Cassim v. Educational Credit Management Corporation, 594 F.3d 432 (6th Cir. 2010). A chapter 13 debtor filed an adversary complaint seeking a determination that because of debtor’s disability debtor was entitled to an “undue hardship” discharge of debtor’s student loans. Debtor asserted that debtor’s student loan debts should be discharged when the bankruptcy court enters the general discharge order following completion of the chapter 13 repayment plan.
The student loan creditor sought to dismiss the adversary complaint on constitutional ripeness grounds. Creditor argued that the student loan debtor would have to wait for the entry of the chapter 13 discharge order before the debtor could file the adversary proceeding. Creditor believed a ruling prior to discharge was simply premature.
The Sixth Circuit framed the issue as whether a bankruptcy court ruling on the undue hardship discharge issue was constitutionally ripe for adjudication prior to the entry of a chapter 13 general discharge that would be entered years later, if ever, and only at the conclusion of the chapter 13 repayment plan. The Circuit Courts are split on this issue and are without Supreme Court guidance.
The Sixth Circuit found that the question of whether debtor’s student loan debt is dischargeable was constitutionally ripe for review by the bankruptcy court despite the fact that debtor had not yet received a chapter 13 general discharge under Section 1328. The court noted that debtor sought to discharge her student loan obligations under Section 523(a)(8) and creditor sought to prevent debtor from obtaining such relief. If debtor prevailed, the student loan creditor stood to lose some or all of its claim. The court therefore believed that the dispute involved a specifically-defined debt and a statutorily-based claim for relief that debtor was entitled to pursue. Consequently, the court found that the collision of these opposing interests produced a definite and substantial controversy between the parties that was currently ripe for adjudication, and not merely an abstract disagreement.
Your Bankruptcy Advisor
Blog By: Attorney Robert Schaller (Bob's bio) of the Schaller Law Firm Click for Bankruptcy Lawyer Job Opportunities. You are invited to contact Attorney Schaller at 630-655-1233 or visit his website at Discharging Student Loans to learn about how the bankruptcy laws can help you. Bob is a member of the National Bankruptcy College Attorney Network, American Bankruptcy Institute and the National Association of Consumer Bankruptcy Attorneys. For information about Chapter 7 bankruptcy Click Here
For information about Chapter 13 bankruptcy Click Here NOTE: Robert Schaller looks forward to the opportunity to talk with you about your legal issues. But please remember that all information on this blog is for advertising and general informational purposes only. Please read Bob's disclaimer. I recommend that you review a few other blogs that may be of interest to you. These blogs are identified in the right column and are set forth below: bankruptcy issues blog; bankruptcy and family law issues blog; bankruptcy and employment issues blog; and bankruptcy and student loan issues blog.
Sunday, May 9, 2010
Saturday, May 8, 2010
Student Loan Discharge Denied Because Circumstances Causing Undue Hardship Occurred After Discharge Was Entered
Student loan dischargeability is a hot issue. A court recently addressed the issue of whether the circumstances causing "undue hardship" must occur prior to the underlying chapter 7 discharge.
In Zygarewicz v. Educational Credit Management, 423 B.R. 909 (Bankr. E.D. Cal. 2010), a chapter 7 debtor filed bankruptcy and received a discharge of all dischargeable debts. However, one of the debts not discharged was debtor’s student loan debt. The student loan debt was not discharged because debtor could not demonstrate that repayment of the student loans would cause an undue hardship.
Two years later debtor’s situation changed for the worst. Debtor suffered a severe injury in a vehicle accident. Debtor then believed debtor would be able to prove that repayment of the student loans would cause an undue hardship. Debtor reopened the bankruptcy case and filed an adversary proceeding against the student loan creditor seeking a ruling that the student loan debt is discharged.
The student loan creditor objected to the discharge because the event causing debtor’s hardship arose years AFTER the discharge order had been entered. The bankruptcy court agreed and entered judgment in favor of the creditor. The court concluded that the circumstances causing a chapter 7 debtor’s financial hardship must arise PRIOR to the entry of the discharge order. Here, the court believed that debtor’s circumstances could not form the basis of a determination that repayment of the student loan would be an undue hardship since the circumstances causing debtor’s hardship (the vehicle accident) arose after the entry of the discharge.
Debtor should consider refiling a new bankruptcy case and attacking the student loan debt within the new bankruptcy case. Contact me if you have questions.
Bob Schaller
Your Bankruptcy Advisor Blog By: Attorney Robert Schaller (Bob's bio) of the Schaller Law Firm
Click for Bankruptcy Lawyer Job Opportunities. You are invited to contact Attorney Schaller at 630-655-1233 or visit his website at Discharging Student Loans to learn about how the bankruptcy laws can help you. Bob is a member of the National Bankruptcy College Attorney Network, American Bankruptcy Institute and the National Association of Consumer Bankruptcy Attorneys. For information about Chapter 7 bankruptcy Click Here
For information about Chapter 13 bankruptcy Click Here NOTE: Robert Schaller looks forward to the opportunity to talk with you about your legal issues. But please remember that all information on this blog is for advertising and general informational purposes only. Please read Bob's disclaimer. I recommend that you review a few other blogs that may be of interest to you. These blogs are identified in the right column and are set forth below: bankruptcy issues blog; bankruptcy and family law issues blog; bankruptcy and employment issues blog; and bankruptcy and student loan issues blog.
In Zygarewicz v. Educational Credit Management, 423 B.R. 909 (Bankr. E.D. Cal. 2010), a chapter 7 debtor filed bankruptcy and received a discharge of all dischargeable debts. However, one of the debts not discharged was debtor’s student loan debt. The student loan debt was not discharged because debtor could not demonstrate that repayment of the student loans would cause an undue hardship.
Two years later debtor’s situation changed for the worst. Debtor suffered a severe injury in a vehicle accident. Debtor then believed debtor would be able to prove that repayment of the student loans would cause an undue hardship. Debtor reopened the bankruptcy case and filed an adversary proceeding against the student loan creditor seeking a ruling that the student loan debt is discharged.
The student loan creditor objected to the discharge because the event causing debtor’s hardship arose years AFTER the discharge order had been entered. The bankruptcy court agreed and entered judgment in favor of the creditor. The court concluded that the circumstances causing a chapter 7 debtor’s financial hardship must arise PRIOR to the entry of the discharge order. Here, the court believed that debtor’s circumstances could not form the basis of a determination that repayment of the student loan would be an undue hardship since the circumstances causing debtor’s hardship (the vehicle accident) arose after the entry of the discharge.
