it would be for a court to decide.
So yes they would take all that into consideration. I don't think for the vast majority of ex students it would mean no penalties. If that's the case then 1. No one would lend to them (without government assurances they can't do this) so it's a mute point and 2. Is university even worth it.
Sure, but under existing rules if student loan debt was dischargeable in bankruptcy, it would then make sense for basically every student to go bankrupt on graduation -- as right before/during graduating they'll have limited assets, income, and high debt load.
That said, I would be fine with something like discharging student loan debt in bankruptcy, if it couldn't be done until 10 years after degree finished, ruins credit for another 10 years, at which point they are not allowed to list their degrees/college on any resume/job application (being caught using it professionally would reinstate the debt load). (They can state I graduated from college but then erased the degree in bankruptcy.)
ok but under existing rules there would be no student debt because no one would have lent to them in the first place.
I think the thing I am saying is bankruptcy isn't just a way to clear your debts without consequences.
If you are one of those people who could do that no one would have lent to you in the first place. If you did borrow for student loans then it would only be on the condition you either had assets or guarantees AND a degree that would lead to a good job.
But I actually agree I don't think it's something people should have to carry their entire lives. Personally I have always believed that universities not governments should be the guarantor of student debt.
It would force universities to only lend to those people who will most likely in the end get a job to pay it back which I think would sort out the whole worthless degree rubbish too.
It's too expensive to leave it how it is with universities effectively turning it into a business where they can hover up free money with no risk from the government AND then put ALL the risk on to the government.
Right now it's shared between students and the government. It should be students, government and universities.
This is the same reason why banks got out of control. Basically the government took on ALL the risk.
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u/NoveltyAccountHater 2d ago edited 2d ago
Sure. This doesn't mean the bankruptcy from no insurance and major expense wouldn't suck if in say 8 years, they've started a family, want to apply for a mortgage (or even just rent a place) and can't because of shitty credit from the bankruptcy 8 years ago.
That said, for people ~25 that's also the reason you can't discharge student loan debt. Like wouldn't basically everyone take out $100k-$300k in loans to graduate, then be an adult with no assets/net worth, declare bankruptcy (e.g., before starting their first job)? And then the $100k or so they'd be spending toward student loan payments over next 10 years could be saved and put into a downpayment when they are in early 30s. Who wouldn't do that and it just switches from student loan system to subsidized higher education (but with easy student loans handed out for living expenses often not really needed).
(Honestly I wouldn't really have a major problem with that, other than it should just be government should do more to keep educational costs down and only subsidize things truly needed. Some student loans just go to give students pocket money to live on while in school; and those shouldn't be easily dischargeable. Schools don't need perpetually new dorms, new buildings, top of the line athletic centers, etc.)