$25k loan, no payments and bankruptcy filed

[DaveSch]

I don't think these companies care much if the loan is paid off or not. They already got their money. If the origination fee were changed to a completion fee, I bet that the loan outcomes would be different. That is, LC and Prosper get paid only after a successful for everyone business transaction occurred.

Last year I realized the lack of alignments and I've not made any more investments. I'm cashing out as the money becomes available to me again. If things change and the environment becomes friendly to the small individual investor, I'll be back. 

[Victor]

If the loan was made within 90 days of the filing of the bankruptcy, there is a legal presumption of fraud under the bankruptcy code and the simple act of filing an objection to discharge or adversary proceeding will make the debt non-dischargeable.  Of course, it may not be collectable.

I've seen a few of my notes file for Chapter 7 six or so months out, but nothing this fast.  If no effort is made by Prosper to challenge discharge and aggressively try to collect in this case, lender confidence should suffer.

[ktrdsl23]

I don't think these companies care much if the loan is paid off or not. They already got their money. If the origination fee were changed to a completion fee, I bet that the loan outcomes would be different. That is, LC and Prosper get paid only after a successful for everyone business transaction occurred.

Last year I realized the lack of alignments and I've not made any more investments. I'm cashing out as the money becomes available to me again. If things change and the environment becomes friendly to the small individual investor, I'll be back.

I would hope that the higher ups at LC/Prosper are better business people than that and recognize that their abilities to make money in the future is tied to whether loans get paid off or not.  They need two willing sides to make money, a borrower and a lender.  The more loans that stop getting paid off or fraudulent events that occur the less interest the lower the returns for the investors.  If returns keep going lower then lenders will no longer be interested in loaning out their money and then LC/Prosper won't be able to originate new loans (a.k.a. make money).  At this point the number being charged off are still low enough that investors can still earn a reasonable return but it won't take long for borrowers to discover the loophole in LC/Prosper's strategy of not pursuing the flagrant actions...hence this discussion.

[ktrdsl23]

If the loan was made within 90 days of the filing of the bankruptcy, there is a legal presumption of fraud under the bankruptcy code and the simple act of filing an objection to discharge or adversary proceeding will make the debt non-dischargeable.  Of course, it may not be collectable.

I've seen a few of my notes file for Chapter 7 six or so months out, but nothing this fast.  If no effort is made by Prosper to challenge discharge and aggressively try to collect in this case, lender confidence should suffer.

The loan originated on 4/2/15 so far less than 90 days. Is that legal presumption specific to individual states or is it a federal regulation?  Do you have a link to a specific statute in the bankruptcy code or is this just an unwritten rule?  I'm wondering if I should highlight this specific loan to Prosper in hopes that they take a closer look at it.  For people's reference the listing # is 2490176.

[kya]

i would for what its worth at least email them that they should be filing an objection which is very easy to do on this chap 7..... so at the very least the debt is not discharged

[Victor]

If the loan was made within 90 days of the filing of the bankruptcy, there is a legal presumption of fraud under the bankruptcy code and the simple act of filing an objection to discharge or adversary proceeding will make the debt non-dischargeable.  Of course, it may not be collectable.

I've seen a few of my notes file for Chapter 7 six or so months out, but nothing this fast.  If no effort is made by Prosper to challenge discharge and aggressively try to collect in this case, lender confidence should suffer.

The loan originated on 4/2/15 so far less than 90 days. Is that legal presumption specific to individual states or is it a federal regulation?  Do you have a link to a specific statute in the bankruptcy code or is this just an unwritten rule?  I'm wondering if I should highlight this specific loan to Prosper in hopes that they take a closer look at it.  For people's reference the listing # is 2490176.

The relevant section of the Bankruptcy Code is Section 523 which deals with fraud by a debtor.  The presumption of fraud can be found in Section 523(c).  Not saying the creditor succeeds just saying there's a process by which this particular issue can be addressed.

[kya]

the other way you could get lucky on this bk is if this case has a "fair" trustee who is supposed to be unbiased between the creditors and debtors... he/she might not allow the debt to be discharged and question the debtor at the first meeting as to where the money went....