Bankruptcy and Student Loans

sajhoffmanhussain

Hi,

This is purely a "hypothetical" idea, I wouldn't do it meself, but I was just wondering .... student loans don't typically get discharged if you become bankrupt because the government closed that loophole in 2004 ... I was just wondering though, if anyone has ever just taken out a personal loan/used credit cards to pay off the student loan (thereby transferring the student loan into a personal loan) and then claimed bankruptcy?

It's not very ethical but I just wonder how many students would consider it as a way of getting out of paying for their loan? Does it constitute fraud (i.e. can you get sent to jail for doing this)?

acguest

I would say that YES it is fraud.
Taking out normal loans to pay off student loans, then making yourself bankrupt on purpose ... is fraud.

valuk

I haven't tried it and wouldn't advise it

gravitytolls

Sounds fairly fraudulent, but I suppose the crux of the matter comes down to proving it.

If you take out loans to clear your student debts, and after say, 2 years, your circumstances change, then to prove fraud may be very difficult.

However, aren't student loans interest free, or low interrest? And am I righ tin thinking you don't start repaying until your income hits £15,000? Which rather begs the question, from the courts point of view, why take out loans upon which your will pay a higher rate of interest, and have to repay whatever your income?

Blacksheep1979

I think the proof would be surrounding why you would take out a loan at a higher rate of interest and more than likely a higher monthly repayment to cover the student loan. Unless you had some very weird circumstances then it would be fraud, but I doubt that they would cotton on to it if you waited more than a year or two between borrowing and settling your student loan/declaring bankruptcy.