Please pardon me, but I would like to share an entirely unsolicited letter of appreciation I have received from one of my clients. If you are interested in a bankruptcy consultation, please contact me.
In my blog of April 11, I commented about the difficulty in using bankruptcy to provide any relief for high student loan debt. One person commented that he/she intended to flee the country to get away from these debts. That's one option, I suppose. It would have been better not to incur $200+k in student loans in the first place, unless you were entering a profession guaranteed to provide sufficient income to repay, such as medical school (definitely NOT law school.)As a legal matter, I would assume that a lawful contract entered in in the United States (such as a student loan contract) could be enforced in a foreign country, although I doubt many lenders would pursue borrowers out-of-country. I am not sure what it means to 'renounce' citizenship, but I doubt it would legally absolve someone from liability on a contracted debt.Before fleeing to wherever, one question is whether the debt is from government-backed student loans or strictly private loans. Both are non-dischargeable in bankruptcy, but it is the government-backed loans that have extraordinary collection powers. For example, a government-backed loan in default can subject the borrower to an administrative wage garnishment (that is, a garnishment without the creditor first obtaining a court judgment) of 15% of disposable income, and this would be in addition to any state law garnishment by another creditor (under New York law, of several creditors have judgments against a debtor, only one at a time can garnish 10% of wages, but a government student loan can be imposed on top of a state law garnishment.A borrower can also lose tax refunds if in default on a government student loan.
And social security or other government benefits (beyond $9,000 p/y) may be seized to repay government student loans, under a 1996 law upheld by the Supreme Court in 2005 But if the student loans are strictly private, not guaranteed by the government, then the lender can only use the collection options available to any creditor. The lender must sue the borrower and get a judgment. Under New York law, a judgment creditor may then garnish 10% of gross wages, put a lien against real estate (but not actually sell the real estate, if it is the debtor's residence, in most cases) and seize bank accounts if the balance is over $1,740.00. As unpleasant as these collection practices are, they may be preferable to leaving the country and attempting to make a living - and a new life - in a foreign country.
I received this inquiry from someone out-of-town, so I will not be representing them as their attorney (some information altered for privacy reasons):
Ms. R from the Buffalo area wrote to me and asked what advise I could give her concerning her $100,000 + student loan debt. Payments are increasing by 1/3 and she can hardly afford the current payment. If you have a better answer than me, please post a comment. My response: