Supreme Court Considers Case About Excusing Student Debt Through Bankruptcy

Paying for College
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<p>From the Chronicle of Higher Education:</p>

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The U.S. Supreme Court is scheduled to hear arguments in a case this week that weighs federal rules for dismissing student debt in bankruptcy proceedings against the authority of a judge's final court orders.</p>

<p>The case, United Student Aid Funds Inc. v. Espinosa, highlights the complex and sometimes contradictory nature of bankruptcy law that makes student loans as difficult to excuse as court-ordered child support. To dismiss student loans in bankruptcy, borrowers must show that repaying the loans would be an "undue hardship," a legal standard that has been applied inconsistently over time.

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<p>Supreme</a> Court Considers Case About Excusing Student Debt Through Bankruptcy - Government - The Chronicle of Higher Education</p>

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[quote]
If the Supreme Court overturns the Ninth Circuit's decision, creditors would be given the opportunity to continue to pursue debts even after a borrower's slate has been wiped clean by the bankruptcy process, said Mr. Lieb, who wrote a brief on behalf of a group of law professors supporting the Ninth Circuit ruling.

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<p>Yikes!</p>

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<p>Court ordered child support is a huge issue. Here in PA, they calc that ~1/4 to 1/3 of GROSS income is available for child support and there is NO requirement for mothers to work (I’m talking about when children are older and no childcare is required). HUGE SCAM</p>

<p>at the LEAST, child support ought to be a deductible expense to the father on income taxes (federal and state)</p>

<p>I know this is OT, but it affects a good friend of mine. Women get pregnant by ‘accident’ alot and scam 18 years of cash from men.</p>

<p>STUDENT DEBT is not in the same category as child support. Nobody ‘accidently’ acquires student debt</p>

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<p>It would be a big mistake to allow student loan debts to be cancelled in bankruptcy because there would be less incentive to be careful not to borrow too much money.</p>

<p>As for “child support” from men whose women accidentally get pregnant, that’s what condoms are for. No one forces a man to have unprotected sex; he’s not obligated to rely on a woman’s claim that she’s on the pill.</p>

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<p>I think banks and other lenders need to be more careful about who they are lending money to, and having debts wiped out in bankruptcy is a good incentive for making them more careful. Yes, people shouldn’t borrow money they will never be able to pay back; likewise, lenders shouldn’t lend money to those who will never be able to pay them back. There is error on both sides, but right now, only one side carries the risk; I think that should be evened out. </p>

<p>I also think that if borrowing is harder, colleges will have more incentive to contain costs. I don’t think it’s accidental that the great increases in college costs coincide with the reduced risks of lending.</p>

<p>And on the “accidental baby” thing, people who don’t want children should rely on no one but themselves to protect themselves from accidental parenthood. I’ve told my son that if he doesn’t want a kid, it’s up to HIM to protect himself from having a kid; it’s no one else’s responsibility.</p>

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<p>he had a vasectomy (after divorce and 3 kids) and she supposedly couldn’t get pregnant. That was one heck of an accident that will be for 19 years since the kid got ‘left behind’ in early elementary school.</p>

<p>Mom hasn’t worked a day in 12 years and uses child support money to feed 5 animals in the house</p>

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<p>Many years ago – probably 30 years ago now – I worked with a new hire who was pregnant with her third kid. Her husband had had a vasectomy after the second. Yeah, he didn’t go back for the final checkup. Bet he did after the second vasectomy, though!</p>

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<p>he had a vasectomy (after divorce and 3 kids) and she supposedly couldn’t get pregnant.</p>

<p>and he “supposedly” couldn’t impregnate anyone either. For him, it was easier to check. He obviously didn’t.</p>

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<p>[The</a> Economic Downturn and Student Loans: Some Practical Advice for Borrowers | a blog post at Beacon Broadside](<a href=“http://www.beaconbroadside.com/broadside/2009/01/the-economic-do.html]The”>http://www.beaconbroadside.com/broadside/2009/01/the-economic-do.html)</p>

<p>Congress repealed the discharge provision for student loans in bankruptcy during the Clinton administration. This meant that students who took out federal loans had lost one of the most basic of consumer protections. This loss was compounded in 2005 when Sallie Mae, Citibank, and others lobbied Congress successfully to remove bankruptcy protections for private student loans as well. </p>

