He got $ 221,000 in student loan forgiveness, but his forgiveness has just been revoked

This story is developing.

This student loan borrower got $ 221,000 in student loan forgiveness, but his discharge has just been revoked.

Here’s what you need to know.

Student loans

As the first reported speak the Wall Street newspaperNavy veteran Kevin Rosenberg was awarded $ 221,000 for student loan cancellation in a US bankruptcy court. However, a New York federal judge, Judge Philip M. Halpern, overturned the bankruptcy court ruling, ruling that Rosenberg failed to show why his college and law school student loans created “undue hardship.”

Student loans: what happened?

In 2020, a U.S. bankruptcy judge in New York City, Cecilia G. Morris, ruled that Rosenberg did not have to pay off her student loan debt because her student loan debt was putting her in undue financial hardship. Despite the initial ruling, Rosenberg’s student loan manager, Education Credit Management Corporation (ECMC), appealed the ruling. “Instead of pursuing the opportunities available to him and paying off his taxpayer-funded federal student loans, the applicant, over the past 10 years, has held various positions in the outdoor adventure industry. , including starting and running his own tour guide business, “ECMC wrote in the documents.

ECMC alleged that Rosenberg could have earned more income by working as a lawyer. Rosenberg borrowed $ 116,500 in student loans between 1993 and 2004. He filed for Chapter 7 bankruptcy in 2018 and asked the court to pay off his student loan debt, which had grown to $ 221,400, including interest. When he filed for bankruptcy, Rosenberg was making $ 37,600 a year, and after living expenses and debts, his monthly net loss was $ 1,500.

Student loan cancellation: the Brunner test

The Brunner The test is the primary legal test for student loans and bankruptcy in all circuit courts except the 8th and 1st circuit. The 8th circuit uses a set of circumstances, which is similar to Brunner, while the 1st circuit has not yet declared a standard. To pay off student loans through bankruptcy, adversarial proceedings (a lawsuit in bankruptcy court) must be filed, and a debtor would argue that paying off student debt would create undue hardship on the debtor.

In fluent English, the Brunner standard says:

1. the student loan borrower has extenuating circumstances creating a hardship;
2. these circumstances are likely to persist throughout the life of the student loan; and
3. the borrower made a good faith attempt to repay the student loan.

“Failure to pay debts alone is not enough to establish undue hardship; otherwise, all bankruptcy litigants would experience undue hardship, ”argued the ECMC. Unlike mortgages or credit card debt, student loans cannot be discharged in bankruptcy. There are exceptions, however, especially if a student loan borrower may be in undue financial hardship.

Student loans: cancel student loans in bankruptcy

President Joe Biden wants to simplify student loan repayments, offer more student loan cancellations, and increase transparency so student loan borrowers are fairly shaken up. Beyond repairing student loans, Congress can take action to help more student loan borrowers get their student loan forgiven. (Here is the Democrats’ position in Congress on canceling student loans). This summer, Senator Dick Durbin (D-IL) and Senator John Cornyn (R-TX) presented the NEW START thanks to the bankruptcy law of 2021, which would help more student loan borrowers have access to student loan cancellation. The bill would primarily help student loan borrowers who are in financial difficulty and who have federal student loans outstanding for more than 10 years get their student loan canceled in the event of bankruptcy. For student loan borrowers with private and federal student loans that have been outstanding for less than 10 years, these student loan borrowers can file for bankruptcy through the existing legal standard of “undue hardship.” This new bill could be monumental because it is the first time Congress has had a bipartisan bankruptcy bill for student loans. The bill would also hold colleges and universities accountable if a student borrower fails to repay their student loans. For example, the proposed legislation requires colleges and universities with more than 33% of students receiving federal student loans to (partially) repay the federal government if the student loan is subsequently discharged in bankruptcy and the colleges have failed. consistently high default rates and low student rates. loan repayment rate.

What this means for your student loans

Can you imagine thinking that your student loans will be canceled only to find out later that your student loan forgiveness has been canceled? It is also shocking to learn that student loans central Navient is unexpectedly leaving the federal student loans department. (Here’s why Navient abandoned your student loans). When it comes to canceling a student loan in bankruptcy, the facts in each individual case become paramount. It is difficult to draw a precise conclusion from a single case. The courts have set aside student loans – both private and federal – due to undue hardship, although the burden can be high. The United States Court of Appeals for the Second Circuit ruled in favor of a student loan borrower who requested the cancellation of his student loan for his private loans. This case could make it easier for more student loan borrowers to get out of private student loans in the event of bankruptcy. If Congress does not cancel student loans, student borrowers could turn to bankruptcy as a last choice if they experience financial difficulties. The new bankruptcy bill, if passed, could amend the U.S. bankruptcy code to help more student borrowers get relief on their student loans. It is important to note that student loan cancellation will not be available to everyone, but this plan is available now to help student loan borrowers get relief on their student loan.

Make sure you understand all of your options for your student loans. Here are some popular ways to save money with your student loans:

Student loans: related reading

How to get approved for a student loan forgiveness

Student loan cancellation will not be available to these borrowers

Student loan cancellation won’t be available to everyone, but this plan is available now

How to get a student loan forgiveness