Debtor should consider refiling a new bankruptcy case and attacking the student loan debt within the new bankruptcy case. Contact me if you have questions.
Bob Schaller
Your Bankruptcy Advisor Blog By: Attorney Robert Schaller (Bob's bio) of the Schaller Law Firm
Click for Bankruptcy Lawyer Job Opportunities. You are invited to contact Attorney Schaller at 630-655-1233 or visit his website at Discharging Student Loans to learn about how the bankruptcy laws can help you. Bob is a member of the National Bankruptcy College Attorney Network, American Bankruptcy Institute and the National Association of Consumer Bankruptcy Attorneys. For information about Chapter 7 bankruptcy Click Here
For information about Chapter 13 bankruptcy Click Here NOTE: Robert Schaller looks forward to the opportunity to talk with you about your legal issues. But please remember that all information on this blog is for advertising and general informational purposes only. Please read Bob's disclaimer. I recommend that you review a few other blogs that may be of interest to you. These blogs are identified in the right column and are set forth below: bankruptcy issues blog; bankruptcy and family law issues blog; bankruptcy and employment issues blog; and bankruptcy and student loan issues blog.
Thursday, January 21, 2010
Student Loan Debtor Granted Trial
In the case of In re Coco, 335 Fed. Appx. 224 (3rd Cir. 2009), a chapter 7 debtor brought an adversary proceeding against the student loan creditor, seeking determination that her student loan debt was not excepted from discharge.
The bankruptcy court granted summary judgment against the student loan debtor, finding there were no material issues of fact and that the student loan creditor was entitled to judgment as a matter of law. The bankruptcy court held that the debtor failed to establish undue hardship and was thus not entitled to a discharge of the student loan debt.
The student loan debtor appealed the bankruptcy court’s decision. The court of appeals held that factual issues as to whether debtor made good-faith efforts to repay her student loans precluded summary judgment for creditor. The bankruptcy court’s judgment was vacated.
The student loan debtor will get her trial to prove that she made good-faith efforts to repay her student loan.
Your Bankruptcy Advisor Blog
By: Attorney Robert Schaller (Bob's bio) of the Schaller Law Firm
Click for Bankruptcy Lawyer Job Opportunities.
You are invited to contact Attorney Schaller at 630-655-1233 or visit his website at http://www.schallerlawfirm.com/student_loan_discharge.htmlto learn about how the bankruptcy laws can help you.
Bob is a member of the National Bankruptcy College Attorney Network, American Bankruptcy Institute and the National Association of Consumer Bankruptcy Attorneys.
For information about Chapter 7 bankruptcy Click Here
For information about Chapter 13 bankruptcy Click Here
NOTE: Robert Schaller looks forward to the opportunity to talk with you about your legal issues. But please remember that all information on this blog is for advertising and general informational purposes only. Please read Bob's disclaimer.
I recommend that you review a few other blogs that may be of interest to you. These blogs are identified in the right column and are set forth below: bankruptcy issues blog; bankruptcy and family law issues blog; bankruptcy and employment issues blog; and bankruptcy and student loan issues blog.
The bankruptcy court granted summary judgment against the student loan debtor, finding there were no material issues of fact and that the student loan creditor was entitled to judgment as a matter of law. The bankruptcy court held that the debtor failed to establish undue hardship and was thus not entitled to a discharge of the student loan debt.
The student loan debtor appealed the bankruptcy court’s decision. The court of appeals held that factual issues as to whether debtor made good-faith efforts to repay her student loans precluded summary judgment for creditor. The bankruptcy court’s judgment was vacated.
The student loan debtor will get her trial to prove that she made good-faith efforts to repay her student loan.
Your Bankruptcy Advisor Blog
By: Attorney Robert Schaller (Bob's bio) of the Schaller Law Firm
Click for Bankruptcy Lawyer Job Opportunities.
You are invited to contact Attorney Schaller at 630-655-1233 or visit his website at http://www.schallerlawfirm.com/student_loan_discharge.htmlto learn about how the bankruptcy laws can help you.
Bob is a member of the National Bankruptcy College Attorney Network, American Bankruptcy Institute and the National Association of Consumer Bankruptcy Attorneys.
For information about Chapter 7 bankruptcy Click Here
For information about Chapter 13 bankruptcy Click Here
NOTE: Robert Schaller looks forward to the opportunity to talk with you about your legal issues. But please remember that all information on this blog is for advertising and general informational purposes only. Please read Bob's disclaimer.
I recommend that you review a few other blogs that may be of interest to you. These blogs are identified in the right column and are set forth below: bankruptcy issues blog; bankruptcy and family law issues blog; bankruptcy and employment issues blog; and bankruptcy and student loan issues blog.
Friday, January 1, 2010
Prepetition Student Loan Debt Not Discharged After Being Consolidated Postpetition
In Barrett v. Great Lakes, 417 B.R. 471 (Bankr. N.D.OH 2009), debtor filed chapter 7 bankruptcy in 2005. The next year debtor brought an adversary proceeding seeking an order determining the dischargeability of debtor’s student loans on “undue hardship” grounds. The original student loan creditor moved to dismiss the adversary complaint alleging that debtor’s prepetition student loan debt was paid postpetition when debtor consolidated various prepetition loans into a new loan made postpetition. The new student loan creditor who funded the consolidated loan supported the position of the original student loan creditor and maintained that the consolidation of debtor’s student loan debt created a new postpetition obligation which could not have been discharged by the underlying chapter 7 discharge.
The facts in this case were not in dispute. After receiving the chapter 7 discharge, debtor entered into a consolidated loan agreement with a new student loan creditor. The consolidation agreement was made pursuant to the Federal Family Education Loan Program, known by its acronym FFELP. Under this agreement, debtor was able to consolidate a number of loans debtor incurred prepetition to finance debtor’s higher education.
