Rbc Sues Md Student Who Dropped Out Due To Mental Illness, Thoughts?

[ploughboy]

Though it's a little late now, I'm going to say what I usually say when a Canadian med student winds up in the news for less-than-ideal reasons...

 

It's a small community.  There are likely people reading this who know and are friends with Mr. Robson.  Choose your words, and think before you post.

[ploughboy]

Also going to say what I usually say when the topic of disability comes up:  Make sure you have adequate disability insurance!

 

My ravings here: http://forums.premed101.com/index.php?/topic/82029-are-you-guys-getting-the-cfms-disability-insurance/?p=928791

[GrouchoMarx]

Bipolar disorder is a devastating illness.

 

To get behind one of our own, and to illustrate the serious nature of mental illness, students should boycott RBC.

 

The bank is owed that money, but this is a Test. They believe they can hustle this poor guy without worry. Were they concerned they'd lose all the doctor money from the rest of us, they would have let it go. It's a small amount in banking terms. So let's call their bluff

[567765]

the bank won't "care" - well more correctly they will care but still cannot do anything about it. The banks have to deal with this sort of thing all the time - a ton of sad situations are attached to their loans. Failed dreams, sudden heart breaking events, and any number of horribly sad situations all mixed in with frequent success stories as well. A bank that doesn't collect on its loans won't be a bank very long. Plus the only real way the could "forgive" things means the bank's risk are higher - the means they would have to charge more interest to cover that risk. It would be interesting to see how many people would accept higher interest rate to cover that (yes the banks will make money from you in the future but they do not on their LOCs - prime interest is by definition low return, and when you think about it the costs of the loan officer, running the program, marketing (including sponsorship), and yes dealing with the odd loan they cannot collect doesn't leave much. Plus they have other routes - each LOC is basically a mortgage - which has same or higher interest and actual collateral)

 

No bank wants to sue someone, or force bankruptcy. No bank wants to come off as the bad guy - both for business reasons (already in this thread people are saying switch from RBC - which I understand on an emotional level), and also moral reasons - you don't become a bank loan manager for professional loans so you can crush people. It is supposed to be a relatively happy rewarding job (your clients are happy, you get to go to the school and sponsor happy things, you are in effect part of a system that leads to helping a lot of people. People like seeing you - how rare is that for a banker?)

 

Again the situation sucks - people PLEASE consider your insurance needs. Any who has been around long enough has run into multiple examples of something like this. Each time I am reminded of how basic boring financial planning can protect everyone. Things like this really can happen to anyone. 

 

I like and agree with most of what you say, except for the nice banker part.

 

This is not a being nice or not nice issue. This is a business transaction with its terms clearly being transparent to you when you signed up with it. Look on a personal level, if anyone I know gives me 160 grand, they will expect me to give that money back.

So how about a bank that specializes in getting its money back from people, with interest on top. How will this pan out?  

This is just the reality.

[Bambi]

The debtor needs to go into bankruptcy and get a fresh financial start. It is necessary and no big deal. He goes to a trustee in bankruptcy, probably will pay about $1,000 in fees, make a small payment schedule that is affordable for a year or so, and will then be discharged with no more debts. The bank is wasting its money in legal fees with no possible recovery.

[rmorelan]

The debtor needs to go into bankruptcy and get a fresh financial start. It is necessary and no big deal. He goes to a trustee in bankruptcy, probably will pay about $1,000 in fees, make a small payment schedule that is affordable for a year or so, and will then be discharged with no more debts. The bank is wasting its money in legal fees with no possible recovery.

 

well maybe - we don't know if there are any assets here. 170K was spent after all

[itsalwayssunny]

Bipolar disorder is a devastating illness.

To get behind one of our own, and to illustrate the serious nature of mental illness, students should boycott RBC.

The bank is owed that money, but this is a Test. They believe they can hustle this poor guy without worry. Were they concerned they'd lose all the doctor money from the rest of us, they would have let it go. It's a small amount in banking terms. So let's call their bluff

Exactly. Honestly, I read through my own disability insurance policy last night and couldn't make heads or tails of it. Can I be absolutely sure that I would be covered in the event of an accident or illness? Nope. Those policies are incredibly confusing for even the well educated.

