Anyone wanna place bets on how long this "people's bailout" will last?

[rocketdodger]

I'm surprised this is the first thread about it: http://rollingjubilee.org/

I'm not familiar with exactly how this works but they claim it has been verified by the IRS as entirely legal. Seems pretty darn cool to me.

Discussion?

[superfreddy]

So, if I understand this correctly, they want me to donate my hard earned money to further enrich the packets of lending institutions who currently own the debt and to release all financial responsibility from dead-beat people who irresponsibly got into too much debt? No thanks, I pass.

[ravdin]

I thought that gambling online was illegal.

[Ampulla of Vater]

I wonder how much they will collect from the 99%:

Quote:

Debt is the tie that binds the 99%, from recent graduates paying hundreds of dollars in interest every month on their student loans, to elderly homeowners underwater to the banks, to teachers and firefighters forced to take pay cuts because their cities are broke, to countries that that have to slash school and hospital budgets to pay back bondholders.

[superfreddy]

Originally Posted by Ampulla of Vater

I wonder how much they will collect from the 99%:

Quote:

Quote:
Debt is the tie that binds the 99%, from recent graduates paying hundreds of dollars in interest every month on their student loans, to elderly homeowners underwater to the banks, to teachers and firefighters forced to take pay cuts because their cities are broke, to countries that that have to slash school and hospital budgets to pay back bondholders.

I believe they're only targeting unsecured, consumer debt, since they mention collection efforts typically associated with such debt.

[theprestige]

Yeah, it looks like they're setting themselves up as a collections agency. Only, instead of buying bad debt at a steep discount, and then trying to collect at a small profit, they're simply buying it at a discount and then forgiving it.

So instead of looking for business loans to start a profitable business, they're looking for charitable donations to fund charity work.

If they are successful, I will probably have to consider defaulting on as much debt as I can, and then just wait for them to buy it out and forgive it.

[Gazpacho]

Since when does the IRS affirmatively declare financial schemes to be legal?

[The Central Scrutinizer]

Originally Posted by Gazpacho

Since when does the IRS affirmatively declare financial schemes to be legal?

Since never.

Years ago, a friend of mine excitedly described to me a "club" she had joined where somehow you could "gift" money ($1500.00, IIRC) to someone, and other's would do the same to you, or something. And the IRS had declared it all 100% legal! Anyhow, I quickly identified it as a pyramid scheme, and agreed to go with her to a happy hour this club was sponsoring, just to have some fun. So we get there, and one of the gullable members starts recruiting me to join. He tells me his name (first and last), and how it's all 100% legal. I tell him I work for the IRS in the "tax enforcement department" (a lie, of course). He turns white as a ghost. For some reason, the happy hour quickly breaks up. No loss...the beer wasn't even free.

[Alt+F4]

What BS! Just because Wall Street has been corrupt doesn't in any-way-shape-or-form release me from any debt that I have. Ever debt I have is LEGITIMATE.

[Lithrael]

Anybody care to walk me through a) why this would be illegal/a problem and b) why some of you guys seem so angry at the idea?

Lending institutions, in the pursuit of profits, end up with some debt that's more trouble than it's worth to them, quite literally. They couldn't care less what happens to the debt once a debt collector has purchased it, surely? Why do you?

[theprestige]

Originally Posted by Lithrael

Anybody care to walk me through a) why this would be illegal/a problem and b) why some of you guys seem so angry at the idea?

Lending institutions, in the pursuit of profits, end up with some debt that's more trouble than it's worth to them, quite literally. They couldn't care less what happens to the debt once a debt collector has purchased it, surely? Why do you?

I think half the respondents here haven't really bothered to figure out exactly what's being proposed, and the other half are going off on tangents anyway.

Personally, I don't see any problem with it, in principle. It's an interesting idea, and I'm curious to see if they can pull it off.

It's intriguing that they seem to have set up the project to be entirely agnostic regarding "deadbeat" borrowers vs. "distressed" borrowers (two terms I just made up).

As a youth, I made some obviously bad credit choices (I mean, I knew they were obviously bad at the time), instead of choosing to live within my means. There was an unpleasant span of two or three years, where debt collectors kept hounding me to pay back what I owed. Over time, I wised up, payed off my debts, and stayed out of that kind of trouble.

I think both society and myself were better off, for me paying my debts. I think if I'd received debt forgiveness instead, that would have sent entirely the wrong message.

So I probably won't be donating to this fund, simply because it doesn't look like they have any intention or ability to distinguish between douchebags like my youthful self, and good people afflicted by unusual hardship who actually need some debt forgiveness to get back on their feet.

[superfreddy]

Originally Posted by Lithrael

Anybody care to walk me through a) why this would be illegal/a problem and b) why some of you guys seem so angry at the idea?

Lending institutions, in the pursuit of profits, end up with some debt that's more trouble than it's worth to them, quite literally. They couldn't care less what happens to the debt once a debt collector has purchased it, surely? Why do you?

I'm not angry at this idea. I just don't care for anyone asking me for money to help people who got into debt in an irresponsible way and in the process, further enriching financial institutions who are bad at risk management.

If a FI makes a bad loan, they should suffer the financial consequences. If a person defaults on a loan, ditto.