The court granted the creditor’s motion to dismiss after holding that the consolidated debt incurred postpetition could not be discharged via the adversary proceeding. The court believed that the consolidated debt arose after the commencement of the debtor’s chapter 7 case and therefore could not be subject to discharge. The court reaffirmed the well-settled fact that a debt must have been in existence prior to the commencement of the bankruptcy case in order for the debt to be encompassed within the scope of a court’s discharge order. In the instant case, the court noted that the consolidated loan was made pursuant to the Federal Family Education Loan Program as governed by 20 U.S.C. §1078-3. Under that statute a consolidation loan is considered a “new loan” and the statute provided that liability upon the initial loan is discharged upon consolidation into a new loan. Therefore, the court found that where student loans are consolidated postpetition, the consolidated debt is deemed to have arisen after the commencement of the bankruptcy case and thus excluded from discharge.
Your Bankruptcy Advisor Blog
By: Attorney Robert Schaller (Bob's bio) of the Schaller Law Firm
Click for Bankruptcy Lawyer Job Opportunities.
You are invited to contact Attorney Schaller at 630-655-1233 or visit his website at http://www.schallerlawfirm.com/student_loan_discharge.htmlto learn about how the bankruptcy laws can help you.
Bob is a member of the National Bankruptcy College Attorney Network, American Bankruptcy Institute and the National Association of Consumer Bankruptcy Attorneys.
For information about Chapter 7 bankruptcy Click Here
For information about Chapter 13 bankruptcy Click Here
NOTE: Robert Schaller looks forward to the opportunity to talk with you about your legal issues. But please remember that all information on this blog is for advertising and general informational purposes only. Please read Bob's disclaimer.
I recommend that you review a few other blogs that may be of interest to you. These blogs are identified in the right column and are set forth below: bankruptcy issues blog; bankruptcy and family law issues blog; bankruptcy and employment issues blog; and bankruptcy and student loan issues blog.
The facts in this case were not in dispute. After receiving the chapter 7 discharge, debtor entered into a consolidated loan agreement with a new student loan creditor. The consolidation agreement was made pursuant to the Federal Family Education Loan Program, known by its acronym FFELP. Under this agreement, debtor was able to consolidate a number of loans debtor incurred prepetition to finance debtor’s higher education.
The court granted the creditor’s motion to dismiss after holding that the consolidated debt incurred postpetition could not be discharged via the adversary proceeding. The court believed that the consolidated debt arose after the commencement of the debtor’s chapter 7 case and therefore could not be subject to discharge. The court reaffirmed the well-settled fact that a debt must have been in existence prior to the commencement of the bankruptcy case in order for the debt to be encompassed within the scope of a court’s discharge order. In the instant case, the court noted that the consolidated loan was made pursuant to the Federal Family Education Loan Program as governed by 20 U.S.C. §1078-3. Under that statute a consolidation loan is considered a “new loan” and the statute provided that liability upon the initial loan is discharged upon consolidation into a new loan. Therefore, the court found that where student loans are consolidated postpetition, the consolidated debt is deemed to have arisen after the commencement of the bankruptcy case and thus excluded from discharge.
Your Bankruptcy Advisor Blog
By: Attorney Robert Schaller (Bob's bio) of the Schaller Law Firm
Click for Bankruptcy Lawyer Job Opportunities.
You are invited to contact Attorney Schaller at 630-655-1233 or visit his website at http://www.schallerlawfirm.com/student_loan_discharge.htmlto learn about how the bankruptcy laws can help you.
Bob is a member of the National Bankruptcy College Attorney Network, American Bankruptcy Institute and the National Association of Consumer Bankruptcy Attorneys.
For information about Chapter 7 bankruptcy Click Here
For information about Chapter 13 bankruptcy Click Here
NOTE: Robert Schaller looks forward to the opportunity to talk with you about your legal issues. But please remember that all information on this blog is for advertising and general informational purposes only. Please read Bob's disclaimer.
I recommend that you review a few other blogs that may be of interest to you. These blogs are identified in the right column and are set forth below: bankruptcy issues blog; bankruptcy and family law issues blog; bankruptcy and employment issues blog; and bankruptcy and student loan issues blog.
Student Loan Debt of $322,000 Discharged Despite $90,000 Annual Income
In the case of Scott v. US Department of Education, 417 B.R. 623 (Bankr. W.D.Wash. 2009), chapter 7 debtors filed an adversary proceeding seeking an order determining that debtors were entitled to “undue hardship” discharge of their more than $322,000 in student loan debt. After an evidentiary hearing, the court found that the repayment of the student loan debts would indeed cause debtors an “undue hardship” and thus debtors were entitled to discharge the student loan debts.
Debtors were married, less than 34 years of age, and were parents to two healthy young children. Both debtors worked and earned a combined annual income in excess of $90,000. Debtors testified that both had consistent work histories since completing their education. Debtors also testified that they do not have opportunities to increase their income in the future.
Debtors’ monthly expenses exceeded their monthly income by approximately $1,000 monthly. Debtors’ rent payment was a modest amount and the day care expenses for both children were expensive. Debtors’ only excessive debt related to an approximately $500 vehicle payment. Other than that, debtors had lived frugally and had made reasonable choices about their expenses.
Debtors’ loan repayment history favored debtors’ position. Debtors made as many as 72 payments on one of the loans and previously received multiple student loan extensions, deferments, and forbearances during their efforts to repay the student loan debts.
The Scott court adopted the three-part dischargeability test set forth in In re Brunner, 46 B.R. 752 (S.D.N.Y. 1985), to determine whether excepting the student loan debts from discharge would constitute an undue hardship on debtors. The Scott court found that debtors proved that they could not, based on their current income and expenses, maintain a “minimal” standard of living for themselves and their dependents if forced to repay the loans. Next, the court found that debtors demonstrated their inability to pay the student loans in the present and a likely inability to pay the student loans in the future. Finally, the court found that debtors had made good faith efforts to repay the student loans after considering the number of student loan payments made, the dollar amount of student loan payments made, and debtors’ efforts to receive multiple student loan extensions, deferments, and forbearances.
Your Bankruptcy Advisor Blog
By: Attorney Robert Schaller (Bob's bio) of the Schaller Law Firm
Click for Bankruptcy Lawyer Job Opportunities.
You are invited to contact Attorney Schaller at 630-655-1233 or visit his website at http://www.schallerlawfirm.com/student_loan_discharge.htmlto learn about how the bankruptcy laws can help you.
Bob is a member of the National Bankruptcy College Attorney Network, American Bankruptcy Institute and the National Association of Consumer Bankruptcy Attorneys.
