by Herbert Wiggins | Oct 20, 2022 | bankruptcy, student loans
The conventional wisdom is that “student loans cannot be discharged in bankruptcy.”
But the “conventional wisdom” is WRONG.
There is a high evidentiary bar for a debtor to discharge (cancel) her or his student loans, but discharge is possible.
In a recent case, the bankruptcy court discharged the loan of a Cambodian immigrant who, as a medical student, had amassed $440,000 in loans for his medical education. In re Koeut, 622 B.R. 72 (2020) [unpublished].
The test for relieving student debt is laid out in Brunner v. New York State Higher Education Servs. Corp., 831 F.2d 395 (2d Cir.1987) The Koeut court applied the 3-part Bruner test to relieve the medical student from the debt:
(1) 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) Additional circumstances exist indicating that this extreme situation is likely to persist for a significant portion of the repayment period of the student loan; and
(3) The debtor has made good faith efforts to repay the loans.
The court applied these factors to the $440,000 that Mr. Koeut declared in the Bankruptcy Court. The Bankruptcy Court eventually discharged about $432,000.
The Koeut court reasoned:
“[Mr.] Koeut has satisfied the tripartite analysis of the Brunner test sufficiently to support a partial discharge of his student loans. Koeut’s current income and expenses do not support a minimal standard of living, even without making loan payments. Koeut’s inability to repay his full loan balance will persist over his remaining expected working life to an extent that he can only make partial payments without [622 B.R. 85] enduring undue hardship. As the DOE admits, Koeut deserves a break. A partial discharge of $432,173.99 of Koeut’s student loans will be ordered, leaving a balance of $8,291.67 with interest to accrue at .11%. Koeut will be required to make payments of $41.87 per month to the DOE from December 2031 to December 2048.” [emphasis added]
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
by Herbert Wiggins | Oct 6, 2022 | bankruptcy, BANKRUPTCY LAW
Where trustee failed to file the adversary proceeding within the time required by law, he could not undo the error by claiming that he had timely filed an adversary complaint in the wrong case. The facts of the InterWorks bankruptcy had nothing to do with the improper file, and thus there was no “relation back” effect based on the late-filed adversary proceeding in the Interworks case. Additionally, the fact that the trustee dismissed the adversary proceedings that he started in the improper case nullified any application of the relation back doctrine; when he dismissed the improper case, there was nothing for the new pleading to “relate back” to.
Furthermore, there was no equitable tolling, so the adversary action was barred. FRCP 15(c)(1)(B); 11 USC 108(a) & 546 (a).
In re Interworks (Chapter 7) CC-22-1027-STL [Unpublished decision of the Bankruptcy Appellate Panel for the 9th Circuit, filed 8/19/2022]
by Herbert Wiggins | Sep 29, 2022 | bankruptcy, BANKRUPTCY LAW
A debtor may file a bankruptcy case where the debtor resides, is domiciled, or has its principal place of business or principal assets. But a debtor can claim exemptions only under the law of the debtor’s domiciliary state. 28 U.S.C. § 1408; In re Larsen, Case No. BAP No. NV-20-1133-FBG (Unpublished) Bankruptcy Appellate Panel, 9th Circuit, filed November 3, 2020.
by Herbert Wiggins | Aug 5, 2022 | bankruptcy, BANKRUPTCY LAW
A debtor who seeks discharge, for himself or for a business, must maintain adequate financial books records to allow the bankruptcy Court to determine the debtor’s true financial condition. For example, pursuant to 11 USC §727(a)(3), the debtor is not entitled to a chapter 7 discharge if that debtor “has concealed, destroyed, mutilated, falsified, or failed to keep or preserve any recorded information, including books, documents, records, and papers, from which the debtor’s financial condition or business transactions might be ascertained, unless such act or failure to act was justified under all of the circumstances of the case[.]” The statute has the consequence of making the discharge dependent on the debtor’s true presentation of his or her financial affairs, and complete disclosure is a condition precedent to the granting of the discharge.
Caneva v. Sun Cmtys. Operating Ltd. P’ship (In re Caneva), 550 F.3d 755, 761-62 (9th Cir. 2008), cited in In re: Frank Daniel Kresock, Appeal from the United States Bankruptcy Court for the District of Arizona, BAP No. AZ-20-1270-BSL (Filed December 22, 2021; Unpublished)
by Herbert Wiggins | Jul 22, 2022 | bankruptcy, BANKRUPTCY LAW
Where Debtor had a judgment entered against him by California state court for fraud and elder abuse, this judgment was not discharged (cancelled) by his Chapter 7 bankruptcy discharge. Debtor’s and Debtor’s counsel’s strategic absence from court at the time of the trials did not eliminate the legal effect of the judgment. The debt was non-dischargeable, pursuant to 11 USC §523(a)(2)(A).
In re: Robert Edward Zuckerman,
UNITED STATES BANKRUPTCY APPELLATE PANEL OF THE NINTH CIRCUIT; BAP No. CC-19-1200-TaFS
Argued and Submitted on February 27, 2020, Pasadena, California [Published Opinion]