Bankers have a simple rule they follow, The restructuring of any debt first requires a Default.
People can encounter any number of life changing situations, such as a medical emergency, caretaking for a family member, job loss beyond their control, victim of a violent crime, and this life changing event can require the renegotiation of a pre-existing debt.
However the banks won't talk to someone unless the bank can first proclaim a default on the debtor in need of a debt restructuring. In the Banking world, a Default basically means the defaulter is unfit, vile, a loser, someone to be pitied and looked down on, someone who should be grateful for any loan they may get in the future and therefore pay A LOT MORE in interest rate charges for that loan.
If we the people can change that one sentence up above in bold to "The restructuring of any debt DOES NOT require a default" Many good things instantly happen.
First, it will mean that anyone with a legitimate reason for restructuring a debt will be allowed to apply to do so without having to default first. Defaulting is like having a surgically implanted GPS that announces ones arrival wherever they go as being a lowlife, deadbeat, irresponsible, not to be trusted, unemployable, unrentable, UNTRUSTWORTHY.
Every day bankers label as untrustworthy people who have lost jobs to take care of an ill family member. Yet it is the Bankers that simultaneously make long term loans to people even as they invest in the outsourcing of businesses that help generate the banks new local business!
A student loan is taken out for 50K and it has now become clear that even if a job is earned after graduation, it will be for far less money than that size of loan could justify. Restructuring the student loan without first requiring a default would be the perfect compromise. Otherwise that 50k loan can eventually grow to 100,000 to 150,000 dollars by the time all the interest payments are factored in.
But banks will only restructure that student loan if there is a default first.
If however, a student loan is restructured without a default, the debt can be renegotiated with no penalty. A 50K student loan could be restructured with a lower interest rate. How about 1.9% instead of 11.9%. Is 55,000 to 60,000 total debt owed better than owing 100,000 or 150,000? Plus there's no default!
The debt can be further restructured so that until there is income, there is no debt obligation. That's pretty reasonable no? And with a super low interest rate attached, the debt will never grow uncontrollably.
This is a such a reasonable solution in which no one can complain that someone got something for free, and it stops the pathetic and insufferable actions of a banking community that continues to suck out significant portions of wealth from main street. This in turn frightens corporations from hiring anybody since they know fewer and fewer people have any wealth to buy their products and services with.
While the above scenario was about a student loan, mortgages and credit card debt should also be restructured without default as well.
As it stands now, Government foreclosure aid programs such as HAMP first require the homeowner default before they can even apply for HAMP!
As it stands now, Government foreclosure aid programs such as HAMP first require the homeowner default before they can even apply for HAMP!
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