 

Also, someone earlier took issue with my reference to insurers using 'loopholes' to get out of paying. Oh boy. I'm fairly certain the word loophole can be found somewhere in the definition of insurance. To expand on this, I had a meeting quite recently with insurance brokers who work with practicing physicians, and this was actually their word- they spoke at length of the various ways in which agencies will try to get out of paying. It's our job to do our research and try to make sure that they can't. If you think that agent is your friend, you are sadly mistaken.

[older]

While it is true that bank that lends money has the right to be repaid, there is a lot more into it.

 

Banks are not in charity business, or in the business of being nice. The only purpose  they exist is to make money, and provide returns to shareholders. In order to fulfill this mission, banks operate at a large risk margin. They cannot expect, and they don't,  that every loan will be repaid.

 

Not only that. As subprime crisis shown, banks gave money to people they knew cannot repaid the loans. So why would they give the money? Because they packaged the  loans and sold them as mortgage-backed securities to unsuspecting investors who believe what you believe - that the loans will be  repaid.  The other example is Greece. This country could not repay their loans, and yet they got more loans.

 

These are extreme examples, but you see many more of them all around. Banks giving credit cards to people who  should  never qualify for them. Granting mortgages that will be non-repayable as soon as interest rates go up (the government had to intervene to restrain this particular risk).  Loan default is factored in in every bank's  business plan, and there is always a risk of even higher default in case of economic downturn, burst of housing bubble or other calamity.

 

With regards to students loans, banks show a bit more restraint, giving large loans almost exclusively to the high-prospect professionals - doctors, MBAs. But their risk is not fool-proof. MBAs are not necessarily getting great jobs, medical student drop off due to mental stress etc, and the bank faces losses -  for which they are well prepared  through their risk management and risk monetization. Certain percentage of loans are bad loans, and this simple fact will not put any bank out of business - unless goes to extreme (again, subprime). That's life, and that's part of doing business.

 

And now the question comes how would the bank approach specific case. Here is a senior swindled of her money. She certainly cannot repay the loan. The bank certainly can afford the loss. The same goes for this poor student.  With that loan, the bank took additional risk, uncalled for, to advance too much funds at once.  Bank  took the risk,  bank got burned. I am definitely not sorry for the bank.

 

Having said that I am by no means suggesting that  an average person taking  a loan should not be bother to repay it just because a bank can afford the loss. But there is a huge difference between fraud or  recklessness on the part of the borrower, versus exceptional, genuine adverse circumstances that were hardly foreseeable  for both borrower and the bank. Especially circumstances like death, illness, or fraud suffered by the borrower. As we know, even adverse but not-so-hard financial circumstances can "excuse" the borrower - hence very lenient bankruptcy laws we have here.  It should be case-by-case approach, and both the examples above (the student and the senior)  are very good candidates for justified loan write-ff. The banks should just butt off.

 

Best of luck to the student, and shame on RBC.

[indefatigable]

I agree that it's pretty cynical going after the former med student by the bank, especially considering the circumstances and excess credit extended.  There's likely no way the student can realistically repay the money, as mentioned above.  The bad publicity I think will cause the bank to back off.  Unfortunately, from what I understand of Canadian bankruptcy laws, there typically has to be a 7 year window before the last date of studies, which can be lowered to 5 years, to discharge the student debt.  This places the former student in a awkward position, preventing retraining for example.  

[Meridian]

It is not a Government student loan.  It is a commercial line of credit. I doubt the unique student loan rules come into play.  My guess is the lawsuit is to force bankruptcy and potentially recover some money from assets.   Again only a guess.

[indefatigable]

It is not a Government student loan.  It is a commercial line of credit. I doubt the unique student loan rules come into play.  My guess is the lawsuit is to force bankruptcy and potentially recover some money from assets.   Again only a guess.

 

Apparently, private student loans are usually considered in a similar fashion to government student loans.  A superficial glance at pertinent legal research suggests that in the event of a bankruptcy the loans would likely be discharged though (with probable minimal recovery), given the circumstances of the case (including illness and lack of completion of studies).  Research is here.     

[rmorelan]

I like and agree with most of what you say, except for the nice banker part.

 

This is not a being nice or not nice issue. This is a business transaction with its terms clearly being transparent to you when you signed up with it. Look on a personal level, if anyone I know gives me 160 grand, they will expect me to give that money back.

