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Can the US Treasury put a lein on your business for a personal debt


Bevo

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Can the US Treasury put a lein on your business for a personal debt and if it can is there a way to prevent it?

I am planning to go into business with a colleague in California. Because California doesn't have PLLCs, an attorney and consultant have told me how to set up the business. We will each have a corporation that enters into a partnership with the parent corporation which owns and operates the business, a medical practice.

I just found out today that the US Treasury Department has sent my future partner to collections. Here is the background: He had the Armed Forces pay for his schooling. At some point, he became anti-war. He hired an attorney and was released from his service requirements as a conscientious objector. The attorney had gone through the same thing and informed him that the Armed Forces would continue to screw with him. For three years he was paying back the Armed Forces for his school debt on a payment plan. In his fourth year of payments, the Armed Forces declined to accept a repayment plan and wanted all its money back in a lump sum. While he was working through this, the Armed Forces sent his debt to the US Treasury Department and the US Treasury Department wants him to pay the lump sum as well. When he called the US Treasury Department, the US Treasury Department told him he needed to take it up with the Armed Forces. And of course, the Armed Forces said that it was out of their control and was in the hands of the US Treasury Department. This is where things stand now.

Each year this business partner will gain 10% ownership of the profits of the parent corporation. At year 5, he will own 50% of the profits.

Is the business protected against the federal government? Is this a show stopper that will prevent me from entering into a partnership with this colleague?

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The debt wouldn't worry me near as much as his character/ quitting on the military after they funded his schooling.

 

In Cali, it's all probably a draw for clientele  though.  Good luck.

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Yes, the government can, in all likelihood, place a lien on his property in an effort to collect the debt.  And also probably garnish wages and other forms of compensation coming to him.  They can't take over your business, per se, but they could take over his shares and get an order that all sums due him from the entity be paid to the government.

Whether and to what extent the government is aggressive in collecting this debt depends somewhat on the source of the debt.  For criminal and administrative fines and penalties, and business (less so personal until a certain threshold) taxes, the feds can be blindly aggressive, liening and foreclosing assets that have little value to them just to be punitive.  No idea how they act with this kind of debt.

Any such collection effort should theoretically be protective of third-party interests, like yours and your entities, but reality can differ from theory.  And you may have to go to court to assert and protect your interests.  And we should all know that going to court is its own punishment, even if the outcome is satisfactory.

The mere presence of the lien on his assets is probably going to fuck up his credit eligibility and in turn your corporate credit.  He (and his corporate interests) will probably also be deemed ineligible for federal programs, which might well include things like SBA loans.  Actually, this information may appear in his credit report without a lien, much like student loan delinquencies.  In tax cases, they frequently place a lien even when the debtor is on an installment plan and paying, so the debt isn't delinquent.

I can't say any of this WILL happen, but it does indeed create quite a bit of uncertainty and potential downside in going into business with him.

Edited by TwiceHorn
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1 hour ago, Bevo said:

Can the US Treasury put a lein on your business for a personal debt and if it can is there a way to prevent it?

Method 1: don't go into business with somebody like that.

Method 2: go into business with them, but make sure your finances are even worse that theirs, so maybe they can bail you out...

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What I've seen done in the past for situations like this where someone was about to have a divorce or some other thing is for the company to be owned by the others and the person who owes simply gets a % of profits. At some point in the future after the debt is cleared you can then sell them shares to make them whole.

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42 minutes ago, Onboard 2.0 said:

That's some strange shit. Pay for my schooling military... oh wait.. I'm now a conscientious objector...  Something very pre meditated, fishy about all of that. 

I don't know about that. I've known him a number of years. His dad is a career military officer and they have been on bad terms since he got out. A few years ago, I kind of joked about it (with pretty much the same attitude as yours) and he kind of jumped on me. It sounded pretty believable. He was somewhat concerned about being deployed but was more concerned about having to shoot someone. As a doctor, I think the odds of that happening would be close to zero, but he said he couldn't do it. That it was immoral...

