Posted by NCBRC - August 18th, 2017
“[N]otwithstanding a debtor’s potential eligibility for an extended term student loan repayment program, if a debtor chose not to enter such a program in good faith, the repayment period under the second Brunner prong is the remaining contractual term of the debtor’s loan.” Price v. Devos (In re Price), No. 15-17645, Adv. Proc. No. 16-11 (Bankr. E.D. Pa. June 23, 2017).
The debtor, Kristin M. Price, was a twenty-nine-year old, soon-to-be-divorced, mother of three young children. She was educated and trained to work in vascular sonography and was employed part-time in that field. She filed for chapter 7 bankruptcy in October, 2015. At that time, she had an outstanding student loan from the Department of Education which she sought to discharge under section 523(a)(8). Read More
Posted by NCBRC - July 5th, 2017
Approximately 2,200 students who enrolled in any one of five schools operated by Corinthian Colleges, Inc., a New Jersey for-profit entity, are eligible to have their federal student loans cancelled. Corinthian Colleges ceased operations in 2015 under scrutiny by government entities into fraudulent conduct including misrepresentations made between 2010 and 2014 about post-graduate employment rates, the transferability of credits, and other issues. The schools affected by the loan cancellation are Everest Institute, Everest College, Everest University, Heald College, and Wyotech. Students who have their federal loans cancelled will make no further payments and will receive a refund of payments already made. The loan cancellation was announced on May 22, 2017, in a Press Release issued by Attorney General Christopher S. Porrino Office. The Attorney General’s office is sending outreach letters and application forms to those students who may be eligible for the loan cancellation.
Posted by NCBRC - June 12th, 2017
A Parent Plus loan made directly from the Department of Education to Penn State University prior to the debtor’s bankruptcy filing is not a fraudulent transfer where the funds were never in the debtor’s possession and would not have been available to his creditors. Eisenberg v. Pennsylvania State Univ. (In re Lewis), No. 16-12372, Adv. Proc. Nos. 16-0282, 16-0284 (Bankr. E.D. Pa. April 7, 2017). Read More
Posted by NCBRC - May 5th, 2017
The standard for appellate review of a bankruptcy court’s decision that repayment of her student loans would constitute an “undue hardship,” in part due to a “certainty of hopelessness” as to future ability to pay, is “clear error” for the factual findings and “de novo” for application of law, and the debtor’s past financial decisions have no bearing on this forward-looking prong of the Brunner test. ECMC v. Acosta-Conniff, No. 16-12884 (11th Cir. April 19, 2017) (unpublished). Read More
Posted by NCBRC - May 3rd, 2017
A loan is not an “educational benefit” within the meaning of section 523(a)(8)(A)(ii), therefore, that student loan discharge exception in did not apply. Kashikar v. Turnstile Capital Management, No. 16-1298 (B.A.P. 9th Cir. April 28, 2017).
Ms. Kashikar attended St. Matthew University School (SMU) in the Grand Cayman Islands. She obtained loans which were paid directly by the creditor to SMU and which, by the time she filed chapter 7 bankruptcy, amounted to over $73,000. She received her chapter 7 discharge and filed an adversary complaint seeking determination that her loans related to her attendance at SMU were discharged. The parties stipulated that “SMU has never been, and is not now, an ‘eligible educational institution’ as that term is defined under section 481 of the Higher Education Act of 1965 (20 U.S.C. 1088), and has never been, and is not now, eligible to participate in a program under title IV of the Higher Education Act.” The court declined to address Ms. Kashikar’s argument under section 523(a)(8)(A)(i) because she had not raised that provision in her complaint. The court, however, applied an “expansive” reading of the phrase “educational benefit,” in section 523(a)(8)(A)(ii), and found the loans nondischargeable. Read More
Posted by NCBRC - February 28th, 2017
Illinois Attorney General, Lisa Madigan, is leading the charge in investigating and enforcing consumer protection violations in the area of student lending. According to a press release issued by the Attorney General’s office, Ms. Madigan is calling for the U.S. Department of Education to forgive student loans for students who attended Everest College or the criminal justice program at Westwood College. Ms. Madigan’s investigations into both colleges revealed that students were fraudulently lured into enrolling in programs that were poorly or non-accredited and that students took out millions of dollars in federal student loans to attend the programs. In 2015, Ms. Madigan reached a $15 million settlement with Westwood College, which included forgiving private loans of students enrolled in the school. Ms. Madigan’s efforts are in addition to a current investigation by the AG’s office into Navient, the largest servicer of student loans in the country. She has also taken action against debt relief scammers who victimize student loan debtors into paying for help that never materializes.