For information about Chapter 7 bankruptcy Click Here
For information about Chapter 13 bankruptcy Click Here
NOTE: Robert Schaller looks forward to the opportunity to talk with you about your legal issues. But please remember that all information on this blog is for advertising and general informational purposes only. Please read Bob's disclaimer.
I recommend that you review a few other blogs that may be of interest to you. These blogs are identified in the right column and are set forth below: bankruptcy issues blog; bankruptcy and family law issues blog; bankruptcy and employment issues blog; and bankruptcy and student loan issues blog.
Debtors were married, less than 34 years of age, and were parents to two healthy young children. Both debtors worked and earned a combined annual income in excess of $90,000. Debtors testified that both had consistent work histories since completing their education. Debtors also testified that they do not have opportunities to increase their income in the future.
Debtors’ monthly expenses exceeded their monthly income by approximately $1,000 monthly. Debtors’ rent payment was a modest amount and the day care expenses for both children were expensive. Debtors’ only excessive debt related to an approximately $500 vehicle payment. Other than that, debtors had lived frugally and had made reasonable choices about their expenses.
Debtors’ loan repayment history favored debtors’ position. Debtors made as many as 72 payments on one of the loans and previously received multiple student loan extensions, deferments, and forbearances during their efforts to repay the student loan debts.
The Scott court adopted the three-part dischargeability test set forth in In re Brunner, 46 B.R. 752 (S.D.N.Y. 1985), to determine whether excepting the student loan debts from discharge would constitute an undue hardship on debtors. The Scott court found that debtors proved that they could not, based on their current income and expenses, maintain a “minimal” standard of living for themselves and their dependents if forced to repay the loans. Next, the court found that debtors demonstrated their inability to pay the student loans in the present and a likely inability to pay the student loans in the future. Finally, the court found that debtors had made good faith efforts to repay the student loans after considering the number of student loan payments made, the dollar amount of student loan payments made, and debtors’ efforts to receive multiple student loan extensions, deferments, and forbearances.
Your Bankruptcy Advisor Blog
By: Attorney Robert Schaller (Bob's bio) of the Schaller Law Firm
Click for Bankruptcy Lawyer Job Opportunities.
You are invited to contact Attorney Schaller at 630-655-1233 or visit his website at http://www.schallerlawfirm.com/student_loan_discharge.htmlto learn about how the bankruptcy laws can help you.
Bob is a member of the National Bankruptcy College Attorney Network, American Bankruptcy Institute and the National Association of Consumer Bankruptcy Attorneys.
For information about Chapter 7 bankruptcy Click Here
For information about Chapter 13 bankruptcy Click Here
NOTE: Robert Schaller looks forward to the opportunity to talk with you about your legal issues. But please remember that all information on this blog is for advertising and general informational purposes only. Please read Bob's disclaimer.
I recommend that you review a few other blogs that may be of interest to you. These blogs are identified in the right column and are set forth below: bankruptcy issues blog; bankruptcy and family law issues blog; bankruptcy and employment issues blog; and bankruptcy and student loan issues blog.
Thursday, December 3, 2009
Law School Student Loan Debt Discharged, Then Reversed
Student loan debts are dischargeable under limited circumstances. The National Law Journal is reporting on a bankruptcy case that had originally granted the discharge of student loan debt, but was later reversed by the district court. It's an interesting article written by Leigh Jones. Here is the article:
"When she graduated four years ago with a law degree at the age of 61, Denise Megan Bronsdon likely did not foresee bankruptcy court in her future. But that's where she ended up -- as a debtor.
The former farmer's wife who operated a tractor before going to Southern New England School of Law in 2002, convinced a Massachusetts bankruptcy court in January that repaying the more than $82,000 she owed in student debt would create an undue hardship. However, the U.S. District Court in Massachusetts, considering an appeal by the lender, Educational Credit Management Corp., found on Nov. 20 that Bronsdon's decision not to participate in a loan repayment assistance program should be part of the bankruptcy court's undue hardship analysis.
Bronsdon, who represented herself, filed for bankruptcy after she could not get a job following her graduation in 2005 from the Dartmouth, Mass., law school. Although she graduated in the top half of her class, she failed the Wisconsin bar exam three times and was unable to pay for test preparation materials and to take the exam again.
Reached by phone, Bronsdon declined to answer questions about the case.
Bronsdon, who worked temporarily as a legal secretary and receptionist, had continually interviewed for full-time work after graduation without success, the Nov. 20 opinion said. She also wrote a novel but was unable to find a publisher. At the time of trial, she was 64 years old and unmarried, with a monthly income of $946 from Social Security.
The district court determined that the bankruptcy court was correct in finding that she was unlikely to obtain paid employment in the foreseeable future, which would make repaying her debt unduly burdensome. However, the district court also found that the bankruptcy court was incorrect in reaching that conclusion without considering her decision not to participate in the William D. Ford Direct Loan Program's Income Contingent Repayment plan available to law school graduates.
Specifically, the district court found that the bankruptcy court erred when it concluded that the loan assistance program was not part of the analysis because it would have resulted in a tax liability that "could leave her in a financial state much more desperate than the one she was currently enduring."
The district court vacated the bankruptcy court's decision and directed it to consider the repayment program in its undue hardship analysis.
Representing Educational Credit Management Corp. was John F. White Jr., an associate at Topkins & Bevans in Braintree, Mass."
Your Bankruptcy Advisor Blog
By: Attorney Robert Schaller (Bob's bio) of the Schaller Law Firm
Click for Bankruptcy Lawyer Job Opportunities.
You are invited to contact Attorney Schaller at 630-655-1233 or visit his website at http://www.schallerlawfirm.com/student_loan_discharge.htmlto learn about how the bankruptcy laws can help you.
Bob is a member of the National Bankruptcy College Attorney Network, American Bankruptcy Institute and the National Association of Consumer Bankruptcy Attorneys.
For information about Chapter 7 bankruptcy Click Here
For information about Chapter 13 bankruptcy Click Here
NOTE: Robert Schaller looks forward to the opportunity to talk with you about your legal issues. But please remember that all information on this blog is for advertising and general informational purposes only. Please read Bob's disclaimer.
I recommend that you review a few other blogs that may be of interest to you. These blogs are identified in the right column and are set forth below: bankruptcy issues blog; bankruptcy and family law issues blog; bankruptcy and employment issues blog; and bankruptcy and student loan issues blog.