 

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2 minutes ago, Bevo said:

I don't know about that. I've known him a number of years. His dad is a career military officer and they have been on bad terms since he got out. A few years ago, I kind of joked about it (with pretty much the same attitude as yours) and he kind of jumped on me. It sounded pretty believable. He was somewhat concerned about being deployed but was more concerned about having to shoot someone. As a doctor, I think the odds of that happening would be close to zero, but he said he couldn't do it. That it was immoral...

 

Yeah I get people have change of heart,  but you've made a decision to take uncle Sams money thru the military scholarship  program.  There are thousands of kids who would take that scholarship, and honor the commitment in a heart beat.  I've seen them I my sons Corp of cadet program at VT. They didn't get scholarships, and weren't able to continue in school.  Hard to see that happen to the kid, and the family.

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Don’t go into business with this guy. Or tell him to clean up his shit before it gets on you.

biggest red flag of all, you found out today about a financial problem he’s had for years.  A future partner (business or spouse) should be pissed that a long term problem is disclosed to them late.

what else don’t you know?

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2 hours ago, blacklab said:

What I've seen done in the past for situations like this where someone was about to have a divorce or some other thing is for the company to be owned by the others and the person who owes simply gets a % of profits. At some point in the future after the debt is cleared you can then sell them shares to make them whole.

Yes, there are probably ways to structure it so that any ownership interest is deferred or masked.   That might avoid the credit and eligibility problems, also.  But it might be unacceptable to him.

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Can the US Treasury put a lein on your business for a personal debt and if it can is there a way to prevent it?

I am planning to go into business with a colleague in California. Because California doesn't have PLLCs, an attorney and consultant have told me how to set up the business. We will each have a corporation that enters into a partnership with the parent corporation which owns and operates the business, a medical practice.

I just found out today that the US Treasury Department has sent my future partner to collections. Here is the background: He had the Armed Forces pay for his schooling. At some point, he became anti-war. He hired an attorney and was released from his service requirements as a conscientious objector. The attorney had gone through the same thing and informed him that the Armed Forces would continue to screw with him. For three years he was paying back the Armed Forces for his school debt on a payment plan. In his fourth year of payments, the Armed Forces declined to accept a repayment plan and wanted all its money back in a lump sum. While he was working through this, the Armed Forces sent his debt to the US Treasury Department and the US Treasury Department wants him to pay the lump sum as well. When he called the US Treasury Department, the US Treasury Department told him he needed to take it up with the Armed Forces. And of course, the Armed Forces said that it was out of their control and was in the hands of the US Treasury Department. This is where things stand now.

Each year this business partner will gain 10% ownership of the profits of the parent corporation. At year 5, he will own 50% of the profits.

Is the business protected against the federal government? Is this a show stopper that will prevent me from entering into a partnership with this colleague?

If you need to speak to an attorney that specializes in CA medical shit, I’ve got a guy.

 

Fair warning: he’s 100% USC

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He was somewhat concerned about being deployed but was more concerned about having to shoot someone. As a doctor, I think the odds of that happening would be close to zero, but he said he couldn't do it. That it was immoral...
 


LOL he's a cunt and a liar.
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On 8/22/2020 at 2:28 PM, Bevo said:

He was somewhat concerned about being deployed but was more concerned about having to shoot someone. As a doctor, I think the odds of that happening would be close to zero, but he said he couldn't do it. That it was immoral...

 

He sounds like he's full of shit and a moron.  My advice is not to screw with the government as once you're on their radar it is almost impossible to get off even if you do everything above board.

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52 minutes ago, horn4life said:

Mainly make sure you have a IRONCLAD way to take control of the business when he tries to fuck you.  Which he will eventually.

Are you saying that based on what I've said about him or based on partnerships in general?

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4 minutes ago, That Guy said:

How much money we talking about here? 

Start-up so $550K initially to $1.5 mil in 3 years if things go according to plan. So basically the company should be worth $1M over start-up costs in 3 years and I would own 50%. I could continue to take 50% of the profit indefinitely or sell and make $500K in 3 years and summer in Rangoon.

