Judges Considering Student Loan Bankruptcy

More bankruptcy judges are realizing that student loan debt decisions must be made in favor of the debtor. Student loan debt is the second highest consumer debt in America, but it is the hardest to reduce in court. The average student loan debt for a Bachelor’s degree is over $37,000 and does not include the debt adults accumulate through master’s programs, law school, medical school, etc. The bankruptcy code allows under 11 U.S.C 523(a)(8) the discharge of student loan debt based on an undue hardship. Most people know this undue hardship as the “Brunner test” which exams if the debt creates an “undue hardship” on the debtor. However, because of the vague language of the law, the interpretation of “undue hardship” varies per circuits.

Earlier this month, the New Jersey Judge John Sherwood ruled for a partial discharge for a debtor claiming “undue hardship” against the private loan company NJ HESSA. This company proved to be relentless when pursuing a repayment for their loans, continuing debt collections after the debtor has died. Another New Jersey Judge Michael Kaplan appeared in the Wall Street Journal, recognizing how his own adult children are bound to their accumulating debt from their education. The WSJ named other judges across the country in Massachusetts, Florida, Kansas,
California, and many other states who are speaking out against Congress’s lack of intervention and the need for courtrooms to step in.

Judge William Sawyer in Alabama canceled “a $112,000 student loan debt for high school science teacher Alexandra Conniff, a single mother of two teen boys whose yearly income is $59,400. . .repaying [her debt] over 15 years would cost $843 a month”. Nevertheless, despite the Judge Sawyer’s ruling, federal attorneys are attempting to appeal the decision under the argument that Ms. Conniff “could cut retirement savings, life insurance payments and $100 in monthly landline-phone costs.” Essentially, these lawyers are arguing that she disregard any hope for retirement because she will be working for decades to repay her student loan debt. The judges can’t act alone, especially if lawyers are unwilling to bring the case to court.
Attorney fees for student loan debt can range up to $10,000 which is an unthinkable price for someone already crippled by their inability to repay their loans. More judges are realizing that their decisions to discharge student loan debt will more positively impact their own children, and so more lawyers and absolutely more Congressmen need to take action towards creating guidelines where student loan debt can be treated as fairly as any other unwieldy debt.