Posted by NCBRC - February 21st, 2017
Where there is little likelihood that the debtor will be able to pay her students loans now or in the future, the fact that an income-based repayment plan may be available does not automatically constitute an “ability to pay.” Fern v. FedLoan Servicing, No.16-6021 (B.A.P. 8th Cir. Feb. 7, 2017).
Sara Fern is a 35 year-old single mother of three who receives food stamps and rental assistance and has a monthly employment income of $1,507. While she receives occasional financial help from her mother, that assistance is expected to end when her mother retires. Her expenses exceed her income by $62/month. Ms. Fern has student loans totaling over $27,000 which have been in forbearance or deferment ever since she left school.
The U.S. Department of Education appealed the bankruptcy court’s finding that Ms. Fern’s student loans were dischargeable based on undue hardship under section 523(a)(8). Read More
Posted by NCBRC - January 19th, 2017
In a Press Release issued on January 18, the CFPB announced that it was suing the nation’s largest student loan servicer, Navient Corporation, for illegal activity at every stage of the student loan process. The company is accused of systematically creating obstacles to repayment by providing bad information, incorrectly processing payments and failing to act on customer complaints. The complaint alleges that Navient’s conduct resulted in borrowers paying much more than they would have had their loans been properly serviced and had they been given accurate information about alternative repayment plans.
Navient, formerly part of Sallie Mae, Inc., services more than 12 million student loans approximately half of which are through its contract with the Department of Education.
According to CFPB Director, Richared Cordray, “For years, Navient failed consumers who counted on the company to help give them a fair chance to pay back their student loans. At every stage of repayment, Navient chose to shortcut and deceive consumers to save on operating costs. Too many borrowers paid more for their loans because Navient illegally cheated them and today’s action seeks to hold them accountable.”
Specifically, the CFPB accuses Navient and two of its subsidiaries, Pioneer Credit Recovery and Navient Solutions, of:
- Failing to correctly apply or allocate payments to borrower’s accounts,
- Steering borrowers who had trouble repaying their loans away from the lower repayment plans they were entitled to under federal law and into forbearance programs which allow interest to accrue while the borrower is on hiatus from repaying the loan,
- Failing to inform borrowers enrolled in income-driven repayment plans of the need to renew those plans annually,
- Deceiving private student loan borrowers as to the steps necessary to release a co-signer from the loan,
- Harming the credit of disabled borrowers including severely injured veterans.
The lawsuit alleges violations of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the FCRA and the FDCPA.
Posted by NCBRC - December 13th, 2016
“This Court respectfully disagrees with other courts’ holding that, without more, nondischargeability of student loans is an insufficient reason for discriminating in favor of Student Loan Claims.”
In a thoughtful, in-depth discussion addressing the state of student loan debt and the treatment of such debts separately from other debts in chapter 13, the Kansas Bankruptcy Court found that the debtors did not unfairly discriminate against general unsecured creditors by prioritizing their student loan debts in their plan. In re Engen, No. 15-20184 (Bankr. Kans. Dec. 12, 2016). Read More
Posted by NCBRC - September 1st, 2016
NACBA and the NCLC have added their voices to an Eleventh Circuit student loan discharge case. Acosta Conniff v. ECMC, No. 16-12884 (11th Cir.). The amicus brief, filed August 22, begins with a direct attack on the Brunner, hardship test as straying too far from the plain language of section 523(a)(8) and from congressional intent to permit discharge of student loans under certain circumstances. Read More
