When it comes to discharging debts in a bankruptcy case, student loan debt has traditionally been one of the most difficult debts to discharge. But a New York court ruling issued on January 7, 2020, has given student loan borrowers hope that change is near.
A New York judge ruled last week that the $221,385.49 in student loan debt that U.S. Navy veteran Kevin Rosenberg owed for six years was considered a dischargeable debt in his Chapter 7 bankruptcy case.
This case is a turning point for those who have held off filing for bankruptcy due to the belief that the largest category of debt filers has, their student loan debt, would stay with them no matter what.
It is estimated that more than $1.6 trillion is owed in student loan debt nationwide as of November 2019, although that figure is arguably up since that time. The student loan crisis has reached such a heightened point that it is now one of the leading issues facing 2020 presidential candidates, each having their own plan on how to “fix” this national crisis.
With respect to this specific case, the borrower, Rosenberg, ended up with over $221,000 in student loan debt after completing his undergraduate and juris doctorate degrees. He began college in 1993, taking out student loans for his undergraduate degree. After he completed his undergraduate degree, he served in the United States Navy for five years before going on to law school. He graduated in 2004, consolidated his loans with the figure being approximately $116,000 at the time. However, since that time, the balance jumped to $221,000 over 14 years. Due to career change, the economic recession and personal issues, he found himself in a serious financial crisis, unable to pay his bills, let alone his student loans.
He struggled for years with his debt before making the decision to file for Chapter 7 bankruptcy. The problem was, no matter how much of his other debt the bankruptcy eliminated, he was still left with well over six figures in student loans.
He looked through all the different tests that could help in eliminating the debt, including the undue hardship test, choosing to pursue the legal matter as his own attorney. He filed an adversary proceeding against the New York State Higher Education Services Corporation, and after six hearings, depositions and expert witness interviews, followed by summary judgment motions, he received the final ruling.
Cecilia Morris, the Chief U.S. Bankruptcy Judge in Manhattan, wrote in a 12-page opinion that Rosenberg had satisfied what is known as the “Brunner test,” a three-pronged standard for dismissing student loan debt in bankruptcy.
Morris, in a scathing commentary, said courts had been incorrectly interpreting that test for decades in such a way that it had become almost impossible to use a bankruptcy filing to get out from under student loan debt.
The court emphasized that Rosenberg made a dedicated and sincere effort to pay back his student loan obligations in good faith. For him, it made sense to pursue a bankruptcy case to eliminate debt, but this may not be the case for all borrowers. It is important that borrowers who are considering filing for bankruptcy examine all their options and speak with an experienced bankruptcy attorney before moving forward.
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For borrowers who are struggling with student loan debt, relief options are available. Many student loan borrowers are unaware that they have rights and repayment options available to them, such as postponement of loan payments, reduction of payments or even a complete discharge of the debt. There are ways to file for bankruptcy with student loan debt. It is important you contact an experienced Miami bankruptcy attorney who can advise you of all your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade Garcia McMaken has been helping people from all walks of life build a better tomorrow. Our attorneys help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade Garcia McMaken website at www.miamibankruptcy.com.