 

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1 minute ago, Bevo said:

Start-up so $550K initially to $1.5 mil in 3 years if things go according to plan. So basically the company should be worth $1M over start-up costs in 3 years and I would own 50%. I could continue to take 50% of the profit indefinitely or sell and make $500K in 3 years and summer in Rangoon.

 

Get those luge lessons scheduled now..

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4 hours ago, That Guy said:

Nice; how much is the lump sum payment the govt is looking for? 

Yeah, that's a good question.  If he's diverting money that could be applied to the government debt to your business, that could have some extra bad ramifications in terms of fraudulent transfer and whatnot.

I was curious about this question and dug a little deeper.  Before suing and taking a judgment, which would entitle the government to a lien, among other things, it doesn't look like they can place a lien for non-tax liabilities.  They can garnish wages and other payments, offset amounts owed the debtor against the debt (tax refunds), and do the usual creditor shenanigans with the usual adverse effects.

If the government were to go so far as to sue him and take a judgment, liens and everything else is on the table, and you can probably count on the government being assholes about it.

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The cost of school is approximately $60K per year so probably $300K just in student loan debt by the time someone starts paying it down. Typically, people also have other living expenses so they might come out with $500K in debt. Interest rates for graduate schools are extremely high and probably in the 8.5% range so most people do an income based repayment plan. Often, with such a plan, the person owes more than the original loan amount some year's out of school. Not too many people can afford a $7500/month student loan payment. Military also provides a salary while in school to pay for living expenses. So to summarize, while I don't know the exact amt owed, I would guess that it would be in the $300K range.

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I love this mentality...it just permeates people’s mindset on the topic.

Dude stiffs the gov’t on his military obligation and now the gov’t is the asshole for pursuing  legal remedies to recoup the obligation said individual failed to fulfill for his medical school being funded by the military.

 

Oh and folks just waltzed on by the fact that same dude is estranged/ sideways with his father, a military officer, himself.

 

Hmmmmmmmmm.  Some a y’all shop for partners in life waaaay the fuck differently than I do... yet the OP seems to be dying to  give Mr Integrity access to a good sum of his life savings.  
 

Ignore every indicator that is screaming at you to run the fuck away...WTF?

Edited by slorch
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5 minutes ago, slorch said:

I love this mentality...it just permeates people’s mindset on the topic.

Dude stiffs the gov’t on his military obligation and now the gov’t is the asshole for pursuing  legal remedies to recoup the obligation said individual failed to fulfill for his medical school being funded by the military.

 

Oh and folks just waltzed on by the fact that same dude is estranged/ sideways with his father, a military officer, himself.

 

Hmmmmmmmmm.  Some a y’all shop for partners in life waaaay the fuck differently than I do... yet the OP seems to be dying to  give Mr Integrity access to a good sum of his life savings.  
 

Ignore every indicator that is screaming at you to run the fuck away...WTF?

I'm listening. I wouldn't have posted if I was deadset on a decision.

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On 8/22/2020 at 11:12 AM, Bevo said:

For three years he was paying back the Armed Forces for his school debt on a payment plan. In his fourth year of payments, the Armed Forces declined to accept a repayment plan and wanted all its money back in a lump sum. While he was working through this, the Armed Forces sent his debt to the US Treasury Department and the US Treasury Department wants him to pay the lump sum as well. When he called the US Treasury Department, the US Treasury Department told him he needed to take it up with the Armed Forces. And of course, the Armed Forces said that it was out of their control and was in the hands of the US Treasury Department. This is where things stand now.

 

 

Have you verified the above or just accepted his word  ?     Strange that the gov't would not continue to accept a payment plan or perhaps he was delinquent or stopped payments.  May want to verify thru a third party, if possible.

Also,  consider if this became public how it would affect your business.

