Paul L. Caron

Thursday, January 9, 2020

Upending Bankruptcy ‘Myths,’ Judge Erases $220,000 Student Loan Debt

Wall Street Journal, Upending Bankruptcy ‘Myths,’ Judge Erases $220,000 Student Loan Debt:

Rosenberg 3A 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.

Legal Ed News, Legal Education | Permalink


Reminder to all of the aggrieve conservative posters on this website that the sitting president of the United States successfully shed over $900,000,000 in personal debts and obligations during just the first of his six business bankruptcies. And yet banks still lend money for construction companies to make new buildings...

Posted by: Unemployed Northeastern | Jan 11, 2020 2:47:11 PM

All of a sudden student loan interest rates skyrocket and noooobodddyyy knows whyyyy.

Posted by: Anon | Jan 10, 2020 10:53:35 AM

So does this mean that someone who takes out loans to get an undergraduate degree in molecular biology and an M.D. degree can later forego medicine, become a juggler earning $20,000 a year working in fairs, circuses, or on the street and get his debts discharged?

Posted by: guy helvering | Jan 10, 2020 6:45:30 AM

But what about the million dollars his law degree gave him, amirite? Surely he could have been a Vault 3 equity partner if he wanted to, because all law degrees are the same and there is no difference in earnings capacity between them!


Posted by: Unemployed Northeastern | Jan 9, 2020 12:13:21 PM