Are we sure this actually occurred? If anything this is going to make it easier for american banks to exploit students and side-step legislation that would actually fix the root of the student debt bubble in America.
By this I mean people will now just point to Canada and demand a bailout without really committing effort to passing laws that will prevent exploitative interest rates and pricing schemes by private universities.
Yes, I can confirm it happened. A relative of mine was quite happy when this happened. Myself, I migrated off their cards years ago.
That said, I don’t think it will lead to bailout. Debt forgiveness is a rare but standard practice in trying to rebuild credit scores, is my understanding, and a way of getting some return rather than the zilch you’d get from a personal bankruptcy. It’s just that bankruptcy doesn’t affect student loans in the US, so folks are absolutely stuck there...
Why would courts care? Student loans are not dischargable, because the student loan creditor lobbied to make sure they get laid. The replacement creditor has not.
Of course, there is no lender who is going to give a an unsecured loan the size of your substantial student debt to someone with said loans and no other assets, for obvious reasons.
You would need to play the long game here. Maybe use a balance transfer with a promotional rate a couple times to kick the can down the road, and then file for bankruptcy.
If this is constituted as a preferential payment, the clawback period is 90 days, if it's considered fraud, it would be longer. However, if someone lets you borrow money unsecured and you use it to pay a non-dischargeable debt, and you can't make the payments on the new debt, that's most likely the new lender's poor judgement.
By this I mean people will now just point to Canada and demand a bailout without really committing effort to passing laws that will prevent exploitative interest rates and pricing schemes by private universities.