BANKRUPTCY LAW (Importance of Automatic Stay); When a debtor files for bankruptcy, 11 USC Section 362(a)(1) automatically stays any other judicial proceeding involving the debtor. The automatic stay “plays a vital role in bankruptcy. The automatic stay aids the debtor in getting a financial fresh start. The automatic stay is “one of the fundamental debtor protections provided by the bankruptcy laws.” The stay promotes stability of the bankruptcy estate for both the debtor and creditors. In re Schwartz, 954 F.2d 569, 571 (9th Cir.1992), cited in FAR OUT PRODUCTIONS, INC. v. OSKAR, 247 F.3d 986, 994-995 (2001)
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 (Automatic Stay): In en banc opinion, 9th Circuit holds that debtor can recover all fees spent in resisting creditor who violates automatic stay in seeking to collect debt (America’s Servicing Co. v. Schwartz-Tallard, originally issued 4/16/2014, San Francisco, modified Autumn 2015)