Let’s look at a recent student loan discharge
case result in bankruptcy court.
Not the most sympathetic plaintiff, right?
First, in order to discharge, get out of, a student loan in bankruptcy court, you have to file a lawsuit against the student loan lender(s). So, you are the plaintiff.
Thanks to friend Bobby Wilbert, NACBA lawyer in Florida, for finding this case.
The applicable law is as follows:
Under the Brunner test, Rosen had to prove: (1) that he could not maintain a minimal standard of living if he were required to repay the loan; (2) that additional circumstances exist to suggest this state of affairs is likely to persist; and (3) that he had made good faith efforts to repay the loan.
So, how close did our disbarred lawyer plaintiff come?
Struck out on all three counts.
The court considered the income of his non-filing wife, that is, she did not file bankruptcy.
So, even though plaintiff was unemployed and had only $1,300 per month in Social Security income, the court found there was an ability to repay, and, the guy could get his law license back in 3 years and be able to earn money then.
The court was not sympathetic to his not being able to find work due to suspension of his law license, which it found to be his fault.
[Rosen] pursued a very narrow job search focused solely on jobs in the finance area.” (Bankr. R. 227.) Rosen also cites poor health as an additional factor in his failure to obtain employment. Judge Cassling noted how this, too, was not supported by evidence showing that Rosen’s health prevented him from working. (Bankr. R. 227.) Rosen admitted to managing his various ailments with medication. (Id.) Judge Cassling ultimately rejected Rosen’s contention that his “self-diagnosis of morbid obesity” and other treatable health issues were a substantial impediment to employment. (Id.); see also Owens v. U.S. Dep’t of Educ., 525 B.R. 719, 722 (C.D. Ill. Bankr. 2015) (denying the debtor’s health-based arguments for hardship where the debtor offered no evidence that they were substantial impediments).
That the court used a 30 year repayment time frame was found appropriate. Which blows my mind, but courts have held that is due to taking out loans late in life.
What about the lenders? Why are they making these loans?
On the second Brunner prong, the 7th Circuit has determined this amounts to a “certainty of hopelessness” which is horrific.
It is NOT the standard in the 6th Circuit, in which Michigan is located.
No good here either.
Rosen has never prioritized paying his student loans, regardless of his income. Rosen worked and earned a salary throughout his graduate studies, which he pursued back-to-back over the course of 16 years. In his final year at the Larkin Center, he reported a salary of $80, 000. Yet Rosen paid just $11, 000 towards his loans over the span of 37 years. To pay even that small percentage, he enlisted his mother’s assistance. Rosen has made no real effort to maximize his income. Finally, and most tellingly, Rosen defaulted on his student loan in 2011, while he was still a lawyer in good standing. He was not charged with misconduct by the ARDC until August 2012, and not suspended until January 2015. In the meantime, Rosen did not make even partial payments towards his loans out of his $1, 200 monthly surplus income or his household’s yearly income tax returns.
So, you have to try to make payments, even if they will not pay off the loans, because you may be in bankruptcy court someday.