"When she graduated four years ago with a law degree at the age of 61, Denise Megan Bronsdon likely did not foresee bankruptcy court in her future. But that's where she ended up -- as a debtor.
The former farmer's wife who operated a tractor before going to Southern New England School of Law in 2002, convinced a Massachusetts bankruptcy court in January that repaying the more than $82,000 she owed in student debt would create an undue hardship. However, the U.S. District Court in Massachusetts, considering an appeal by the lender, Educational Credit Management Corp., found on Nov. 20 that Bronsdon's decision not to participate in a loan repayment assistance program should be part of the bankruptcy court's undue hardship analysis.
Bronsdon, who represented herself, filed for bankruptcy after she could not get a job following her graduation in 2005 from the Dartmouth, Mass., law school. Although she graduated in the top half of her class, she failed the Wisconsin bar exam three times and was unable to pay for test preparation materials and to take the exam again.
Reached by phone, Bronsdon declined to answer questions about the case.
Bronsdon, who worked temporarily as a legal secretary and receptionist, had continually interviewed for full-time work after graduation without success, the Nov. 20 opinion said. She also wrote a novel but was unable to find a publisher. At the time of trial, she was 64 years old and unmarried, with a monthly income of $946 from Social Security.
The district court determined that the bankruptcy court was correct in finding that she was unlikely to obtain paid employment in the foreseeable future, which would make repaying her debt unduly burdensome. However, the district court also found that the bankruptcy court was incorrect in reaching that conclusion without considering her decision not to participate in the William D. Ford Direct Loan Program's Income Contingent Repayment plan available to law school graduates.
Specifically, the district court found that the bankruptcy court erred when it concluded that the loan assistance program was not part of the analysis because it would have resulted in a tax liability that "could leave her in a financial state much more desperate than the one she was currently enduring."
The district court vacated the bankruptcy court's decision and directed it to consider the repayment program in its undue hardship analysis.
Representing Educational Credit Management Corp. was John F. White Jr., an associate at Topkins & Bevans in Braintree, Mass."
Your Bankruptcy Advisor Blog
By: Attorney Robert Schaller (Bob's bio) of the Schaller Law Firm
Click for Bankruptcy Lawyer Job Opportunities.
You are invited to contact Attorney Schaller at 630-655-1233 or visit his website at http://www.schallerlawfirm.com/student_loan_discharge.htmlto learn about how the bankruptcy laws can help you.
Bob is a member of the National Bankruptcy College Attorney Network, American Bankruptcy Institute and the National Association of Consumer Bankruptcy Attorneys.
For information about Chapter 7 bankruptcy Click Here
For information about Chapter 13 bankruptcy Click Here
NOTE: Robert Schaller looks forward to the opportunity to talk with you about your legal issues. But please remember that all information on this blog is for advertising and general informational purposes only. Please read Bob's disclaimer.
I recommend that you review a few other blogs that may be of interest to you. These blogs are identified in the right column and are set forth below: bankruptcy issues blog; bankruptcy and family law issues blog; bankruptcy and employment issues blog; and bankruptcy and student loan issues blog.
Wednesday, November 11, 2009
Can I Eliminate Student Loan Debts?
I am frequently asked if student loan debt is dischargeable in bankruptcy. Many non-bankruptcy lawyers believe that the bankruptcy laws had been changed so that student loan is no longer dischargeable by filing bankruptcy. That is not true. Although Congress may have made it more difficult to eliminate student loan debt, discharging student loan debt in bankruptcy is not impossible.
I read a very interesting opinion that was rendered by a Minnesota bankruptcy judge that discharged over $310,000 of student loan debt from a person who had completed college, medical school, and graduate school... and was healthy... and married... to a husband who made over $67,000 annually!!!!
So, there is hope for other people who owe student loan debt and cannot afford to repay it. Please contact me to discuss this case and other issues relating to the elimination of student loan debt or see my website at http://www.schallerlawfirm.com/student_loan_discharge.html . Below is a summary of the case to which I referred.
In re Walker v. Sallie Mae Servicing, 406 B.R. 840 (Bankr. D. Minn. 2009). Debtor discharged over $310,000 of student loan debt that she incurred while earning a bachelor’s degree at the University of Illinois, a medical degree at University of Illinois College of Medicine, and a master’s degree at Governors State University. Debtor was healthy and able to work, but stayed home to rear five children. Debtor’s husband held a full-time job as a policeman and a part-time job as a security officer. Debtor’s approximate household income was $67,000 annually.
In addition, within a year of filing the adversary proceeding to discharge the student loan debt, debtor’s spouse purchased a $40,000 new vehicle by incurring a vehicle loan with a monthly payment obligation of $850. Plus, debtor’s spouse signed a $50,000 second mortgage to build a 22-foot deck off their home with a monthly payment obligation of $372.
Nevertheless, the bankruptcy court rejected the objections to discharge argued by the student loan creditors, finding that debtor had provided sufficient evidence that the repayment of the student loan debt would have been an “undue hardship” on debtor and debtor’s dependents. The Walker Court applied the 8th Circuit’s “totality-of-the-circumstances” test. The court made note that the health of debtor’s twin approximately 9-year old sons was a major factor in its decision. The twins suffered with a form of child autism and were receiving intensive therapy offered by the state government for children with autism.
Surprising, the court allowed the discharge finding that the debtor had overcome debtor’s burden of proving “undue hardship” without calling an expert witnesses for an opinion as to the sons’ status and prognosis from the perspective of medicine/psychology or education. Nevertheless, the $310,000 student loan debt was discharged.
Your Bankruptcy Advisor Blog
By: Attorney Robert Schaller (Bob's bio) of the Schaller Law Firm
Click for Bankruptcy Lawyer Job Opportunities.
You are invited to contact Attorney Schaller at 630-655-1233 or visit his website at http://www.schallerlawfirm.com/student_loan_discharge.htmlto learn about how the bankruptcy laws can help you.
Bob is a member of the National Bankruptcy College Attorney Network, American Bankruptcy Institute and the National Association of Consumer Bankruptcy Attorneys.
For information about Chapter 7 bankruptcy Click Here
For information about Chapter 13 bankruptcy Click Here
NOTE: Robert Schaller looks forward to the opportunity to talk with you about your legal issues. But please remember that all information on this blog is for advertising and general informational purposes only. Please read Bob's disclaimer.
