I know there is a big difference there, but I am focusing on your implied point that everyone under an ugly debt load needs to be taught a lesson. If some billionaire philanthropist paid off everyone’s medical or student loans, would you say that’s against the public interest?
I think every person needs to be taught financial lessons, or they’re often being taught be the school of hard knocks.
If Bill Gates wanted to wipe out the debt of all former students and medical patients, it’s his money to do with as he pleases. He just shouldn’t be surprised if every person still in school expects him to do the same for them. Or even sues him, saying he’s set a precedent and requires him to do the same for them.
StG
First, just to be clear, the original debtor (say, XYZ Hospital) have charged off the debt. They’ve decided to take the pennies on the dollar for the debt. So, even if the debt were paid off in FULL, it would not go to the original organization to whom the money was originally owed ever, no matter who collects it.
Second, the debt is on the secondary market. I think they ran a test that used $500 to buy $14,000 in debt. That is debt available for anyone to buy.
If a debt collector gets 100% of the amount, then they’d be doing well above average. But, for the most part they run minimum wage (maybe less?) employees who harass the person who owes the money and often harass their relatives and work places.
This group has every right to buy that debt just like the debt collectors do. But, instead of trying to make a profit from it, they forgive the debt based on the Biblical concept of Jubilee.
It sounds like they’ve focused on medical debts in this first go-round… what should people learn about accruing large medical debts? Few people wreck cars, break bones or suffer serious illnesses on purpose. Should they do as the Republican healthcare program dictates and just die quickly next time (even if it’s a treatable injury or illness). That way others won’t be offended if by some seriously long shot odds their debt happens to be forgiven by strangers?
this is probably a state thing, but in this area the kids are given instruction in finances, debt, managing money, etc. One of my nieces is even doing a small business as part of her grade (all the kids have to set up and run a small business).
These are private people donating to this group. So, it is also their money to do with as they please.
IF anyone could find an attorney to take on the “you owe me” case, I’m pretty sure that the judge would not only throw out the case, but potentially fine the attorney for clogging up the courts. Just because someone does something one time or even fifty time… that doesn’t give strangers any right to expect it to continue, let alone demand that it continue.
The way it worked for me, several years ago, was the company holding my debt for $2200 offered to settle it for $1100. I was just able to scrape up that amount of money, so I settled the debt. The person I spoke with warned me up front that a) they would send me a tax document showing the amount of the debt that was forgiven, and b) that it was considered to be income for me, and c) I was expected to include it in my taxes for that year.
So, come tax time, which is usually the one time of the year I’m flush, because I always have more then the minimum taken out, the taxes paid on that income cut my return by quite a bit.
It sucked, but what didn’t suck was knowing that I had settled the debt to the holder’s satisfaction, and that I wouldn’t be getting multiple calls a day, dunning me for money I didn’t have.
It occurred to me last night that this doesn’t necessarily have to happen with OWS’s work. I don’t believe there is anything that requires the debt holder to tell the IRS that they’ve taken a loss by forgiving a debt. The holder does declare it, because it decreases their tax liability. OWS, however, is a non-profit, and they don’t have to claim their losses to the IRS.
Why does this bother you so much?
The original debt holder was able to recoup some value of the debt and write off the remainder as a business loss, thus lowering their tax burden. The secondary debt holder gets the price they’re asking for the debts they’re selling. OWS purchases the debts with the clear intention of voiding the debts.
The people whose debts are forgiven haven’t pulled anything. They haven’t stolen anything or cheated or run some kind of con. I can promise you that their credit ratings have already taken a beating, and they won’t be able to borrow money without paying a much higher interest rate or possibly not at all.
They were given a gift, free and clear. That’s what charities do. Doing charitable work is considered a moral and righteous thing to do, because it relieves the suffering of our fellow humans. The most meaningful charities do their work without asking whether the recipients deserve it or not.
This was probably an in-house debt collection because the IRS wants to know immediately when the debt is forgiven. Written off debt can be hounded for 5-7 years and much if it isn’t collected at all, so it would do no good for the IRS to wait all that time and hope someone along the line reports it as income. Debts can be resold several times over in the secondary markets, so it makes no sense for each of those debt collectors to report the same thing to the IRS (nor does it make sense for the debt collector to get a write off for the full $2k when they only paid about $100 for it in the first place).
Example: Wells Fargo runs a lot of ‘off-name’ credit companies (like when you buy tires and can get it on credit right there). They’re complete rip-offs w/huge fees and high percentage rates, they’re a huge revenue stream for Wells Fargo.
When those accounts go bad, Wells Fargo has an entire internal collection department (basically front line, people in chairs in a sweat shop hounding people by phone operation). They don’t use the name “Wells Fargo” or the name of the original credit company… they use “XYZ settlements”. But, the debt hasn’t really been formally sold onto the secondary market yet because it was just moved over to different business unit.
Plus, even if there were no consequences, only a small number of people are being helped, and they don’t even know they are being helped. His big fear that people will decide to bet on the fact that OWS will wind up forgiving their debt is ridiculous.
