Either way, this is really unfortunate. The way we treat debt, especially in regard to our younger population, is kind of despicable. But hey, whatever keeps the wheels turning, right?
I have a debt, I cannot pay the debt. What do you suggest as an alternative to bankruptcy? Indentured servitude?
> Why would you allow someone to gamble for almost 1m?
My point exactly. The lender is responsible for lending to people who can make good on their bets.
> It's the same logic that if an underage kid shouldn't go to jail if he kills someone.
I think it's more about finding a sweet spot between lender/borrower responsibility. If you're giving some kid who's day trading after watching a few youtube videos $1M, you're irresponsible and deserve to lose your $1M. The system shouldn't protect these people. I would apply the same logic and processes to student loans as well.
Fiar point, fully agree.
wage garnishment. take some $ from each paycheck automatically deducted from payroll. i believe credit card companies and other debtors can do this
Credit card companies created a bunch of services designed to "help" you get out of debt without declaring bankruptcy. Which is really just a way to keep debtors tied up paying on a debt they can never pay back for as long as possible. To the point where the total interest payments and arbitration fees exceed the interest and principal on the initial loan.
Bankruptcy is an important part of capital markets. It's there to make clear the risks of lending to people who don't have the ability to pay back the loans. The more difficult it becomes to declare bankruptcy, the more predatory lending becomes.
If you knew it was impossible for someone to declare bankruptcy, why wouldn't you loan as much as possible to them? This is exactly how we got into a student loan crisis. If debtors could declare bankruptcy, then lenders would be much more judicious with their money. But as it stands, there's no real risk to giving an 18 year old hundreds of thousands of dollars in loans because it's practically a guarantee of 7% interest payments for 20+ years.
so first of all, the reason there's no risk in student loans is because the servicer doesn't actually lend their own money; they just manage the loan for the government.
second, bankruptcy isn't the only risk you take when you make a loan. there's always a chance that the person simply won't make enough money in their natural life to pay back the principle. $100k, you will probably get back in interest over many years. but if you loan $1mm, you might never recover the principal.
A lender can sue for repayment, and get that enforced through garnishment, but the debt can be discharged through bankruptcy. Credit card lenders are generally unsecured debt, so if the debtor doesn't have enough assets, they'll get nothing; it's in such lenders' interests to avoid a bankruptcy filing.
Not sure if that makes it better or worse