I recommend that you review a few other blogs that may be of interest to you. These blogs are identified in the right column and are set forth below: bankruptcy issues blog; bankruptcy and family law issues blog; bankruptcy and employment issues blog; and bankruptcy and student loan issues blog.
I read a very interesting opinion that was rendered by a Minnesota bankruptcy judge that discharged over $310,000 of student loan debt from a person who had completed college, medical school, and graduate school... and was healthy... and married... to a husband who made over $67,000 annually!!!!
So, there is hope for other people who owe student loan debt and cannot afford to repay it. Please contact me to discuss this case and other issues relating to the elimination of student loan debt or see my website at http://www.schallerlawfirm.com/student_loan_discharge.html . Below is a summary of the case to which I referred.
In re Walker v. Sallie Mae Servicing, 406 B.R. 840 (Bankr. D. Minn. 2009). Debtor discharged over $310,000 of student loan debt that she incurred while earning a bachelor’s degree at the University of Illinois, a medical degree at University of Illinois College of Medicine, and a master’s degree at Governors State University. Debtor was healthy and able to work, but stayed home to rear five children. Debtor’s husband held a full-time job as a policeman and a part-time job as a security officer. Debtor’s approximate household income was $67,000 annually.
In addition, within a year of filing the adversary proceeding to discharge the student loan debt, debtor’s spouse purchased a $40,000 new vehicle by incurring a vehicle loan with a monthly payment obligation of $850. Plus, debtor’s spouse signed a $50,000 second mortgage to build a 22-foot deck off their home with a monthly payment obligation of $372.
Nevertheless, the bankruptcy court rejected the objections to discharge argued by the student loan creditors, finding that debtor had provided sufficient evidence that the repayment of the student loan debt would have been an “undue hardship” on debtor and debtor’s dependents. The Walker Court applied the 8th Circuit’s “totality-of-the-circumstances” test. The court made note that the health of debtor’s twin approximately 9-year old sons was a major factor in its decision. The twins suffered with a form of child autism and were receiving intensive therapy offered by the state government for children with autism.
Surprising, the court allowed the discharge finding that the debtor had overcome debtor’s burden of proving “undue hardship” without calling an expert witnesses for an opinion as to the sons’ status and prognosis from the perspective of medicine/psychology or education. Nevertheless, the $310,000 student loan debt was discharged.
Your Bankruptcy Advisor Blog
By: Attorney Robert Schaller (Bob's bio) of the Schaller Law Firm
Click for Bankruptcy Lawyer Job Opportunities.
You are invited to contact Attorney Schaller at 630-655-1233 or visit his website at http://www.schallerlawfirm.com/student_loan_discharge.htmlto learn about how the bankruptcy laws can help you.
Bob is a member of the National Bankruptcy College Attorney Network, American Bankruptcy Institute and the National Association of Consumer Bankruptcy Attorneys.
For information about Chapter 7 bankruptcy Click Here
For information about Chapter 13 bankruptcy Click Here
NOTE: Robert Schaller looks forward to the opportunity to talk with you about your legal issues. But please remember that all information on this blog is for advertising and general informational purposes only. Please read Bob's disclaimer.
I recommend that you review a few other blogs that may be of interest to you. These blogs are identified in the right column and are set forth below: bankruptcy issues blog; bankruptcy and family law issues blog; bankruptcy and employment issues blog; and bankruptcy and student loan issues blog.
Tuesday, November 3, 2009
Can I eliminate my student loans by filing bankruptcy?
The Bankruptcy Code does provide for the elimination or “discharge” of student loan debt under certain circumstances. However, you also ought to consider non-bankruptcy options for eliminating or discharging student loan debt. A skilled bankruptcy attorney should be able to help you understand both options.
The review of each student loan bankruptcy case is fact intensive since the courts must decide whether to discharge or not discharge student loan debt on a case-by-case basis. I urge you to analyze my other student loan blog entries [found in the blog archive to the right] for a review of case law regarding the discharging of student loan debt. Also, you can go to my website at http://www.schallerlawfirm.com/student_loan_discharge.html to read more information about discharging student loan debts.
In a nutshell, the bankruptcy option is available for any student loan debtor who could make a three-part showing demonstrating that the payment of the student loan debt would be an undue burden upon the debtor and the debtor’s dependents. The three-part test requires a showing---
1. That the debtor cannot maintain, based on current income and expenses, a “minimal” standard of living for the debtor and the debtor’s dependents if forced to repay the loans;
2. That additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period of the student loans; and
3. That the debtor has made good faith efforts to repay the loans.
For some people, a non-bankruptcy option may be their best choice. While for others, a bankruptcy filing may be what’s best for them. Before making a decision, you should seek the counsel of a skilled bankruptcy attorney to help guide you through the thorny path of eliminating student loan debt.
Contact me to discuss the details of your specific situation.
Your Bankruptcy Advisor Blog
By: Attorney Robert Schaller (Bob's bio) of the Schaller Law Firm
Click for Bankruptcy Lawyer Job Opportunities.
You are invited to contact Attorney Schaller at 630-655-1233 or visit his website at http://www.schallerlawfirm.com/student_loan_discharge.htmlto learn about how the bankruptcy laws can help you.
Bob is a member of the National Bankruptcy College Attorney Network, American Bankruptcy Institute and the National Association of Consumer Bankruptcy Attorneys.
For information about Chapter 7 bankruptcy Click Here
For information about Chapter 13 bankruptcy Click Here
NOTE: Robert Schaller looks forward to the opportunity to talk with you about your legal issues. But please remember that all information on this blog is for advertising and general informational purposes only. Please read Bob's disclaimer.
I recommend that you review a few other blogs that may be of interest to you. These blogs are identified in the right column and are set forth below: bankruptcy issues blog; bankruptcy and family law issues blog; bankruptcy and employment issues blog; and bankruptcy and student loan issues blog.
The review of each student loan bankruptcy case is fact intensive since the courts must decide whether to discharge or not discharge student loan debt on a case-by-case basis. I urge you to analyze my other student loan blog entries [found in the blog archive to the right] for a review of case law regarding the discharging of student loan debt. Also, you can go to my website at http://www.schallerlawfirm.com/student_loan_discharge.html to read more information about discharging student loan debts.
