The Dark Side of Student Loans: Debt Burden, Default, and Bankruptcy

This article addresses three hypotheses: (1) only a minority of Canadian student loan borrowers experience severe difficulty in repaying their student loans; (2) those who default on their student loans do so largely because they cannot pay, rather than because they do not want to pay; and (3) for Canadians who are filing for bankruptcy and who have student loans among their debts, bankruptcy is a last resort, and their economic situation is more difficult than that of the average person seeking bankruptcy protection. A review of the literature strongly supports the first two hypotheses; a new analysis of a 1997 survey of debtors seeking bankruptcy protection supports the third. The author concludes that most debtors with student loans among their debts are not behaving opportunistically in seeking bankruptcy; bankruptcy is indeed a last resort. The article questions whether recent legislative changes, which impose a ten-year waiting period before allowing the discharge of student loan debt through bankruptcy, are motivated by an assumption of opportunistic behaviour on the part of student loan borrowers. The author believes those changes are unwise and unnecessary

The Empirical Dimensions of Consumer Bankruptcy: Results from a Survey of Canadian Bankrupts

The number of consumer bankruptcies in Canada has risen substantially over the last twenty years. Using a 1997 survey of approximately 1,000 Canadian debtors, this article explores the economic situation of debtors seeking bankruptcy protection. This economic situation seems to be quite weak-most of the debtors have very low income, very high debts, and few assets. Moreover, the economic situation of the 1997 debtors seems quite similar to that of the 1977 debtors studied by Wayne Brighton and Justin Connidis almost twenty years ago. The aggregate amount of consumer credit, as a proportion of disposable income, has not risen dramatically, and the author discusses the possibility that the increase in bankruptcy is the result of greater amounts of borrowing among three specific groups of borrowers: the self-employed, women, and young people. Overall, the findings from the survey are quite similar to those reported in a similar American study of bankrupts, and suggest that the rise in bankruptcies is not the result of more widespread opportunistic behaviour by debtors

Collaboration or Participant Observation? Rethinking Models of 'Linguistic Social Work'

Documentary linguists aspiring to conduct socially responsible research find themselves immersed in a literature on ‘collaborative methods’ that does not address some of the most pressing interpersonal challenges that fieldworkers experience in their community relationships. As recent controversies about the nature of collaboration indicate, collaborative models embed assumptions about reciprocity, negotiation, and the meaning and moral valence of categories like ‘research,’ ‘language,’ and ‘documentation,’ which do not translate equally well across all communities. There is thus a need for a method flexible enough to respond to the complexity and diversity of what goes on in particular cross-cultural researcher-community relationships. In this article, we encourage documentary linguists to consider the benefits of participant observation, a research method that is designed specifically to deal with the interpersonal nature of fieldwork in the human sciences. Because it ties knowledge production directly to the development of social relationships across difference, participant observation can help documentary linguists think fruitfully about the social approaches they take in their fieldwork, whether these ultimately come to involve formal collaboration or some other form of reciprocity.National Foreign Language Resource Cente

Bankruptcy for the Poor?

The conventional wisdom is that the poor are not heavy users of the insolvency system, because creditors are unwilling to take risks on the poor and because many of the poor are judgment-proof. However, credit is now widely available across the spectrum of income groups. In addition, poverty is often a temporary state for many Canadians; therefore, being judgment-proof is likewise temporary. Some of those who are poor at any point in time are in fact in need of bankruptcy protection. They have debts that they are unable to pay and little likelihood of being able to repay in the near future. We begin by presenting evidence on indebtedness among families in the lower income deciles. We then turn to the main question: should the Canadian bankruptcy process be more readily available to poor debtors? Following a comparative analysis (considering the United States, Australia, New Zealand, and the United Kingdom) and analysis of interviews with Canadian bankruptcy trustees and other insolvency professionals, we offer six recommendations for reform

Debtor Assistance and Debt Advice: The Role of the Canadian Credit Counselling Industry