So how about a bank that specializes in getting its money back from people, with interest on top. How will this pan out?  

This is just the reality.

 

I am not saying the bank is nice, or the banker in charged primary function is to be nice. Just that being the banker in charge of LOCs is a "nice gig" to have in the banking world

[older]

Government's student loans are non-dischargeable in bankruptcy, the same way as child and spousal support payments are not. With regards to OSAP,  government has some rules that allow for deferment of payments, and also eventual forgiveness after 7 years of so, taking into account individual circumstances  (not sure about exact rules). Loans on commercial credit lines, whether for educational or other purposes, are dischargeable in bankruptcy.

 

The point is that the bank should NOT force the student into bankruptcy. It is unlikely that the bank recovers much from a person who barely makes a living, and who is also currently disabled by mental illness. Whatever they recover, it will be the poor guy's last dime, and most likely will go as a fee to bankruptcy trustees. Moreover, the bank will have to cover their costs in bankruptcy proceedings. Although it is a bad business for them, they still rather do it than back off. Bulldog mentality.  

 

The discharge will be automatic but it will destroy the student's credit record for 7 years (that's officially, but banks are free to look beyond that) , which means he might not be able to get even a credit card for several years, not to mention another tuition loan, car loan or mortgage. Loan default may still stay on the record (which is only fair to other potential lenders), but it will have much less detrimental impact than bankruptcy.

 

Forcing this student to bankruptcy is like kicking somebody on the ground, with no benefit whatsoever to the "kicker".  The bank itself would  be better off by quietly settling the matter rather than suffering public backslash. But greed is blinding.

 

rmorelan, I know you did not say banks are nice (how could you?), I was just being sarcastic.

[indefatigable]

On 3/15/2017 at 2:11 PM, older said:

Government's student loans are non-dischargeable in bankruptcy, the same way as child and spousal support payments are not. With regards to OSAP,  government has some rules that allow for deferment of payments, and also eventual forgiveness after 7 years of so, taking into account individual circumstances  (not sure about exact rules). Loans on commercial credit lines, whether for educational or other purposes, are dischargeable in bankruptcy.

 

The link I posted above indicates that student loans, especially for medical students, are not usually discharged in bankruptcy (p. 10-1) -  it gives a couple of examples of medical graduates seeking relief from private loans that weren't discharged.  It's possible they could be (like probably in this case), but that's not the overriding case law.  It shows that a commercial line of credit is really not the same as an educational line of credit - otherwise they'd be more incentive for medical students to declare bankruptcy.  I agree with the overly agressive description.  Ultimately RBC won't get much from this except bad publicity (and can further cause distress to the student).  

 

Edit: p. 12 gives another example.  MD student in a motorcycle accident - loans absolutely discharged.

[rmorelan]

Government's student loans are non-dischargeable in bankruptcy, the same way as child and spousal support payments are not. With regards to OSAP,  government has some rules that allow for deferment of payments, and also eventual forgiveness after 7 years of so, taking into account individual circumstances  (not sure about exact rules). Loans on commercial credit lines, whether for educational or other purposes, are dischargeable in bankruptcy.

 

The point is that the bank should NOT force the student into bankruptcy. It is unlikely that the bank recovers much from a person who barely makes a living, and who is also currently disabled by mental illness. Whatever they recover, it will be the poor guy's last dime, and most likely will go as a fee to bankruptcy trustees. Moreover, the bank will have to cover their costs in bankruptcy proceedings. Although it is a bad business for them, they still rather do it than back off. Bulldog mentality.  

 

The discharge will be automatic but it will destroy the student's credit record for 7 years (that's officially, but banks are free to look beyond that) , which means he might not be able to get even a credit card for several years, not to mention another tuition loan, car loan or mortgage. Loan default may still stay on the record (which is only fair to other potential lenders), but it will have much less detrimental impact than bankruptcy.

 

Forcing this student to bankruptcy is like kicking somebody on the ground, with no benefit whatsoever to the "kicker".  The bank itself would  be better off by quietly settling the matter rather than suffering public backslash. But greed is blinding.

 

rmorelan, I know you did not say banks are nice (how could you?), I was just being sarcastic.

