Some Hope of Relief For Law School Grads
There’s a glimmer of hope for law grads with huge student debt seeking relief from bankruptcy courts.
While the test for when that rare species of relief for student loans may be discharged (the Eighth Circuit uses a “totality of circumstances” measure), a new decision from the chief judge of Manhattan’s bankruptcy court took one heckuva load from the shoulders of a non-practicing man.
The 2004 grad, who had run up student debt of $116,000 – which had ballooned to $221,000 when he sought relief – convinced the court that he met the three-part Brunner test, which had been as rare as hens’ teeth to do, and exited victorious.
Younger lawyers (and any students with college loans) can tell you that the burden facing them as they walk across the stage with a diploma can be staggering. Last year, the average new J.D. has a debt of $145,000 from both undergrad and professional school (see, Nerdwallet, July 24, 2019). The new J.D.s may not have studied bankruptcy law, but they know that Section 523 says student loans are not dischargeable.
Now comes Brunner v. New York State Higher Education Services Corp., 831 F,2d 295 (CA2 1987) with a three-part test in which a person has to show genuine hardship, the likelihood of things never getting better and a good faith effort to pay, to get mercy.
Most courts applying the test conclude, “Sorry, buddy!” until the New York decision last week in which Chief Judge Cecilia Morris ruled that the Brunner doctrine had been too harshly applied and discharged the student loan debt of Kevin Rosenberg.
Some commentators have said that a debtor couldn’t get relieved unless he/she lived in poverty and was mentally ill or physically incapacitated – or very old. Judge Morris seeks to apply a less draconian standard to relief-seekers.
What about students who choose to live in luxury flats, with pools and underground parking for their Maseratis? Perhaps they won’t get discharged; but then, there is always a rich uncle!
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