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5 minutes ago, torre said:

Have you verified the above or just accepted his word  ?     Strange that the gov't would not continue to accept a payment plan or perhaps he was delinquent or stopped payments.  May want to verify thru a third party, if possible.

Very good point, but I don't think it is possible to find out the details.

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32 minutes ago, slorch said:

I love this mentality...it just permeates people’s mindset on the topic.

Dude stiffs the gov’t on his military obligation and now the gov’t is the asshole for pursuing  legal remedies to recoup the obligation said individual failed to fulfill for his medical school being funded by the military.

 

Oh and folks just waltzed on by the fact that same dude is estranged/ sideways with his father, a military officer, himself.

 

Hmmmmmmmmm.  Some a y’all shop for partners in life waaaay the fuck differently than I do... yet the OP seems to be dying to  give Mr Integrity access to a good sum of his life savings.  
 

Ignore every indicator that is screaming at you to run the fuck away...WTF?

I don't see where you're getting some mentality out of it.

OP asked a question that's legit.  Quite a number of people have indicated that perhaps the guy is a bad business partner on more than financial grounds.

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31 minutes ago, torre said:

Have you verified the above or just accepted his word  ?     Strange that the gov't would not continue to accept a payment plan or perhaps he was delinquent or stopped payments.  May want to verify thru a third party, if possible.

Also,  consider if this became public how it would affect your business.

In my snooping around, I see that under the Debt Collection Improvement Act, various federal agencies are "encouraged" to hand over debt to Treasury for collection, which is what seems to have happened here. https://www.fiscal.treasury.gov/dms/about/about-dcia.html

It is not clear to me when an agency (DOD apparently here) can "keep" a debt or must turn it over to Treasury for collection.

Further snooping, I see that DOD gives people 120 months to repay education related debts, with a minimum payment of $50/month.

If I had to guess, he had not paid in full after 10 years, so it went to Treasury for collection.

Edited by TwiceHorn
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28 minutes ago, TwiceHorn said:

I don't see where you're getting some mentality out of it.

OP asked a question that's legit.  Quite a number of people have indicated that perhaps the guy is a bad business partner on more than financial grounds.

You yourself posted that OP should be careful about gov’t being assholes.  My apologies if you meant it differently than the gov’t attempting to collect the debt.

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16 minutes ago, slorch said:

You yourself posted that OP should be careful about gov’t being assholes.  My apologies if you meant it differently than the gov’t attempting to collect the debt.

I meant being assholes about the process, and specifically about disregarding the rights of third parties, rather than it being assholish of the government to collect a debt owed it.

Exemplia gratia:  I don't have a problem with the government collecting tax debts owed it.  It does, however, have a habit of going in and absolutely ruining businesses while only collecting pennies on the dollar when a more subtle approach could result in a much higher collection rate and less destruction and collateral damage, as in to other creditors of the business, its landlord, employees, etc.

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8 hours ago, Bevo said:

Start-up so $550K initially to $1.5 mil in 3 years if things go according to plan. So basically the company should be worth $1M over start-up costs in 3 years and I would own 50%. I could continue to take 50% of the profit indefinitely or sell and make $500K in 3 years and summer in Rangoon.

 

What kind of doctoring are we talking about

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18 hours ago, Bevo said:

Are you saying that based on what I've said about him or based on partnerships in general?

I'm saying based on a guy who stole an education from the US Military.  Partnerships in general are usually screwed up in one of a couple ways  1) Greed - the company does well and the buyouts and compensation were not CLEARLY spelled out in the founding documents. 2) The flip side of the same coin. The company doesn't do well and one partner is basically left holding the bag, and the costs of not being successful were not clearly defined in founding papers. 3) The usual way they go bad is one person ends up doing a lot more work than the other partner for similar compensation. Again usually due to not clearly specified responsibilities and remedies in the founding papers.

I would be EXTREMELY hesitant to give any ownership position to a person owing the government a large debt.  Especially if you ever plan to sell the business.