As is his idea that there are adults who think they can go into debt without consequence who only learn from the fact that there are consequences. The ignorance that causes debt is not that, it is that they don’t realize how much debt they are accruing until it’s too late, being more than they can pay off. No one needs a lesson on how accruing lots of debt is bad. What they need to be taught is how to deal with that debt once it becomes too big.
I mean, I fairly recently learned that you even can settle your debt without going into bankruptcy or using one of those seedy companies that renegotiate your debt for you. That’s something no one ever tells you, and the school of hard knocks never teaches you. Thank God for people who teach rather than make you go through negative experiences, thinking that that will automatically teach you.
So, they’re up to $290k+ ( hoping to cancel $5,818,398 in debt ) this time around. They’re also hinting about a phase II.
BigT - I’m a she.
I guess since I’ve spent the majority of my working life doing credit and collections, I have this feeling that people who owe a debt need to pay it. I’ve worked in retail (department store) credit and commercial credit for distribution companies that sell products to other businesses. I always made more than minimum wage, and abided by the Fair Debt Collection Practices Act. When my book distribution company sold books to small booksellers (who have a hard time with internet sales and large chain retailers), we needed to collect on most of that debt. As distributors, our profit margins were small and a large loss could really impact the bottom line. My goal in credit and collections was to keep a friendly working relationship with our customers, while helping them resolve their debt. We wanted these folks to continue to purchase from us, so we made solutions as workable and amicable as possible. Bad debt write offs may give you a tax write off, but that’s a fraction of the amount you actually lose.
I’ve also worked these jobs whether I liked it or not, to make sure I could have good health insurance and could pay my obligations. I know bad things happen to good people. I also know that people spend money they don’t have on crap they don’t need and then whine when it comes time to pay the piper.
StG
Well, you didn’t really seem to acknowledge that until now. I get the impression that you are convinced that the vast majority of people in debt trouble are the crap-buying whiner variety. Measure for Measure’s earlier cite of " And 40-60% of all bankruptcies in the US are medical related" may be a little misleading, the study merely notes that a significant portion of the debt is medical bill related in 40-60% of the bankruptcies, but I think it goes to show that it’s not all 50" flat screen TVs getting these people into trouble.
What about people spending money they don’t have on stuff they do need?
I finally had time to review the cited study and have some problems with their numbers. According to their study, about 62% of the bankrupt debtors who responded to their poll were college educated. According to this study, in 2006 college graduates only made up about 25% of bankruptcy filers. That means that probably the polled responders (about 1/4 of the people who were originally contacted) are more likely to respond if they are college graduates. In fact, my cited study shows that filings due to accident or injury is down.
Whose study is an accurate view? I don’t know. But I do know that I have a co-worker who has the roughly the same job as me. Probably relatively the same pay. Both childless. She has $40K in credit card debt and a mortgage she worries about paying off. She just refinanced to reduce her payments and extend her mortgage back out to 30 years. I have no credit card debt, enough savings to pay off my house if I want and pay the insurance and taxes for 10 years, with 6 years left on my mortgage. She’s taken three out of town vacations, plus the odd weekend here and there. I’ve taken none. Which of us is more likely to declare bankruptcy?
StG
Do NOT bring that study up in decent company again. It should be taught int schools - as a lesson is fraud, deceit, and deliberate skewing of the facts. It’s among the the most infamously deceptive “studies” ever perpetrated, and has no place in any informed discussion.
Fantastic. So the banking system was bailed out by the government instead of allowing more financial institutions to crash and take each other down, which means the next crash will be even more spectacular since the system is backstopped by the government. You realize the massive profits these institutions generate are in part based on the minimal-interest money sources the government provides them that other banks don’t have access to, and the ability to take higher risks since these institutions are “too big to fail.”
Complete load of crap, btw. Massive financial institutions are the last people I’d consider as role models, unless you want this story: channel massive amounts of money through lobbyists to our law makers, get any kind of regulation in your industry removed, go crazy and create new financial products with huge payouts and the associated massive risk, get bailed out by the government when things collapse. Welcome to 2008.
Can you provide a cite or (if this is based on your opinion) describe what is wrong with this study? I’ve seen similar numbers (perhaps all from this study) and would like to understand why you feel that it isn’t credible.
A couple of things have happened that could cause the change in percentages. First, new regulations made it harder for credit companies to promote to college students. In the past, credit card companies pushed onto campuses in a major way and issued cards based on NO income at all because the credit card companies knew the parents would pay it off for the kids. That was stopped around 2008?
Second, beginning in 2008 a significant portion of the population became unemployed (in some verticals, this actually started in mid 2007). When there is 15-10% of the population unemployed or underemployed, they are going to use credit to pay everyday expenses, then end up going under NOT for medical bills, but because the economy is still bad and their credit could outlast the economic downturn.
So it is possible that BOTH studies are correct.
They are now up to $309k (hoping to squelch $6,195,781 of debt).
I question the idea of “too big to fail,” too. That sounds like nonsense to me - if you’re too big to fail, something needs to be fixed. Has that actually happened in the US with the car companies and financial institutions?