Dear Friends
and Clients,
It
is accepted as "common knowledge" that student loans are
not
dischargeable
in bank- ruptcy. The
bankruptcy code
does in fact
provide an "undue hardship" provision for relief from student loans, but, the rigors of
proving an "undue
hardship" have been so
strenuous, that for the
most
part, debtors and their attorneys
seldom bother to even attempt to get discharges
of
student loans included on
their bankruptcy proceedings.
As a result, higher educational tuitions have risen at roughly double
the cost of living over
the last twenty (20) years as
professors and
institutions, both accredited and non accredited
have
granted themselves
unbridled salary
and
tuition benefit increases; knowing that
parents,
grandparents
and students
are
stuck with the bill, regardless
of
the value they
receive in exchange
for the
students loans
that make
the whole process possible.
Today,
we have students with obscene
amounts of student loans graduating with no way to repay them because of our new bril- liantly engineered "part time" economy. It
would seem that the chickens
have
finally
come home
to roost as
students and their
naively coerced parental and family
guarantors
are left holding the bag; loaded with student loan debts, having no jobs, no pay and in many cases, degrees
that are ill suited
to making the
kind of income
that is required
to be
able
to pay.
Recently however, a case before the Eighth Circuit Bankruptcy Appellate Panel
(BAP) provides a little
more light at the
end of the tunnel. In
Conway vs Nation- al
Collegiate Trust,
the BAP took a reasoned approach
to a debtor's future ability
to repay student loans
that had ballooned to over $118,000.00! The lower court
had denied relief on the
basis that the debtor was articulate,
well spoken and in- telligent,
and even though
in the 8 years since graduating,
the debtor
had an av- erage income of
only $21,000.00 per year (the
debtor working sometimes
2 jobs), still had at least 30
years of her working lifetime
in which to build a career
adequate to the task of paying the
student loans.
Incidentally, the loans
in question involved a combination of 15
loans over a number of semesters
that originally totaled
$70,000.00, not including approxi- mately $37,000.00
in additional federal
and private loans that
she was not seek- ing to discharge.
Due to interest charges and an
obvious inability to pay, the debt had
grown to more than $118,000.00 and was
headed
even
higher!
The
Court noted that there is
no provision in the code or
case law that allows
the court to partially provide relief,
meaning if the $118,000.00
had constituted a single loan
amount, a finding that
the debtor did not have
the capacity to
pay would mean that all of the debt
would be discharged.
The Court also noted that, given the
debtors historic and current
income
due to lack of employment
oppor- tunities, to suggest
that
30 years
of time to develop
a career to repay was merely speculative,
which was not a valid basis for determining an
ability to
repay.
While the BAP
did not go so far as to discharge all of the loans, (remember, there were 15 individually issued
loans) it did send the case back to the lower court
to make a determination if any of the loans might be within the capacity of
the debtor to be repaid.
Her
case is
a rare look at what considerations
a court should be considering when
determining the
ability of
a debtor in bankruptcy to
discharge student loans under the "undue hardship" measure.
0 comments:
Post a Comment