[Irony]

The government already provides people completely overwhelmed with debt a way out. It's called bankruptcy. It's an unpleasant process with some serious consequences, but it should be, that helps weed out the people who would abuse it.

As for the lenders, they should simply have to eat the bad debt. They made the loan, they assume the risks. Should things get completely out of control then bankruptcy exists for them as well.

[Alt+F4]

Originally Posted by theprestige

Personally, I don't see any problem with it, in principle. It's an interesting idea, and I'm curious to see if they can pull it off.

They won't. Occupy Wall Street blew through about $750,000 in donations with nothing to show for it.

[Ferguson]

Originally Posted by theprestige

As a youth, I made some obviously bad credit choices (I mean, I knew they were obviously bad at the time), instead of choosing to live within my means. There was an unpleasant span of two or three years, where debt collectors kept hounding me to pay back what I owed. Over time, I wised up, payed off my debts, and stayed out of that kind of trouble.

I think both society and myself were better off, for me paying my debts. I think if I'd received debt forgiveness instead, that would have sent entirely the wrong message.

This mirrors me quite exactly, between 18 and 22 I got quite a bit in debt by making poor decisions, buying things I don't need, and borrowing money to help friends who had bad credit pay their rent . In other words I was an idiot, who had to learn my lesson by paying all that back plus interest.

I think the idea is "noble" in a sense, as a charity, but the problem with removing the consequences of irresponsible behavior (from both the lenders and borrowers), is that you promote more irresponsible behavior.

[Alt+F4]

Originally Posted by superfreddy

If a FI makes a bad loan, they should suffer the financial consequences. If a person defaults on a loan, ditto.

Indeed, if I'm making $50,000 a year and a banker offers me a mortgage for a million dollar home it's MY fault if I take it.

[Lithrael]

Originally Posted by superfreddy

I'm not angry at this idea. I just don't care for anyone asking me for money to help people who got into debt in an irresponsible way and in the process, further enriching financial institutions who are bad at risk management.

I agree it's unclear if the idea in the OP would be able to do much about helping those in need despite due diligence, as opposed to helping those who gave up early and put their credit card bills at the bottom of a pile of mail.

But how would it 'further enrich' these institutions? Surely they intend to sell the debt no matter what. It sounds like you think this program would purchase debt the lenders would otherwise have no market for.

Originally Posted by Irony

The government already provides people completely overwhelmed with debt a way out. It's called bankruptcy. It's an unpleasant process with some serious consequences, but it should be, that helps weed out the people who would abuse it.

That's true.

Originally Posted by Irony

As for the lenders, they should simply have to eat the bad debt. They made the loan, they assume the risks. Should things get completely out of control then bankruptcy exists for them as well.

Isn't that the same regardless of the idea in the OP? Selling their bad debt at a discount is their version of 'eating it' isn't it?

[superfreddy]

Originally Posted by Lithrael

But how would it 'further enrich' these institutions? Surely they intend to sell the debt no matter what. It sounds like you think this program would purchase debt the lenders would otherwise have no market for.

Collection agencies buy bad debt according to payment expectations - the easier to collect the higher the pennies on the dollar paid, thus effectively pricing bad debt. This initiatives appears to be targeted at buying any kind of bad debt, most likely the type that is totally worthless for the bank.

My take is that under normal circumstances, such debt would be written off by the FI and this initiative is just providing additional monies to the FIs on worthless debt.

[geni]

Originally Posted by Irony

As for the lenders, they should simply have to eat the bad debt. They made the loan, they assume the risks. Should things get completely out of control then bankruptcy exists for them as well.

I think the point is that there isn't bankruptcy of major financial institutions is currently viewed as too messy to be allowed.

[Lithrael]

Ah, OK. So the very bottom of the collection market would be the stuff even collection agencies would be reluctant to touch, and that's where this idea would most likely start. I see what you mean now.

[Alt+F4]

Originally Posted by Irony

As for the lenders, they should simply have to eat the bad debt.

They do, so I don't know why these fools would give money to them.

[LTC8K6]

The IRS sometimes calls a cancelled debt "income"...

http://www.irs.gov/taxtopics/tc431.html

[Gazpacho]

By my reading of that publication, if you had a loan on high-valued property that suddenly dropped in value, resulting in foreclosure of the property, you are liable for tax on the difference between the loan balance and the impaired market value of the property. That is, tax on an entirely fictitious benefit. Is this true?

Originally Posted by Irony

The government already provides people completely overwhelmed with debt a way out. It's called bankruptcy.

It provides other means besides that, which are called "the rights of debtors." Collection depends heavily on people not knowing their rights and allowing agencies to get judgements against them without even working at it.

[Lithrael]

Originally Posted by Gazpacho

By my reading of that publication, if you had a loan on high-valued property that suddenly dropped in value, resulting in foreclosure of the property, you are liable for tax on the difference between the loan balance and the impaired market value of the property. That is, tax on an entirely fictitious benefit. Is this true?

Yep. Though at the moment there's temporary income tax forgiveness for income from forgiven loans after foreclosure. I have to look into all that as my first home just foreclosed and auctioned for about the same amount as my down payment was when I bought it. Pretty depressing. Don't know yet if they're writing the rest off or selling it to a collector.