Student Loans

Where neither the debtor nor the creditor presented sufficient evidence to establish or counter the three prongs of the Brunner undue hardship test, neither was entitled to summary judgment on the debtor’s adversary complaint seeking discharge of his student loan. Rosenberg v. ECMC, No. 20-688 (S.D. N.Y. Sept. 29, 2021).

The debtor financed his undergraduate and law school degrees in part with student loans. He worked for a time as a lawyer but found the work unsatisfying and quit to open his own business dealing in outdoor equipment sales and tours. At the time he filed for chapter 7 bankruptcy his consolidated student loans had grown to over $220,000.00. He was 45 years old, never married, and had no dependents, but had suffered an injury requiring surgery. It was undisputed that the debtor’s monthly expenses were $4,005.00 and his monthly income $2,456.24. The debtor filed an adversary complaint seeking to discharge his student loan as an undue hardship under section 523(a)(8). Both the debtor and the creditor, ECMC, filed motions for summary judgment. The bankruptcy court granted judgment in favor of the debtor and denied ECMC’s motion. ECMC appealed to the District Court for the Southern District of New York. [Read more…] about Absence of Evidence Defeats SJ for Both Debtor and Student Loan Creditor

The 51-year-old debtor with no mental or physical impairments, no dependents, and a history of underemployment, could not discharge her over $650,000 in student loans as undue hardship but must participate in the offered income-based repayment plan. Parvizi v. U.S. Dept. of Ed., No. 18-30578, Adv. Proc. No. 19-3003, 2021 WL 1921121 (Bankr. D. Mass. May 12, 2021), motion to amend judgment granted, July 28, 2021.

The pro se chapter 7 debtor entered bankruptcy with a student loan debt of over $650,000 which she sought to discharge as undue hardship under section 523(a)(8). She was 51-years-old, had no dependents, spoke four languages, and had no physical or mental impairments standing in the way of employment. She obtained multiple degrees including a medical degree though she never completed a medical residency. She described years of under-employment, most often in education. She made clear that so long as she could live comfortably, she sought employment for personal fulfillment rather than for maximizing her income. Though she could avail herself of an income-based repayment plan at a rate of $80/month, she chose not to, in part because she blamed the psychiatric residency program from which she voluntarily withdrew for failing to provide her with the education it promised. [Read more…] about Eligibility for REPAYE Relevant Consideration for Student Loan Discharge

The Supreme Court today declined the opportunity to clarify the test for determining whether a debtor has met the undue hardship standard for purposes of student loan discharge under section 523(a)(8). McCoy v. United States, No. 20-886, pet’n denied, (June 21, 2021). The debtor/petitioner sought to reverse the Fifth Circuit’s application of the Brunner test under which that court found that the 62-year-old debtor, who had suffered a cascade of mental and physical catastrophes, failed to establish “total incapacity” to repay the debt in the future. In re McCoy, No. 19-40269 (5th Cir. June 5, 2020). The petition contrasted the Fifth Circuit’s Draconian test with the totality of circumstances test, under which the Eighth and the First Circuits consider whether the debtor’s “reasonable future financial resources will sufficiently cover payment of the student loan debt[] while still allowing for a minimal standard of living.” NACBA filed an amicus brief in support of the petitioner pointing out that a debtor’s chance of discharging a student loan was almost entirely dependent on what jurisdiction the debtor happened to live in. Unfortunately, the Supreme Court chose not to correct the anti-debtor stance the Fifth Circuit and other courts have adopted.

McCoy petition for cert

McCoy Amicus SCt Jan 2021