Student Loans

06 Mar Student Loan Dischargeability: Diabetic, Permanently Disabled, Blind, Prosthetic Eye, Pancreas and Kidney Transplants, But Still No “Undue Hardship”

It's no secret that federal bankruptcy courts are reluctant to grant a bankruptcy discharge of student loans based on section 523(a)(8)'s "undue hardship" standard. Indeed, courts haveusually construed the phrase "undue hardship" narrowly, rendering it difficult to discharge student loans in bankruptcy. However, in a recent Ohio case, the court went to unusual lengths in finding that the repayment of student loans would not create an undue hardship for the bankruptcy debtor. The debtor in this case, Wallace v. Educational Credit Management Corp., 2010 WL 5764771 (Bky.S.D. Ohio Dec. 1, 2010), had been diagnosed with diabetes at age nine. In 2004 he obtained a bachelor's degree in sociology, incurring student loan debt of $32,500 in doing so. He worked for one year after graduation, earning about $12,000. However, his diabetes caused him to gradually become blind and was forced to leave the workforce. The debtor'sdiabetes alsocaused him to require dialysis and even kidney and pancreas transplants. By 2008 he had a prosthetic right eye, was deemed legally blind, and was awarded social security disability in the amount of $811 per month. He had not been employed since the year he left college. He lived with his father and listed expenses of $790 per month in his chapter 7 petition. Interest of 2.875% had cause the student loan balance to increase to $38,000.
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10 Jan Bankruptcy and Student Loans-Time to Reconsider Discharge

Student loan debt is not dischargeable in bankruptcy. That's not news--it's pretty much common knowledge. But student loan debt for newly-minted lawyers is a growing problem, since the job market for lawyers is, well, abysmal would be an optimistic assessment. [A] generation of J.D.’s face...

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31 Dec Am I Responsible for a Deceased Child Borrower’s Student Loan Debt?

On more than one occasion, I have represented individuals in Chapter 7 and Chapter 13 bankruptcy cases when the debt that prompted the filing was wholly or in large part co-signed debt. It seems that underwriting standards for most large loans have become tighter and nowhere is this more true than in the case of student loans.
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06 Nov Student Loans Not Discharged Due to Boyfriend’s Income and Voluntary Underemployment

Below poverty level income for five of the past six years was no basis for discharging a chapter 7 debtor's student loans, where she was voluntarily underemployed, had no dependents,and lived with her boyfriend,relying on his income as if they were married, according to the Bankruptcy Appellate Panel for the Eighth Circuit. The debtor in Sederlund v. Educational Credit Management Corp., 2010 WL 4273243 (8th Cir. BAP Nov. 1, 2010), was a 42 year old college graduate who had obtained her degree in psychology, but had never worked in that field. She graduated in 1992 owing $16,649.70 in student loan debt. She paid $11,825.10 toward the student loans over the next twelve years, but was later granted deferrals on the payments. At the time of her chapter 7 filing in 2008, she owed approximately $47,000.00 on her consolidated student loans. In the years leading up to the case, the debtor's income had been minimal: in 2004, it amounted to $6,601; in 2005, $5,930; in 2006, $9,180; in 2007, $5,316; in 2008, $12,635; and in 2009, $6,506. All these figures except that for 2008 fell below the federal poverty level for annual income. The debtor had typically worked as a secretary for law firms and had an inconsistent employment history, working most recently at a catering company. The court noted that the debtor had either quit some jobs, or had been fired from others, for reasons for which she was at least partly to blame. She quit one job after arguing with her boss; she quit another because she disliked her supervisors' abusive attitudes; she quit another due to arguments with coworkers; she was fired from another job after having a dispute with a coworker over work hours.The debtor was currently working in food service, but despitehaving a low number of weekly work hours,she testified she was not seeking a better payingoffice job.
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09 Jun Appeals Court Discharges $300,000 in Student Loans, Despite Purchase of Deck and “Loaded” SUV

The 8th Circuit Federal Bankruptcy Appellate Panel recently upheld a Minnesota bankruptcy court's discharge of $300,000 in student loans, even though the debtor's husband was paying for a newly installed screened-in deck and had just purchased a luxury Chevrolet Suburban. In this case, In re Walker,...

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