 

Thinking about this some more a reason I think the bank may be jumping to bankruptcy is that they problem feel that there is needs to be court appointed oversight at this point of the student's finances. They probably don't think they can trust the student to manage things.That would be pretty blunt but the bank is aware that someone with bipolar could relapse and end up in even more financial trouble as a result. Some for of guaranteed wage garnish in the end is in there best interest. After all bankruptcy doesn't simply clear all debit. 

 

Not to mention the recovery of whatever assets they can get re that route.

 

One other minor point - 170K is a crap load of debit no question. I mean seriously it is a lot of money. Yet it is quite similar to the debit that most residents have and someone earning what a resident earns can actually pay that off with enough time (In roughly 3.5 years I have paid off 50K from mine for instance and I am not living in a card board box. There were some probably would call sacrifices of course along they didn't mean as much to me as not having as much debit). Teachers earn on average a bit more than residents (this is actually one of the reasons the bank ideally would hold off - if the student was able to become a teacher - his goal - then they could recover some of this). It would take a long time - years, and years but I can imagine banks may be thinking along those terms.

[indefatigable]

Thinking about this some more a reason I think the bank may be jumping to bankruptcy is that they problem feel that there is needs to be court appointed oversight at this point of the student's finances. They probably don't think they can trust the student to manage things.That would be pretty blunt but the bank is aware that someone with bipolar could relapse and end up in even more financial trouble as a result. Some for of guaranteed wage garnish in the end is in there best interest. After all bankruptcy doesn't simply clear all debit. 

 

Not to mention the recovery of whatever assets they can get re that route.

 

One other minor point - 170K is a crap load of debit no question. I mean seriously it is a lot of money. Yet it is quite similar to the debit that most residents have and someone earning what a resident earns can actually pay that off with enough time (In roughly 3.5 years I have paid off 50K from mine for instance and I am not living in a card board box. There were some probably would call sacrifices of course along they didn't mean as much to me as not having as much debit). Teachers earn on average a bit more than residents (this is actually one of the reasons the bank ideally would hold off - if the student was able to become a teacher - his goal - then they could recover some of this). It would take a long time - years, and years but I can imagine banks may be thinking along those terms.

 

Likely, the local branch is "panicking" since they might have to write-off a significant sum of money.  In a judicial proceeding, context becomes key.  The bank extended an excessive amount of credit to an individual in what they felt was essentially a risk-free opportunity.  The individual now has a diagnosed mental illness and is unable to complete their studies which would have given entry to high-paying career, and hence a good return on investment for the bank.  

 

The individual's alternative career appears to be teaching: this is a minimal 2 year investment to become accredited and possibly some more time as a supply teacher before getting a permanent job.  Starting salaries for school teachers are between 40-50K, not really higher than a resident salary.  If the bank forces a bankruptcy, the individual will have much more difficulty getting support to retrain as a teacher and thus the bank will be unlikely to recover any money (and go through hardship).  If the bank doesn't do anything, they likely won't recover any money either, since supply teaching and going back to school doesn't really earn enough to repay the loan.  RBC spending money on legal fees and incurring bad publicity will probably be the real result.

 

Based on p. 12 (document above), the bank might claim that the excess debt is caused by "misconduct" rather than "misfortune", thus putting mental illness on trial to some extent.  Unlike a motor cycle accident, the bank might try to argue irresponsibility.  They might question the reasons for leaving the program - possibly arguing along similar lines.  It's possible they could "win" a ruling like that, but then the bank is unlikely to recover anything, as mentioned above.  

 

I imagine the questions in the bank might be -what does the bank do moving forward?  It could try screening for mental illness, entering some new ethical territory, although I'm not sure if it would have made a difference in this case, for instance.  

[1D7]

I imagine the questions in the bank might be -what does the bank do moving forward?  It could try screening for mental illness, entering some new ethical territory, although I'm not sure if it would have made a difference in this case, for instance.  

 

If this problem was prevalent enough banks would just increase interest rates to cover such risks.

[rmorelan]

Likely, the local branch is "panicking" since they might have to write-off a significant sum of money.  In a judicial proceeding, context becomes key.  The bank extended an excessive amount of credit to an individual in what they felt was essentially a risk-free opportunity.  The individual now has a diagnosed mental illness and is unable to complete their studies which would have given entry to high-paying career, and hence a good return on investment for the bank.  

