Wall Street Journal, Upending Bankruptcy ‘Myths,’ Judge Erases $220,000 Student Loan Debt:
A bankruptcy judge excused a U.S. Navy veteran with a law degree from repaying more than $220,000 in student loan debt, the latest court ruling to lower the barriers to discharging educational debt.
Judge Cecelia G. Morris of the U.S. Bankruptcy Court in Poughkeepsie, N.Y., discharged the law school graduate’s unpaid student loans even though he isn’t disabled or unemployable, saying that satisfying his law school debt in full would impose an undue hardship.
In her ruling, Judge Morris said most bankruptcy professionals and laypeople “believe it impossible to discharge student loans.” She said she would not perpetuate those “myths” and would apply a legal test developed in 1987 “as it was originally intended.”
The standard, known as the Brunner test, requires borrowers seeking bankruptcy relief from their student debt to show they cannot maintain a minimal standard of living, their circumstances are likely to continue for a significant period and they have made good-faith efforts at repayment.
The judge’s ruling comes as some judges, experts and politicians re-evaluate the legal hurdles preventing borrowers in difficult financial straits from using bankruptcy to eliminate student loan debt.
With few borrowers qualifying for relief, student loan cancellations remain rare, but some bankruptcy judges are becoming more sympathetic. ...
Tuesday’s decision sided with Kevin J. Rosenberg, 46, of Beacon, N.Y., who filed for chapter 7 bankruptcy in 2018 and asked in June to wipe out his student loan debt with Educational Credit Management Corp. Between 1993 and 2004, he borrowed about $116,500, which had ballooned with interest to a total outstanding balance of nearly $221,400, according to the decision.
Mr. Rosenberg used the loans to earn a history degree at the University of Arizona and a law degree from Cardozo Law School at Yeshiva University. At the time of his bankruptcy filing, he had an income of about $37,600 a year and negative income of about $1,500 each month after expenses. ...
He worked for a short time at a law firm and as a part-time contract attorney. In the past 10 years, he has worked in the outdoor adventure industry, including owning an adventure tour guide business, according to court papers.