Children’s Future Hostage to Student Loans

Children whose parents have large educational debts can be enslaved to pay off those debts, says the US District Court judge John D. Rainey in the case of Pratt v. ECMC. The judge backed ECMC, a well heeled collector and, in effect, told Mrs. Pratt she has too many children.

I commented earlier on ECMC’s predatory collection practices in fighting the hardship discharge of a disabled homeless veteran [see Student Loan Servicers: Wolves in Sheep’s Clothing]. In this latest triumph of financial rapacity, ECMC argues that the parents’ decision to have a large family obligates the children not only to live on rice and beans, but to compromise their own educational and social advancement to free up money to pay a parent’s student loans. This worse-than-Dickensian scenario makes a complete mockery our bankruptcy laws.The decision of the Appellate Court of the Southern District of Texas (2007 WL 951543 SD Texas) is valid under existing case law: Amy Pratt did not meet the second prong of the court concocted Brunner Test [see What is the Brunner Test for Dischargeability of Student Loans?] in that she failed to demonstrate that the financial difficulties that brought her and her husband into Chapter 7 bankruptcy were likely to persist for a significant proportion of their lifetime. The Court held that once the youngest of the Pratt’s six children entered school, day care expenses would no longer be a barrier to Amy’s returning to the workforce. That is true.

If Mr. Pratt’s current stable employment situation persists, no unforeseen calamity intervenes, and Amy is able to secure full-time work utilizing her degree, the Pratt’s should be able to meet their current loan payments five years down the road without incurring undue hardship or additional debt. Of course, by then any refinancing or workout they enter into to deal with their present undisputed inability to make payments will have added substantially to the outstanding balance, and the payments will be correspondingly higher.

After expostulating at length on the voluntary nature and implied irresponsibility of the Pratts’ decision to have six children, the judge added the following “Further, as the younger children reach school age, this will make her available to work and eliminate any prohibitive child care costs. Also, as the older children reach the age of majority, the Pratts will have even less strain on their family budget. The older children can also relieve Amy from all the child care responsibilities, allowing her to seek at least part-time employment.”

Let us consider what the above analysis means for the eldest daughter of this family, who cannot be more than eleven years old. Evidently the judge considers it reasonable to require her to rush home from the sixth grade to care for three siblings under the age of five, and work whatever weekend hours are necessary, until the youngest is able to stay home alone after school. This will be about the time the eldest graduates from high school, if she manages to graduate from school at all while maintaining a schedule that allows for no extracurricular activities and very little time for homework. Then, having reached her majority, she’s on her own, since neither she nor her parents have been able to save anything for her education.

The younger children are also being shortchanged. Such daycare arrangements are neither adequate nor safe, and would be illegal in most states if the young teenaged provider were not a family member. There is something bizarre and profoundly disquieting about having our bankruptcy courts and bankruptcy laws protect creditors by holding the autonomy and right to pursue prudent self-interest of some of a debtor’s children, and the safety and well-being of the rest of them, hostage to a debt incurred by parents who were scarcely more than children themselves when they signed on the dotted line.