In two recent student loan cases out of the First Circuit, the bankruptcy courts rejected Brunner and, instead, applied a totality-of-circumstances test to grant discharge under section 523(a)(8). Smith v. U.S. Dept. of Ed., No. 16-10998, Adv. Proc. No. 16-1079 (Bankr. D. Mass. April 4, 2018); Erkson v. U.S. Dept. of Ed., No. 16-20169, Adv. Proc. No. 16-2018 (Bankr. D. Me. April 3, 2018). Read More
Tag Archive: Student loans
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Student Loans Discharged under Totality-of-Circumstances Test
Posted by NCBRC - May 29th, 2018
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Guarantor May Contest Dischargeability of Student Loan
Posted by NCBRC - May 10th, 2018
A guarantor on a student loan is an “accommodation party” who comes within the purview of the student loan nondischargeability provision when she is required to pay the loan on behalf of the debtor. De la Rosa v. Kelly (In re Kelly), No. 17-32295, Adv. Proc. No. 17-3320 (Bankr. S.D. Tex. March 23, 2018).
Mary De la Rosa was the guarantor on a student loan acquired by her friend and fellow church member, Tabitha Kelly. When Ms. Kelly defaulted on the loan, the lender sued Ms. De la Rosa and she paid the debt pursuant to a state court judgment. Ms. Kelly and her husband later filed for chapter 13 bankruptcy and Ms. De la Rosa filed an adversary complaint seeking to have the debt deemed nondischargeable under section 523(a)(8)(A)(ii). Read More
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Brunner Test Does Not Require that Debtor Take Advantage of IBR
Posted by NCBRC - May 3rd, 2018
Willie West was 60 years old, had been largely unemployed for thirty years and owed over $60,000 in student loans. He lived rent-free with his aunt and received $197.00 under the Supplemental Nutrition Assistance Program. When he sought to discharge the loans in bankruptcy the case came before the court on the parties’ cross-motions for summary judgment. West v. U. S. Dept. of Ed., No. 17-20506, AP No. 17-78 (Bankr. W.D. Tenn. Feb. 4, 2018). Read More
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No Excuses for Student Loan Servicer’s Failure to Comply with Plan
Posted by NCBRC - February 15th, 2018
The chapter 13 debtor was entitled to an award of attorney’s fees for her efforts to get the DOE’s student loan servicer to comply with the terms of her confirmed Plan. In re Berry, No. 16-1460 (Bankr. D. S.C. Feb. 2, 2018). Read More
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Court Not Required to Dismiss Case Exceeding Debt Limits
Posted by NCBRC - February 9th, 2018
A court is not required to dismiss a chapter 13 case where the debtor’s student loan debt causes his total unsecured debts to exceed the statutory debt cap. In re Pratola, 578 B.R. 414 (Bankr. N.D. Ill. Dec. 27, 2017), appeal filed, Stearns v. Pratola, Case No. 1:18-cv-213 (N.D. Ill. filed Jan. 11, 2018). Read More
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District Court Reassesses Evidence of Undue Hardship
Posted by NCBRC - February 6th, 2018
The district court reassessed the evidence presented at the adversary hearing and overturned the discharge of the debtor’s student loan debt. DeVos v. Price (In re Price), No. 17-3064 (E.D. Pa. Jan. 24, 2018). Chapter 7 debtor, Kristin M. Price, was a mother of three pre-school children, separated from her husband, and employed part-time as a vascular sonographer. She sought to discharge her almost $26,000.00 federal student loan. The bankruptcy court applied the three-part Brunner test specifically finding that Ms. Price’s financial distress was likely to persist for at least five of the seven years remaining on her loan contract. Because this constituted a “significant portion of the repayment period,” the court granted discharge under section 523(a)(8). Read More
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Debtor’s Treatment of Student Loan Outside Plan Not Confirmable
Posted by NCBRC - January 15th, 2018
The court could not confirm the debtor’s plan proposing to pay all claims in full except her student loan debt for which she proposed payments on interest only outside the plan. In re Ryan, 17-1507 (Bankr. M.D. Fla. Nov. 7, 2017).
Jenna Ryan’s chapter 13 petition schedules listed total debts in the amount of approximately $173,000, including a student loan debt from the Department of Education of almost $80,000. Her disposable income was $4,417.72. Her plan proposed to pay $1,403.09 per month for sixty months to pay off all debts in full except for the student loan debt. As to that claim, the plan proposed that Ms. Ryan would maintain payments outside the plan. She took the “position that there are no payments due under the terms of the student loan, given the filing of the bankruptcy, so her payments are voluntary and enough to cover the accruing interest payments.” Read More
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Win for Debtor in Student Loan Arena
Posted by NCBRC - November 21st, 2017
A loan that is not itself an “educational benefit” does not fall under section 523(a)(8)(A)(ii)’s exception to discharge as an “obligation to repay funds received.” Essangui v. SLF V-2015 Trust, No. 16-12984, Adv. Proc. No. 16-201 (Bankr. Md. Oct. 2, 2017).
Chapter 7 debtor, Yolande Essangui, enrolled in a Medical Education Readiness Program (MERP, or Program) in preparation for entering Ross University School of Medicine. Because MERP was not a Title IV institution, students were not eligible to receive federal student loans to attend the Program. Ms. Essangui financed her attendance in MERP with the private loan at issue, which, by the time of her bankruptcy, totaled $37,175.25. She used the money to pay tuition, buy books and pay for housing and other expenses during her schooling. Ms. Essangui completed the Program and enrolled in Ross University, but never graduated. Read More
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Court Properly Declined to Compel Arbitration of Educational Loan Issue
Posted by NCBRC - October 23rd, 2017
Potential discharge of an educational loan is a core bankruptcy proceeding over which the bankruptcy court may exercise jurisdiction despite an arbitration clause in the lending agreement. Navient Solutions v. Farmer, No. 17-764 (W.D. Wash. Oct. 16, 2017).
In her chapter 7 bankruptcy, Janay Farmer sought to discharge a loan she had taken out to finance her post-graduation bar-examination. The lender, Navient, moved to compel arbitration in accordance with the terms of the lending agreement. Reasoning that the issue of treatment of the loan was a core bankruptcy matter, the bankruptcy court found that it had discretion to exercise jurisdiction over the case. In re Farmer, 567 B.R. 895 (Bankr. W.D. Wash. 2017). Read More
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Court Applies Realistic Fact-Based Analysis to Student Loan Discharge
Posted by NCBRC - September 26th, 2017
The Brunner undue hardship test requires examination of the unique facts and circumstances of each case, and the analysis for whether the debtor’s financial condition is likely to persist should not look beyond the life of the loan. ECMC v. Murray, No. 16-2838 (D. Kans. Sept. 22, 2017).
After an evidentiary hearing and inquiry into Alan and Catherine Murray’s expenses and income, the bankruptcy court found they could not maintain a minimal standard of living if they were required to pay off their student loans in their entirety, including interest, but that they could afford to pay off the principals.
ECMC appealed the discharge of all but the principal to the District Court. Read More
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