<p>Students and families who take out student loans are now missing the protection that exists for every other type of loan in the United States. Standard bankruptcy protections and statutes of limitations are largely unavailable for the student borrower.</p>

<p>Sallie Mae saw its fee income increase by 228% between 2000-2005 (its loan portfolio grew by only 87% during this time). Its 2003 annual reported that the record earnings that year were attributable to collections on defaulted loans.</p>

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<p>Consider the fact that the trend is absolutely moving toward all federal student loans being Direct Loans (that is, directly through the government - not SallieMae or any other bank). That means taxpayers will be directly affected if student loans can be discharged in bankruptcy. Personally, I don’t have any more money to give away. I am just so tired of living within my means while others just borrow & expect it all to go away with a magic wand.</p>

<p>My apologies to those who end up in bankruptcy even though they, too, have lived within their means - only to have their lives turned upside down due to unexpected job loss or enormous medical bills. I do sympathize with these folks.</p>

<p>I just have grown so weary of the pervasive entitlement attitude of so many Americans.</p>

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<p>I heard about this case on the radio this morning. In this case, the debtor is a guy who took out a loan for a computer class while he was working in an auto factory. His pay got cut, and although he lived frugally, he was having trouble making payments on his loan, which was about $13,000. He got a lawyer, declared bankruptcy, and the bankruptcy trustee restructured the loan. Under the revised terms, he paid off all the principal over an extended period, and only the accrued interest was discharged. The bank was notified of the terms several times, and never appeared in the case, and didn’t appeal from the final decision of the bankruptcy court. Several years later, the bank came after him for the interest (just the interest, because all the principal had been paid). I predict that the Supreme Court will throw out this case on equitable grounds without ever reaching the question of whether you can discharge this kind of debt in bankruptcy. The debtor did everything he could do, and the bank slept on its rights.</p>

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<p>With all (and much!) due respect, I don’t see it as an entitlement issue; people lose income (and others get sick) through no fault of their own. I accept this kind of bankruptcy as a kind of insurance against a life ruined forever due to misfortune, knowing that I have to pay more for products as the insurance premium.</p>

<p>I heard the NPR radio report; I agree with Hunt that they may sidestep the issue, saying the bank was negligent in asserting its rights (had they done so, the interest may not have been waived). It can be simple negligence in this one case, with no precedent set.</p>

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<p>Old thread I ran across–here’s the decision:</p>

<p><a href=“http://www.supremecourt.gov/opinions/09pdf/08-1134.pdf[/url]”>http://www.supremecourt.gov/opinions/09pdf/08-1134.pdf&lt;/a&gt;&lt;/p&gt;

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Your friend should have kept his pants zipped! </p>

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Amen!</p>

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<p>OT: child support. </p>

<p>Regardless of how a woman got pregnant, I don’t think child support is always determined fairly. Men with the same income and the same number of children to support can be assessed different amount of child support (at least in MN) depending on the judge. </p>

<p>And the fact that child support is not handled the same way as alimony for tax purposes is also outrageous. In child support case, the mother gets the benefit of dependent exemptions and non-taxable income, while the father gets to pay taxes on income he does not use with no benefit dependent exemptions. At least alimony is tax deductible and reportable on recipients’ taxes as income.</p>

<p>P.S. I am a female.</p>

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<p>Dear lerkin, you are absolutely incorrect about judges assigning different child support amounts for similar circumstances. The amounts are determined very fairly. Even though each state determines alimony/child support individually, they all have very similar established guidelines for child support and have been moving to make them as similar as possible. The judge only has a discretion of ±5%. The only major real difference is that some states require child support to continue until the child graduates college and the non-custodial parent has to also share in the tuition payment, while other states cut child support when the child reaches 18 yrs. Child support does not care whether the non-custodial parent remarries or has more children as the individual knew his/her financial obligations before starting a new family. That’s why when child support is determined for different families of the individual non-custodial parent, the children of the subsequent family are out of lack since for his AGI is considered what is left over after the first family’s child support is deducted. That’s why you see all these women who have different children from different fathers since each child gets a full amount of child support. If the children had the same non-custodial parent, each added child only adds ~3% on the child support base. </p>

<p>Thee is also nothing outrageous on why child support is not-taxed on the custodial parent as it defeats the purpose of providing child support for the child. </p>