In a nutshell, the bankruptcy option is available for any student loan debtor who could make a three-part showing demonstrating that the payment of the student loan debt would be an undue burden upon the debtor and the debtor’s dependents. The three-part test requires a showing---
1. That the debtor cannot maintain, based on current income and expenses, a “minimal” standard of living for the debtor and the debtor’s dependents if forced to repay the loans;
2. That additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period of the student loans; and
3. That the debtor has made good faith efforts to repay the loans.
For some people, a non-bankruptcy option may be their best choice. While for others, a bankruptcy filing may be what’s best for them. Before making a decision, you should seek the counsel of a skilled bankruptcy attorney to help guide you through the thorny path of eliminating student loan debt.
Contact me to discuss the details of your specific situation.
Your Bankruptcy Advisor Blog
By: Attorney Robert Schaller (Bob's bio) of the Schaller Law Firm
Click for Bankruptcy Lawyer Job Opportunities.
You are invited to contact Attorney Schaller at 630-655-1233 or visit his website at http://www.schallerlawfirm.com/student_loan_discharge.htmlto learn about how the bankruptcy laws can help you.
Bob is a member of the National Bankruptcy College Attorney Network, American Bankruptcy Institute and the National Association of Consumer Bankruptcy Attorneys.
For information about Chapter 7 bankruptcy Click Here
For information about Chapter 13 bankruptcy Click Here
NOTE: Robert Schaller looks forward to the opportunity to talk with you about your legal issues. But please remember that all information on this blog is for advertising and general informational purposes only. Please read Bob's disclaimer.
I recommend that you review a few other blogs that may be of interest to you. These blogs are identified in the right column and are set forth below: bankruptcy issues blog; bankruptcy and family law issues blog; bankruptcy and employment issues blog; and bankruptcy and student loan issues blog.
Thursday, October 29, 2009
Bankruptcy Plan Cannot Favor Student Loan Creditors and Discriminate Against Other Unsecured Creditors
Case Law Update:
In re Knecht, 410 B.R. 650 (Bankr. D. Montana 2009). A bankruptcy debtor filed chapter 13 bankruptcy and proposed a repayment plan that would cause the student loan creditor to be the only unsecured creditor to receive any money. Specifically, the debtor sought confirmation of the repayment plan which proposed to pay more than $36,000 to the student loan creditor while paying nothing to the other unsecured creditors. The trustee objected asserting that the proposed plan unreasonably “discriminated” among unsecured creditors.
The bankruptcy court sustained the trustee’s objection and denied confirmation, holding that the student loan debtor had failed to satisfy the burden of proving that the repayment plan’s separate classification of student loan debt did not unfairly discriminate against the other unsecured creditors.
The court believed that a student loan creditor cannot create a chapter 13 plan that allows a student loan debtor to repay student loans “out of the hide” of other unsecured creditors. Instead, the other unsecured creditors must be paid their pro rata share. For example, let’s assume a debtor owes both $36,000 in student loan debt and another $36,000 in credit card debt. Now, if that debtor would file a plan calling for unsecured creditors to receive $36,000, then the student loan creditor would only be receiving $18,000 while the credit card creditors would also be receiving the other $18,000. Clearly this result is not as beneficial to a debtor because the $18,000 paid to the credit card creditor would be wasted since any unpaid credit card debt would be discharged---whether $18,000 is still owed or the full $36,000 is still owed; moreover, this result is not as beneficial because the $18,000 of unpaid student loan debt would survive the bankruptcy and have to be repaid--- absent a separate adversary complaint proving undue hardship.
Your Bankruptcy Advisor Blog
By: Attorney Robert Schaller (Bob's bio) of the Schaller Law Firm
Bob is a member of the National Bankruptcy College Attorney Network, American Bankruptcy Institute and the National Association of Consumer Bankruptcy Attorneys.
For information about Chapter 7 bankruptcy Click Here
For information about Chapter 13 bankruptcy Click Here
You are invited to contact Attorney Schaller at 630-655-1233 or visit his website at http://www.schallerlawfirm.com/to learn about how the bankruptcy laws can help you.
NOTE: Robert Schaller looks forward to the opportunity to talk with you about your legal issues. But please remember that all information on this blog is for advertising and general informational purposes only. Please read Bob's disclaimer.
I recommend that you review a few other blogs that may be of interest to you. These blogs are identified in the right column and are set forth below: bankruptcy issues blog; bankruptcy and family law issues blog; bankruptcy and employment issues blog; and bankruptcy and student loan issues blog.
In re Knecht, 410 B.R. 650 (Bankr. D. Montana 2009). A bankruptcy debtor filed chapter 13 bankruptcy and proposed a repayment plan that would cause the student loan creditor to be the only unsecured creditor to receive any money. Specifically, the debtor sought confirmation of the repayment plan which proposed to pay more than $36,000 to the student loan creditor while paying nothing to the other unsecured creditors. The trustee objected asserting that the proposed plan unreasonably “discriminated” among unsecured creditors.
The bankruptcy court sustained the trustee’s objection and denied confirmation, holding that the student loan debtor had failed to satisfy the burden of proving that the repayment plan’s separate classification of student loan debt did not unfairly discriminate against the other unsecured creditors.
The court believed that a student loan creditor cannot create a chapter 13 plan that allows a student loan debtor to repay student loans “out of the hide” of other unsecured creditors. Instead, the other unsecured creditors must be paid their pro rata share. For example, let’s assume a debtor owes both $36,000 in student loan debt and another $36,000 in credit card debt. Now, if that debtor would file a plan calling for unsecured creditors to receive $36,000, then the student loan creditor would only be receiving $18,000 while the credit card creditors would also be receiving the other $18,000. Clearly this result is not as beneficial to a debtor because the $18,000 paid to the credit card creditor would be wasted since any unpaid credit card debt would be discharged---whether $18,000 is still owed or the full $36,000 is still owed; moreover, this result is not as beneficial because the $18,000 of unpaid student loan debt would survive the bankruptcy and have to be repaid--- absent a separate adversary complaint proving undue hardship.
Your Bankruptcy Advisor Blog
By: Attorney Robert Schaller (Bob's bio) of the Schaller Law Firm
Bob is a member of the National Bankruptcy College Attorney Network, American Bankruptcy Institute and the National Association of Consumer Bankruptcy Attorneys.
For information about Chapter 7 bankruptcy Click Here
For information about Chapter 13 bankruptcy Click Here
You are invited to contact Attorney Schaller at 630-655-1233 or visit his website at http://www.schallerlawfirm.com/to learn about how the bankruptcy laws can help you.