 

The individual's alternative career appears to be teaching: this is a minimal 2 year investment to become accredited and possibly some more time as a supply teacher before getting a permanent job.  Starting salaries for school teachers are between 40-50K, not really higher than a resident salary.  If the bank forces a bankruptcy, the individual will have much more difficulty getting support to retrain as a teacher and thus the bank will be unlikely to recover any money (and go through hardship).  If the bank doesn't do anything, they likely won't recover any money either, since supply teaching and going back to school doesn't really earn enough to repay the loan.  RBC spending money on legal fees and incurring bad publicity will probably be the real result.

 

Based on p. 12 (document above), the bank might claim that the excess debt is caused by "misconduct" rather than "misfortune", thus putting mental illness on trial to some extent.  Unlike a motor cycle accident, the bank might try to argue irresponsibility.  They might question the reasons for leaving the program - possibly arguing along similar lines.  It's possible they could "win" a ruling like that, but then the bank is unlikely to recover anything, as mentioned above.  

 

I imagine the questions in the bank might be -what does the bank do moving forward?  It could try screening for mental illness, entering some new ethical territory, although I'm not sure if it would have made a difference in this case, for instance.  

 

Your right the don't start as high as I thought! - seemly like the min is about 45K to start in canada and by the 10 year mark it is 70K (at least according to stats can ha ) 

 

All this again not to say paying that sort of thing off would be easy. I would still be surprised that the entire amount would be waved in any case but I am not an expert at bankruptcy for sure.

 

They cannot screen for mental illness easily - may people develop schizophrenia for instance around the time you are in medical school. Cannot screem for something that doesn't exist yet. It is the stress/lack of sleep/isolation that comes with medical training that often brings out disorders by overwhelming copping mechanisms. Assuming their existing safety margins are overwhelmed. 

 

 

 

If anything a bank - thinking like banks would do - would either raise interest rates to cover the risk, or require someone to have disability insurance that covers these sorts of things in order to get the loan (similar to how I have to have house insurance as a requirement for the mortgage I have). Either way covering the cost.

[indefatigable]

Your right the don't start as high as I thought! - seemly like the min is about 45K to start in canada and by the 10 year mark it is 70K (at least according to stats can ha ) 

 

All this again not to say paying that sort of thing off would be easy. I would still be surprised that the entire amount would be waved in any case but I am not an expert at bankruptcy for sure.

 

They cannot screen for mental illness easily - may people develop schizophrenia for instance around the time you are in medical school. Cannot screem for something that doesn't exist yet. It is the stress/lack of sleep/isolation that comes with medical training that often brings out disorders by overwhelming copping mechanisms. Assuming their existing safety margins are overwhelmed. 

 

 

 

If anything a bank - thinking like banks would do - would either raise interest rates to cover the risk, or require someone to have disability insurance that covers these sorts of things in order to get the loan (similar to how I have to have house insurance as a requirement for the mortgage I have). Either way covering the cost.

 

I'm not a lawyer either, although in my educational distant past I did study elementary law.  The legal opinion on discharging private student debt is by Goodman's, a reputable law firm apparently (reposted here).

 

A  strict insurance option would possibly cover costs, but not raise rates and would probably be preferable from the bank's point of view.  The insurance company would likely do more extensive screening, but, as you mention, may not be that useful.

[rmorelan]

I'm not a lawyer either, although in my educational distant past I did study elementary legal theory.  The legal opinion on discharging private student debt is by Goodman's, a reputable law firm apparently (reposted here).

 

A  strict insurance option would possibly cover costs, but not raise rates and would probably be preferable from the bank's point of view.  The insurance company would likely do more extensive screening, but, as you mention, may not be that useful.

 

well that is interesting

 

Courts have continued to treat student loans granted by private entities or individuals (“Private Student Loans”) as invoking a “higher moral standard” and have continued to often place conditions on the bankrupt’s discharge that require all or a substantial portion of the student loans to be repaid. This provides an opportunity for private lenders to achieve greater recoveries in a bankruptcy than what might otherwise be available with regular unsecured claims."

