NAVY VETERAN’S STUDENT LOANS RULED NONDISCHARGEABLE BY A FEDERAL DISTRICT COURT JUDGE
Last year, a Navy veteran’s student loans, totaling $221,000 were discharged in bankruptcy by Southern District of New York Chief Bankruptcy Judge Cecilia Morris. The citation to the case is In re Rosenberg, 610 BR 454 - Bankr. Court, SD New York 2020. The student loans resulted from the veteran attending college and law school. Judge Morris, ruled that the $221,000 of student loans were an undue “hardship”to the veteran and that they would be discharged in his chapter 7 personal bankruptcy filing.
Chief Judge Morris wrote in her opinion discharging the student loans that “she wouldn't perpetuate "myths" that it's impossible to discharge student debt through bankruptcy”.
A federal court judge recently reversed that decision. A bankruptcy court decision, like those rendered by a bankruptcy judge, can be appealed to a Federal District Court. The student loan creditor appealed Judge Morris's decision, and it was reversed. The case has been remanded back to Bankruptcy Court for further hearings on the issue of undue hardship.
Kevin Rosenberg, the veteran, was devastated by the decision.
The Federal judge reversed that decision because Mr. Rosenberg had failed to demonstrate undue hardship using the Brunner standard. According to Brunner, "undue hardship" occurs when debtors cannot maintain a minimum standard of living, their circumstances will not improve, and they have made a good-faith effort to repay their student loans.
An excellent article about this topic can be found on the Business Insider website at https://www.businessinsider.com/veteran-student-loan-debt-forgiveness-revoked-bankruptcy-discharge-2021-10.
The Brunner standards are so difficult to meet and the cost of litigation is so high that most debtors do not attempt to discharge their student loans in personal bankruptcy. In this case, Mr. Rosenberg was the exception.
As shown in this case, student loan borrowers are at a disadvantage when attempting to discharge their student loans on the basis of bankruptcy.
Certain lawmakers, however, are advocating for making the discharge of student debt easier in bankruptcy, and in August this year, Senate Majority Whip Dick Durbin and Texas Sen. John Cornyn introduced the FRESH START Through Bankruptcy Act of 2021. After 10 years, this bill would enable borrowers to discharge federal student loans through bankruptcy.
Prior to a law change, student loans that were outstanding for 7 years could be discharged in bankruptcy. According to this author, bankruptcy is a mechanism for the discharge of many types of debt and student loans should be able to be discharged with certain limitations and conditions. The proposed FRESH START legislation is a good step in that direction. James Shenwick 212 541 6224 jshenwick@gmail.com
No comments:
Post a Comment