NOTE: Robert Schaller looks forward to the opportunity to talk with you about your legal issues. But please remember that all information on this blog is for advertising and general informational purposes only. Please read Bob's disclaimer.
I recommend that you review a few other blogs that may be of interest to you. These blogs are identified in the right column and are set forth below: bankruptcy issues blog; bankruptcy and family law issues blog; bankruptcy and employment issues blog; and bankruptcy and student loan issues blog.
Participation in Deferral Payment Program Does Not Preclude Student Loan Bankruptcy Discharge
Case Law Update:
In re Booth, 410 B.R. 672 (Bankr. E.D. Wash 2009). A chapter 7 bankruptcy debtor brought an adversary complaint against a student loan creditor seeking discharge of the student loan debt pursuant to Section 523(a)(8) of the Bankruptcy Code alleging that an “undue hardship” would result if the debtor had to repay the student loan debt. Prior to filing bankruptcy, the debtor had participated in a student loan deferral payment program. As a result of the program and debtor’s deteriorating financial position, the student loan creditor established a zero dollar per month short-term repayment plan with the balance to be paid much later. Nevertheless, debtor filed for bankruptcy and sought a complete discharge of all the student loan debt.
The student loan creditor opposed the complete discharge of the student loan debt. In fact, the creditor filed a motion for summary judgment seeking an order finding the student loan debtor NOT eligible for a bankruptcy discharge AS A MATTER OF LAW because the deferral payment program had granted debtor a zero dollar per month short-term repayment plan. In short, the student loan creditor believed that the debtor could not establish “undue hardship” as a matter of law since debtor had agreed to a zero dollar short-term repayment plan and therefore no hardship existed, much less “undue” hardship.
The Court rejected the student loan creditor’s argument and denied the motion for summary judgment. The court noted the difference in relief granted by both options: (a) the bankruptcy discharge offered permanent relief by eliminating the student loan debt forever, whereas (b) the deferral payment program only offered short-term relief with the balance coming due later. Next, the court focused on the factual review given by both options: (a) the bankruptcy court would review the facts of each case on a case-by-case basis to determine if the repayment of the student loan debt would result in an undue hardship upon the debtor, whereas, (b) the deferral payment program gave no individual review, instead relying upon a formula to determine loan payments.
The conclusion is that the student loan debtor was allowed to go forward with the bankruptcy case and will be offered an opportunity to prove that the payment of the student loan debt would be an undue hardship on the debtor and debtor’s dependents.
Your Bankruptcy Advisor Blog
By: Attorney Robert Schaller (Bob's bio) of the Schaller Law Firm
Bob is a member of the National Bankruptcy College Attorney Network, American Bankruptcy Institute and the National Association of Consumer Bankruptcy Attorneys.
For information about Chapter 7 bankruptcy Click Here
For information about Chapter 13 bankruptcy Click Here
You are invited to contact Attorney Schaller at 630-655-1233 or visit his website at http://www.schallerlawfirm.com/to learn about how the bankruptcy laws can help you.
NOTE: Robert Schaller looks forward to the opportunity to talk with you about your legal issues. But please remember that all information on this blog is for advertising and general informational purposes only. Please read Bob's disclaimer.
I recommend that you review a few other blogs that may be of interest to you. These blogs are identified in the right column and are set forth below: bankruptcy issues blog; bankruptcy and family law issues blog; bankruptcy and employment issues blog; and bankruptcy and student loan issues blog.
In re Booth, 410 B.R. 672 (Bankr. E.D. Wash 2009). A chapter 7 bankruptcy debtor brought an adversary complaint against a student loan creditor seeking discharge of the student loan debt pursuant to Section 523(a)(8) of the Bankruptcy Code alleging that an “undue hardship” would result if the debtor had to repay the student loan debt. Prior to filing bankruptcy, the debtor had participated in a student loan deferral payment program. As a result of the program and debtor’s deteriorating financial position, the student loan creditor established a zero dollar per month short-term repayment plan with the balance to be paid much later. Nevertheless, debtor filed for bankruptcy and sought a complete discharge of all the student loan debt.
The student loan creditor opposed the complete discharge of the student loan debt. In fact, the creditor filed a motion for summary judgment seeking an order finding the student loan debtor NOT eligible for a bankruptcy discharge AS A MATTER OF LAW because the deferral payment program had granted debtor a zero dollar per month short-term repayment plan. In short, the student loan creditor believed that the debtor could not establish “undue hardship” as a matter of law since debtor had agreed to a zero dollar short-term repayment plan and therefore no hardship existed, much less “undue” hardship.
The Court rejected the student loan creditor’s argument and denied the motion for summary judgment. The court noted the difference in relief granted by both options: (a) the bankruptcy discharge offered permanent relief by eliminating the student loan debt forever, whereas (b) the deferral payment program only offered short-term relief with the balance coming due later. Next, the court focused on the factual review given by both options: (a) the bankruptcy court would review the facts of each case on a case-by-case basis to determine if the repayment of the student loan debt would result in an undue hardship upon the debtor, whereas, (b) the deferral payment program gave no individual review, instead relying upon a formula to determine loan payments.
The conclusion is that the student loan debtor was allowed to go forward with the bankruptcy case and will be offered an opportunity to prove that the payment of the student loan debt would be an undue hardship on the debtor and debtor’s dependents.
Your Bankruptcy Advisor Blog
By: Attorney Robert Schaller (Bob's bio) of the Schaller Law Firm
Bob is a member of the National Bankruptcy College Attorney Network, American Bankruptcy Institute and the National Association of Consumer Bankruptcy Attorneys.
For information about Chapter 7 bankruptcy Click Here
For information about Chapter 13 bankruptcy Click Here
You are invited to contact Attorney Schaller at 630-655-1233 or visit his website at http://www.schallerlawfirm.com/to learn about how the bankruptcy laws can help you.
NOTE: Robert Schaller looks forward to the opportunity to talk with you about your legal issues. But please remember that all information on this blog is for advertising and general informational purposes only. Please read Bob's disclaimer.
I recommend that you review a few other blogs that may be of interest to you. These blogs are identified in the right column and are set forth below: bankruptcy issues blog; bankruptcy and family law issues blog; bankruptcy and employment issues blog; and bankruptcy and student loan issues blog.
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