 

so (again not a lawyer) if I am understanding this legal opinion there are protections for creditors to exactly prevent someone from getting an education from a loan (and thus gaining a permanent asset that help increase their income) and then to avoid paying back that debit through bankruptcy. As the education is permanent, so is the loan effectively.

 

If so this student is now even more in trouble than I thought.  

[rmorelan]

although maybe this part would help them:

 

In Re Goreil, the bankrupt took out a Private Student Loan to enroll in an accounting course. Having encountered great difficulty with the material, the bankrupt declined to write the exams as it was obvious that she would not pass. Her subsequent employment was unrelated to her education and she had no ability to repay her loan. In granting an absolute discharge, the Court reasoned that where a bankrupt receives no apparent benefit from the education financed by the student loan program, and where there are no other extenuating circumstances, student loans should not be treated any differently than any other indebtedness or obligation of the bankrupt.27 Similarly, in Conexus, the bankrupt took out a student line of credit to attend university, and withdrew from his university studies after two years. The Court reasoned that because the bankrupt did not attain a long term asset, his student line of credit should be treated the same way as any other unsecured debt.28

[indefatigable]

although maybe this part would help them:

 

In Re Goreil, the bankrupt took out a Private Student Loan to enroll in an accounting course. Having encountered great difficulty with the material, the bankrupt declined to write the exams as it was obvious that she would not pass. Her subsequent employment was unrelated to her education and she had no ability to repay her loan. In granting an absolute discharge, the Court reasoned that where a bankrupt receives no apparent benefit from the education financed by the student loan program, and where there are no other extenuating circumstances, student loans should not be treated any differently than any other indebtedness or obligation of the bankrupt.27 Similarly, in Conexus, the bankrupt took out a student line of credit to attend university, and withdrew from his university studies after two years. The Court reasoned that because the bankrupt did not attain a long term asset, his student line of credit should be treated the same way as any other unsecured debt.28

 

Yeah - that was my reasoning too.  Pages 10-12 gives three examples of bankrupt med students: two of them did not have their loans and lines of credit discharged after graduating (legal reasoning is given), and the third one did (motorcycle accident on p12 - considered "misfortune" rather than "misconduct" preventing med student graduation).  The conclusion gives a nice summary of the likely important points that are likely considered in a judicial context.  

[rmorelan]

Yeah - that was my reasoning too.  Pages 10-12 gives three examples of bankrupt med students: two of them did not have their loans and lines of credit discharged after graduating (legal reasoning is given), and the third one did (motorcycle accident on p12 - considered "misfortune" rather than "misconduct" preventing med student graduation).  The conclusion gives a nice summary of the likely important points that are likely considered in a judicial context.  

 

what will be interesting is if they could argue that now that he is aware of his condition he could actually finish medical school (doesn't matter if he wants to or not). If he could potentially do that then the education would not be useless - it would have value. If he is now well enough to continue but chooses not too. 

 

ha I am way outside of my area of even remote understanding  

[older]

The point was that student lines of credit are "dischargeable", contrary to  assertions od few posters. Whether bankruptcy court choses to discharge debt or not, and on what grounds, is a different matter.

In this case, with documented illness that made it impossible for the student to  continue education and pay back the loan, it will be no-brainer. Bankruptcy courts will not speculate whether he can improve sufficiently to finish the school etc. He will be discharged.

 

But why would bank choose to push the student to bankruptcy in the first place? There is nothing to gain, other than showing claws and gaining bad publicity. Hopefully the bank backs off.

 

About banks rising interest rates... What a naivete. Not because of this or that student default! Bad loans are a monetized risk in everyday banking business. And  loan interest rates depend on several market factors, student debt not being one of them.

 

That being said, individual credit rating has obvious impact when negotiating individual loans.  This is where bankruptcy record comes in. It is unlikely that a bankrupt can get any loan for the next 7 years. And a person with low credit score (e.g. for late bill payment, excessive credit card balance etc.) may face higher interest rate than his/her peers who borrow the same amount for the same purpose.

[Meridian]

But why would bank choose to push the student to bankruptcy in the first place? There is nothing to gain, other than showing claws and gaining bad publicity. Hopefully the bank backs off.

 

Pure conjecture on my part  ---  but maybe the lawsuit is due to a $50K car or some other asset they want liquidated for partial payment.  Student did burn atleast $80K more than they would have required for 2 years of Med school.