A friend of ours got involved with an old friend who had made a fortune on wall street and wanted to flip houses.  The wall street partner bought the house and my friend renovated it on her dime and they were going to spit the profits.  Well when it came time to sell, she couldn't because the wall street person had some IRS issues that were unbeknownst to my friend.  The rich wall street partner wasn't too worried and said it would get cleaned up shortly.  Well my friend who had put her money into the house for the renovation along with her time was none too pleased. The house did sell, but that was the end of the business relationship and sort of the friendship as the wall street partner simply didn't take seriously the concerns of the other partner (not as rich) who had most of her savings invested in the remodel.

Had the rich friend not taken care of the tax issue, or been UNABLE to, my friend would have been screwed.  That Government money is gonna get paid back somehow, and you do NOT was to be associated with that debt in any way, shape or form.  I might make the options for ownership conditional upon having the debt cleared up.  I would at the minimum have them make full disclosure and include the documentation of the disclosure in the founding paperwork.  With the penalty for misrepresentation of key facts surrounding the debt, especially any omission, ground for reversion of all ownership shares to you.If they balk at this then you saved yourself a lot of time and money.

I still go back to my initial thought that ultimately this guy is gonna screw you.  I get a Medical career paid for by the military and then I fail to fulfill the ONLY obligation I had to receive the education for my medical career?  That's basically fraud.  I would probably not go into partnership with a guy whose career was created by a fraud.  but that's just me.

Edited by horn4life
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One other thing about this that you need to consider, besides the character of the guy and the direct effect this could have on your business (credit, eligibility for federal programs, etc.) is that governmental collections could mess this guy up personally without ever directly "touching" your business so that the guy becomes a professional liability rather than a positive contributor.

When people get themselves under financial pressure, whether it be from drugs/alcohol, gambling, divorce, the IRS or whatever, untoward and unethical shit has a habit of happening.

 

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13 hours ago, Bevo said:

I'm listening. I wouldn't have posted if I was deadset on a decision.

I can appreciate that.

There's just a lot of liability on your part with someone who has demonstrated some pretty fundamental violations of trust in his past.  That's all I am saying?  If it was me, there's no way I'd go into business with those two huge factors in 1) renegging  on military obligation and compounding it by not repaying what he knows is owed 2) the family situation, and yeah, career military dads can be complete dicks/ assholes/ people you don't want to be around, I get that;  but I am just going on what was said and filling in the blanks.  I don't know why Pops is mad at Son, but i bet it has  something to do with defrauding the military and not fulfilling an obligation your buddy knowingly took on, both with regard to financing the education AND the military service.

So, then it comes to your own perspective.  Maybe $500k is chump change to you.  It is not to me.  Combine that with setting up shop and building a career with a known fraud with a very high potential for legal/ financial ramifications on your business?  It doesn't add up, and honestly, it feels like some other details are being left out, which is fine, but at face value, many of us on here are asking, "Why the fuck isn't the OP run, run, running away?"

Look if you were dating some chick with $50k in credit card debt, 2 ex husbands, and 4 kids with different dads; do you think it would be crazy for your friends to tell you, "You aren't going to be the one to make her faithful...?"   There are some indicators in life that shouldn't be ignored.

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Please don't misinterpret this as making excuses for the guy. And there does need to be full disclosure, but we don't know any of the details. He is married with a kid. It is quite possible that his wife threatened him with leaving if he was deployed or if she was forced to live in Killeen or some other godforsaken place. Literally, there could be tons of reasons that could cause him to be a conscientious objector. I don't think we need to automatically jump to him being a sucky person.

There are tons of good points on this thread and I appreciate all the input.

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1 hour ago, Bevo said:

Please don't misinterpret this as making excuses for the guy. And there does need to be full disclosure, but we don't know any of the details. He is married with a kid. It is quite possible that his wife threatened him with leaving if he was deployed or if she was forced to live in Killeen or some other godforsaken place. Literally, there could be tons of reasons that could cause him to be a conscientious objector. I don't think we need to automatically jump to him being a sucky person.

