Student Loans May Be Discharged In Full

Student Loans May Be Discharged In Full

BANKRUPTCY LAW (Student Loans): A former medical student was entitled to $440,000 in debt relief, because he was able to meet the following standards pursuant to Brunner v. New York State Higher Educ. Services Corp., 831 F.2d 395, 396 (2nd Cir. 1987).

“Under [11 U.S.C.] § 523(a)(8), [debtor]’s student loans may be discharged in full, in part, or not at all, based upon the extent to which the court finds the repayment of these loans would constitute an undue hardship. Craig, 579 F.3d at 1045-46. Both [debtor] and the [Department of Education] concede the court has authority to enter a partial discharge pursuant to its equitable authority under § 105(a). Saxman v. Educ. Credit Mgmt. BJR Corp. (In re Saxman), 325 F.3d 1168, 1174 (9th Cir. 2003) (holding that a debtor is entitled to a discharge of that portion of the student loan that meets the requirements of § 523(a)(8)); Educ. Credit. Mgmt. Corp. v. Jorgensen (In re Jorgensen), 479 B.R. 79, 86 (B.A.P. 9th Cir. 2012) (applying each element of the Brunner test to the partial discharge analysis).The Ninth Circuit in United Student Aid Funds v. Pena (In re Pena), 155 F.3d 1108, 1112 (9th Cir. 1998), adopted the three part test (“Brunner test”) for determining undue hardship articulated in Brunner v. New York State Higher Educ. Services Corp., 831 F.2d 395, 396 (2nd Cir. 1987):
>
(i) the debtor cannot maintain, based on current income and expenses, a “minimal” standard of living for himself and his dependents if forced to repay the loans;

(ii) additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period of the student loans; and

(iii) the debtor has made good faith efforts to repay the loans.”
> The debtor’s dire circumstances met this test.
>
> See the Court’s decision in In re Koeut, 622 B.R. 72 (2020)

 

A Former Medical Student Was Entitled To $440,000 In Debt Relief

A Former Medical Student Was Entitled To $440,000 In Debt Relief

BANKRUPTCY LAW (Student Loans): A former medical student was entitled to $440,000 in debt relief, because he was able to meet the following standards pursuant to Brunner v. New York State Higher Educ. Services Corp., 831 F.2d 395, 396 (2nd Cir. 1987).

“Under [11 U.S.C.] § 523(a)(8), [debtor]’s student loans may be discharged in full, in part, or not at all, based upon the extent to which the court finds the repayment of these loans would constitute an undue hardship. Craig, 579 F.3d at 1045-46. Both [debtor] and the [Department of Education] concede the court has authority to enter a partial discharge pursuant to its equitable authority under § 105(a). Saxman v. Educ. Credit Mgmt. BJR Corp. (In re Saxman), 325 F.3d 1168, 1174 (9th Cir. 2003) (holding that a debtor is entitled to a discharge of that portion of the student loan that meets the requirements of § 523(a)(8)); Educ. Credit. Mgmt. Corp. v. Jorgensen (In re Jorgensen), 479 B.R. 79, 86 (B.A.P. 9th Cir. 2012) (applying each element of the Brunner test to the partial discharge analysis).The Ninth Circuit in United Student Aid Funds v. Pena (In re Pena), 155 F.3d 1108, 1112 (9th Cir. 1998), adopted the three part test (“Brunner test”) for determining undue hardship articulated in Brunner v. New York State Higher Educ. Services Corp., 831 F.2d 395, 396 (2nd Cir. 1987):

(i) the debtor cannot maintain, based on current income and expenses, a “minimal” standard of living for himself and his dependents if forced to repay the loans;

(ii) additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period of the student loans; and

(iii) the debtor has made good faith efforts to repay the loans.”

The debtor’s dire circumstances met this test.

See the Court’s decision in In re Koeut, 622 B.R. 72 (2020)

BANKRUPTCY LAW (Homestead Exemption)

BANKRUPTCY: Student Loans Can be Discharged

BANKRUPTCY: Student Loans Can be Discharged

The popular wisdom is that student loans are not dischargeable in bankruptcy. One will often hear a potential client say, “I know I can’t discharge a student loan.”

