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Malaysia's Bankruptcy or Imprisonment Policy A Warning To America

Posted By admin || 13-Jun-2011

Malaysia's Bankruptcy or Imprisonment Policy A Warning To America

Malaysia's recent proposal that student loan debtors either be forced into bankruptcy or put into prison for failure to pay their debts could serve as warning to America. While the U.S. does not have a policy of imprisoning debtors for failure to pay student loans, we also do not have a policy for easily freeing students of their student loan debt in bankruptcy, something most consider unfair and unjust.

Currently, it is nearly impossible for debtors to discharge student loan debts in bankruptcy even if they are facing a major disability and chronic underemployment. But ironically, a few years back a convicted felon was allowed to discharge his student loans because the bankruptcy judge ruled that it was unlikely, due to his criminal history, that he would ever earn enough to repay the student loan debt.  Is this what it has come to?  Only those ensnared in the criminal justice system have a fighting chance of discharging their student loan debt? We certainly hope not. But if one was to take only a cursory glance at how student loan discharges are handled during bankruptcy, it wouldn't be unreasonable to conclude that student loan debts  have become their own type of imprisonment.

Many experts who follow the student loan debt issue have argued that such tight controls on student loan debt discharges in bankruptcy have curtailed innovation and discouraged graduates from taking career changes.  And with an unemployment rate which hovers above 9 percent, it is this type of innovation we need to propel our economy into a much needed recovery.

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