In her January 7, 2020 ruling, Chief Bankruptcy Judge Celelia Morris discharged $221,385.49 in student loan debt for Navy veteran and lawyer Kevin Rosenberg under chapter 7 bankruptcy. Not surprisingly, Educational Credit Management Corporation (ECMC) — a nonprofit that guarantees and services student loans on behalf of the Department of Education (ED) — is challenging the decision.
This decision seeming contradicts the common notion that student loan debt is not dischargeable under chapter 7 bankruptcy. Judge Morris spoke directly to this point in her decision. She wrote, “Over the past 32 years, many cases have pinned on Brunner punitive standards.” Judges have sometimes replaced the hardship standard of the Brunner test with a required proof of “hopelessness”. Judge Morris wrote that these interpretations were “applied and reapplied so frequently” and have “become a quasi-standard of mythic proportions so much so that most people… believe it impossible to discharge student loans,” the judge stated. “This Court will not participate in perpetuating these myths… Rather, this Court will apply the Brunner test as it was originally intended.”
ECMC’s main contention in their appeal hinges on Judge Morris’ interpretation of the Brunner test. They stated, “Inability to pay one’s debts by itself cannot be sufficient to establish an undue hardship; otherwise all bankruptcy litigants would have an undue hardship… the Bankruptcy Court, in the case at hand, rejected 32 years of case law applying the Brunner test in order to determine, on summary judgment, that Plaintiff met his burden to establish an undue hardship…”
In a recent Yahoo Finance article, Jason Iuliano, assistant professor of law at Villanova University, stated that “very few student loan cases get appealed, so the Rosenberg case is unusual in that regard.” Iuliano, an expert on bankruptcy law, added “It’s not surprising that the Rosenberg case was appealed, though… Given the publicity the case has received and the judge’s strong rhetoric against the undue hardship standard, ECMC had no choice but to appeal.”
Rosenberg, the plaintiff in this possibly watershed decision, told Yahoo Finance that “the appeals process is beyond my level of knowledge and experience, so I’m reaching out to advocacy groups and attorneys in hopes of finding pro bono representation.” He added: “The case is likely to go the Supreme Court so whomever represents me in the case will truly make a name for themselves. So, on one hand, I wish this was over already. And on the other, I’m excited about what this means for those still suffering under the weight of an unjust system.”
If you are in financial crisis with student loan debt and need advice, a knowledgeable bankruptcy attorney may be able to help. For more information call attorney Chris Bush at (619) 678-1134. He is an experienced bankruptcy attorney and passionate consumer debt advocate. He’ll help you obtain the best solution to your debt burden and get you back on track to financial freedom.