<p>The following principles are why the non-custodial parent pays child support:(** are my emphasis)</p>

<p>1) To minimize the economic impact on the child of family breakup;
<em>**2) To encourage joint parental responsibility for child support in proportion to, or as a percentage of income;
*</em><em>3) To provide the standard of living the child would have enjoyed had the family been intact;
*</em><em>4) To meet the child’s survival needs in the first instance, but to the extent either parent enjoys a higher standard of living to entitle the child to enjoy that higher standard;
5) To protect a subsistence level of income of parents at the low end of the income range whether or not they are on public assistance;
*</em>*6) To take into account the non-monetary contributions of both the custodial and non-custodial parents;
7) To minimize problems of proof for the parties and of administration for the courts; and
8) To allow for orders and wage assignments that can be adjusted as income increases or decreases.</p>

<p>The child support amount in MN as in other states does not depend on the judge but on the state guidelines which include a calculator that takes under consideration the same circumstances for everyone, just like fafsa or the ccs profile. There is a federal law that requires states to have these guidelines so a judge can not arbitrarily assign different amounts. The only issues that affect the amount of support if all else is equal is the age of the children, whether all children have the same non-custodial parent or not, if the child has high medical expenses, if the non-custodial’s parent’s income exceeds a certain income threshold determined by the state but we are talking about ~140k salary+.</p>

<p>It does not matter whether you are a female or not as the guidelines refer to custodial/non-custodial parent. Until the child reaches 6yrs old, the custodial parent does not have to work. After that age, the custodial parent is obligated to find a job equivalent to his/her educational and prior work experience and if she does not act in good faith to find one, then the non-custodial parent can go to court to have the child support reduced.</p>

<p>That’s how MN determines child support:
[Child</a> Support - Guidelines](<a href=“http://www.dhs.state.mn.us/main/idcplg?IdcService=GET_DYNAMIC_CONVERSION&dDocName=id_000758&RevisionSelectionMethod=LatestReleased]Child”>Guidelines / Minnesota Department of Human Services)</p>

<p>the income of both parents
• the number of children
• the cost of raising a child at different income levels
• the availability and cost of medical support
The guidelines consider basic, medical, and child care support.</p>

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<p>BTW, PA has similar guidelines, not the misrepresentations stated earlier in this thread.</p>

<p>A. Income Shares Model. Pennsylvania’s child support guidelines are based upon the Income Shares Model. That model was developed under the Child Support Guidelines Project funded by the U.S. Office of Child Support Enforcement and administered by the National Center for State Courts. The Guidelines Project Advisory Group recommended the Income Shares Model for state guidelines. At present, 37 states use the Income Shares Model as a basis for their child support guidelines.</p>

<p>The Income Shares Model is based upon the concept that the child of separated, divorced or never-married parents should receive the same proportion of parental income that she or he would have received if the parents lived together. A number of authoritative economic studies provide estimates of the average amount of household expenditures for children in intact households. These studies show that the proportion of household spending devoted to children is directly related to the level of household income and to the number of the children. </p>

<p>"1. Economic Measures. The support schedule in Rule 1910.16-3 is based upon child-rearing expenditures measured by David M. Betson, Ph.D., Professor of Economics, University of Notre Dame. Dr. Betson’s measurements were developed for the U.S. Department of Health and Human Services for the explicit purpose of assisting states with the development and revision of child support guidelines. Dr. Betson’s research also was used in developing the prior schedule, effective in January 2006. Dr. Betson updates his estimates using data from the Consumer Expenditure Survey conducted by the U.S. Bureau of Labor Statistics. In the current schedule, those figures were converted to 2008 price levels using the Consumer Price Index.</p>

<ol>
<li>Source of Data. The estimates used to develop the schedule are based upon national data. The specific sources of the data are the periodic Consumer Expenditure Surveys. Those national surveys are used because they are the most detailed available source of data on household expenditures. The depth and quality of this information is simply not available at the state level and would be prohibitively costly to gather.</li>
</ol>

<p>The U. S. Department of Agriculture’s Center for Nutrition Policy and Promotion (‘‘CNPP’’) also develops economic estimates for the major categories of child-rearing expenditures. Although the committee reviewed these estimates, it is aware of only one state that relies upon the CNPP estimates as a basis for its child support schedule, and even that state makes certain adjustments."</p>