There are tons of good points on this thread and I appreciate all the input.

Perhaps there are some very good reasons why he wanted to avoid service. We're all entitled to change our mind, which the military obviously allows. You're not arrested or hauled off to boot camp. But why hasn't he settled his debt? Sounds like now he wants to start up a company with some funds. He should pay off his past debts before moving on.  I would be worried that his attitude to past problems could easily be repeated with you. 

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42 minutes ago, Nice Guy Eddie said:

Perhaps there are some very good reasons why he wanted to avoid service. We're all entitled to change our mind, which the military obviously allows. You're not arrested or hauled off to boot camp. But why hasn't he settled his debt? Sounds like now he wants to start up a company with some funds. He should pay off his past debts before moving on.  I would be worried that his attitude to past problems could easily be repeated with you. 

Pretty good synopsis of it, right there.

On the one hand, I can see that maybe a person in his situation doesn't have six figures in cash lying around to settle up with the gubmint.

On the other hand, if he's got the money and plans to invest it with you, that may not be "right" in several ways.

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44 minutes ago, Nice Guy Eddie said:

Perhaps there are some very good reasons why he wanted to avoid service. We're all entitled to change our mind, which the military obviously allows. You're not arrested or hauled off to boot camp. But why hasn't he settled his debt? Sounds like now he wants to start up a company with some funds. He should pay off his past debts before moving on.  I would be worried that his attitude to past problems could easily be repeated with you. 

I am providing the funds. I think he would be happy to pay based on income. Not many people with student loan debt can afford to write a $300K check.

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2 hours ago, Bevo said:

Please don't misinterpret this as making excuses for the guy. And there does need to be full disclosure, but we don't know any of the details. He is married with a kid. It is quite possible that his wife threatened him with leaving if he was deployed or if she was forced to live in Killeen or some other godforsaken place. Literally, there could be tons of reasons that could cause him to be a conscientious objector. I don't think we need to automatically jump to him being a sucky person.

There are tons of good points on this thread and I appreciate all the input.

I do.  I understand that the vast majority of folks who become educated at the cost of the government do not often have financial means.  The cost of the education is offset by the potential value of the USE of said education for a certain length of time. SHIT TONS of folks with wives that don't want to go to fucking Killeen, but that's part of the fee of the education, a lack of choice.

To pretend that this was anything other than a scam is silly.  Yeah guy has a kid, yeah guy has a wife.  he could have had both those working at Discount tire too.  But he CHOSE to take advantage of an educational opportunity, and took ALL of that benefit, without fulfilling his portion of the bargain.  Fear of getting killed is not "contentious objector" justification, nor is a wife wanting a divorce, nor a kid. But the guy wanted a bright future and SOMEBODY needs to pay for it.  The guy should pay for it, as he promised to, via service.  IF not cough up the cash.

Again I don't tend to want to go into business with people who are not trustworthy.  It's a recipe for disaster.

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I wouldn't touch this guy with a 10 foot pole.  He made an agreement with the federal government that they would educate him for free in exchange for military service.  He refused the military service and is now refusing to repay the government for the services rendered (his education).  He knew the terms very well on the front end.  This was not a bait and switch.

Wait until he gets in a tough spot with you and he'll likely see your partnership agreement as optional as well.  

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20 hours ago, slorch said:

I love this mentality...it just permeates people’s mindset on the topic.

Dude stiffs the gov’t on his military obligation and now the gov’t is the asshole for pursuing  legal remedies to recoup the obligation said individual failed to fulfill for his medical school being funded by the military.

 

Oh and folks just waltzed on by the fact that same dude is estranged/ sideways with his father, a military officer, himself.

 

Hmmmmmmmmm.  Some a y’all shop for partners in life waaaay the fuck differently than I do... yet the OP seems to be dying to  give Mr Integrity access to a good sum of his life savings.  
 

Ignore every indicator that is screaming at you to run the fuck away...WTF?

I fucking hate it when Slorch is right.  

 

 

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