A continuing theme of our work, and that of others, has been the failure of insolvency law to keep pace with the new problems faced by low-income debtors. Researchers have suggested that the cost of personal bankruptcy puts it beyond the reach of many of those in need of it, though it has proven difficult to demonstrate conclusively that large numbers of low income debtors would take advantage of bankruptcy if the price was lower. In this paper, we analyze another industry — the not-for-profit credit counselling industry — that has grown rapidly in recent years and that offers a different sort of remedy for financial distress. We begin in Section II with a brief history of the credit counseling industry in Canada and in the US. We show how the industry has evolved from a small set of government-subsidized and community-based not-for-profit groups into an industry that is heavily subsidized by credit suppliers and, for the most part, lacking any significant community connection. In Section III, we briefly set out the regulatory framework that seems to encompass credit counselling agencies (“CCA”), both for-profit and not-for-profit. We do not, however, reach any conclusions on the application of this framework to Canadian CCA. Instead, we describe the concepts underlying the framework in a coordinated way. In Section IV, based on a set of mystery calls to the largest CCA, we show that most simply have nothing to offer low-income debtors and that most do not do a good job of providing information concerning the alternatives available to them. Rather than introducing substantive legislative or legal rules to help low-income debtors, the Canadian federal government has chosen instead to promote financial education with its 2010 Task Force on Financial Literacy. In Section V, we briefly analyze the Task Force process, suggesting that it largely overlooked the needs of the poor

Credit Counselling in Canada: An Empirical Investigation

When debt becomes unmanageable, two options for a consumer debtor in Canada are: (1) enlisting the services of a bankruptcy trustee, and (2) becoming a client of a not-for-profit credit counselling agency. Each of these options is regulated differently and has public and private dimensions. At first glance, these two options might seem to illustrate the potential of multiple legal orders to better serve the public. In this paper, however, we argue, based on empirical research on the credit counselling industry, that while this pluralism has potential to facilitate debt relief in Canada, it has failed to do so. The lines between public and private options have been blurred to the point where they are difficult to discern, and the consumer debtor is ultimately disadvantaged

Bankruptcy for the Poor?

For two reasons, the conventional wisdom is that the poor are not heavy users of the insolvency system. First, creditors are reluctant to extend credit to the poor because the risks of non-payment are high. Not having been able to borrow, the poor are not over-indebted and are therefore not in need of bankruptcy protection. Second, some poor debtors - lone parents on social assistance for example - are judgment-proof meaning that judgments for money recoveries obtained by their creditors are of no effect because these debtors do not have sufficient non-exempt property or income to satisfy the judgment. Developments in two areas may challenge the conventional view. Undoubtedly, credit is now widely available across the spectrum of income groups. Even a short-term, low-wage job can bring a credit card to the doorstep of the poor and the slogan no credit, no problem testifies to the availability of retail credit. In addition, we now know that poverty is often a temporary state for many Canadians, with many moving in and out of low-income. Accordingly, the judgment-proof state is not a permanent condition, but a temporary status for many. While this may be welcome news in some respects, it means that debts can be accumulated during periods of relative economic well-being only to go unpaid when a job ends or when hard times return. These developments suggest the possibility that some of those who are poor at any point in time are in fact in need of bankruptcy protection. They have debts that they are unable to pay and little likelihood of being able to repay in the near future. We begin the paper by presenting evidence from the 1999 Survey of Financial Security on indebtedness among families in the lower income deciles. We then turn to the main question: should the Canadian bankruptcy process be more readily available to poor debtors. We draw on two sources to shed light on this question: a) a comparative analysis (considering England and Wales, the United States, Australia and New Zealand) and b) a series of semi-structured interviews with Canadian bankruptcy trustees and other insolvency professionals

Bankruptcy for the Poor?

The conventional wisdom is that the poor are not heavy users of the insolvency system, because creditors are unwilling to take risks on the poor and because many of the poor are judgment-proof. However, credit is now widely available across the spectrum of income groups. In addition, poverty is often a temporary state for many Canadians; therefore, being judgment-proof is likewise temporary. Some of those who are poor at any point in time are in fact in need of bankruptcy protection. They have debts that they are unable to pay and little likelihood of being able to repay in the near future. We begin by presenting evidence on indebtedness among families in the lower income deciles. We then turn to the main question: should the Canadian bankruptcy process be more readily available to poor debtors? Following a comparative analysis (considering the United States, Australia, New Zealand, and the United Kingdom) and analysis of interviews with Canadian bankruptcy trustees and other insolvency professionals, we offer six recommendations for reform