This is not true. Although the bar is high, student loans can be discharged in bankruptcy.

The debtor must initiate a trial in the bankruptcy court, against the lender. (The case is heard by the bankruptcy judge; there is no jury in bankruptcy court).

Then, the debtor must make a very thorough, detailed evidentiary showing:

“In Polleys [(Educational Credit Mgmt. Corp. v. Polleys, 356 F.3d 1302 (10th Cir.2004)], we held that under the Brunner test [(Brunner v. New York State Higher Education Servs. Corp., 831 F.2d 395 (2d Cir.1987)] in order to establish an undue hardship a debtor must prove:

“(1) that the debtor cannot maintain, based on current income and expenses, a minimal standard of living for herself and her dependents if forced to repay the loans;

“(2) that additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period of the student loans; and

“(3) that the debtor has made good faith efforts to repay the loans.

“Under the Brunner analysis, if the court finds against the debtor on any of the three parts, the inquiry ends and the student loan is not dischargeable. Id. at 1307 (internal citation omitted).”

In re Aldrete, 412 F.3d 1200 (10th Cir., 2005), cited in In re Nys, 446 F.3d 938 (9th Cir., 2006).

Therefore, a debtor who seeks discharge of a student loan in bankruptcy must make a very thorough, detailed showing. And the debtor (and the lender) have the right of appeal, no matter how the Bankruptcy Court decides.

A difficult road, yes; but not an impossible one.

WARNING: THIS POST DOES NOT CONSTITUTE LEGAL ADVICE, AND READING IT DOES NOT CREATE AN ATTORNEY-CLIENT RELATIONSHIP. PLEASE CONSULT WITH AN ATTORNEY!!

#bankruptcy  #studentloans  #education  #finances  #lending  #banking  #fairlending

Discharge Of Student Loans

Discharge Of Student Loans

BANKRUPTCY LAW: In unpublished opinion, Bankruptcy Appellate Panel agrees that Debtor did not show “undue hardship” that would entitle her to discharge of student loans (Ng-A-Qui v. College Assist, issued 10/9/2015; Argued and submitted at Seattle, WA)

BANKRUPTCY: Student Loans Can be Discharged

BANKRUPTCY: Student Loans Can be Discharged

The popular wisdom is that student loans are not dischargeable in bankruptcy. One will often hear a potential client say, “I know I can’t discharge a student loan.”

This is not true. Although the bar is high, student loans can be discharged in bankruptcy.

The debtor must initiate a trial in the bankruptcy court, against the lender. (The case is heard by the bankruptcy judge; there is no jury in bankruptcy court).

Then, the debtor must make a very thorough, detailed evidentiary showing:

“In Polleys [(Educational Credit Mgmt. Corp. v. Polleys, 356 F.3d 1302 (10th Cir.2004)], we held that under the Brunner test [(Brunner v. New York State Higher Education Servs. Corp., 831 F.2d 395 (2d Cir.1987)] in order to establish an undue hardship a debtor must prove:

“(1) that the debtor cannot maintain, based on current income and expenses, a minimal standard of living for herself and her dependents if forced to repay the loans;

“(2) that additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period of the student loans; and

“(3) that the debtor has made good faith efforts to repay the loans.

“Under the Brunner analysis, if the court finds against the debtor on any of the three parts, the inquiry ends and the student loan is not dischargeable. Id. at 1307 (internal citation omitted).”

In re Aldrete, 412 F.3d 1200 (10th Cir., 2005), cited in In re Nys, 446 F.3d 938 (9th Cir., 2006).

Therefore, a debtor who seeks discharge of a student loan in bankruptcy must make a very thorough, detailed showing. And the debtor (and the lender) have the right of appeal, no matter how the Bankruptcy Court decides.

A difficult road, yes; but not an impossible one.

WARNING: THIS POST DOES NOT CONSTITUTE LEGAL ADVICE, AND READING IT DOES NOT CREATE AN ATTORNEY-CLIENT RELATIONSHIP. PLEASE CONSULT WITH AN ATTORNEY!!

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