Student loan manager appeals landmark $ 220,000 bankruptcy decision
Educational Credit Management Corporation (ECMC) – a non-profit organization that guarantees and manages student loans on behalf of the Department of Education (ED) – is challenging the Jan. 7 ruling made by the Chief State Bankruptcy Judge- United, Cecelia G. Morris, who released $ 221,385.49 in student loans. debt to Navy veteran and lawyer Kevin Rosenberg under Chapter 7 bankruptcy.
The ruling belies the popular idea that student debt is not dischargeable under Chapter 7.
Morris J. applied the Brunner test – a three-factor standard used to determine whether the borrower is in undue hardship and cannot make a repayment – to assess whether Rosenberg was eligible for release.
“This Court will not participate in the perpetuation of these myths,” Morris wrote in his decision. “Rather, this Court will apply the Brunner test as originally intended.”
The main argument of the ECMC in its appeal is that Rosenberg was licensed to practice law but did not seek employment opportunities in the same field: over the past 10 years has held various positions in the industry outdoor adventure, including starting and running your own tour guide business.
The loan officer also suggested that Judge Morris’ interpretation of the Brunner test was lax.
“Failure to pay debts alone is not enough to establish undue hardship; otherwise, all bankruptcy litigants would experience undue hardship, ”they said. “The bankruptcy court in the instant case rejected 32 years of jurisprudence applying the Brunner Test to determine, by summary judgment, that the plaintiff had discharged his onus of establishing undue hardship, thereby releasing the Applicant’s total student debt of approximately $ 221,385. “
Yahoo Finance reached out to ECMC, who said it was not commenting on the pending litigation.
“Very few student loan files are appealed”
Jason Iuliano, assistant professor of law at Villanova University and bankruptcy expert, told Yahoo Finance that “very few student loan cases are appealed, so the Rosenberg case is unusual in this regard. “.
Iuliano, who has done years of research into potentially discharged student loans in bankruptcy, added that the appeal rate is less than 5% for conflicting student loan proceedings.
“It is not surprising that the Rosenberg case has been appealed,” he added. “Given the publicity the case received and the judge’s strong rhetoric against the undue hardship standard, the ECMC had no choice but to appeal.”
In the latest case, the ECMC chose to “have the appeal heard by the United States district court rather than the bankruptcy appeal panel.”
Rosenberg told Yahoo Finance that “the appeal process is beyond my level of knowledge and experience, so I am reaching out to advocacy groups and lawyers in hopes of finding pro bono representation.”
He added: “The case is likely to go to the Supreme Court, so whoever represents me in the case will really make a name for himself. So on the one hand, I wish it was already over. And on the other hand, I’m excited about what it means for those who still suffer under the weight of an unjust system.
What happens next?
Following the appeal, the ECMC’s appeal will go to a judge of the District Court for the Southern District of New York. This judge will then review the case and determine whether the bankruptcy court applied the Brunner test correctly.
If the district judge rules in favor of Rosenberg, “it could have an immediate impact on borrowers in the region,” Mike Pierce, director of policy and general counsel for the Student Borrower Protection Center, told Yahoo Finance. “It could also be the first step towards pursuing justice and equity issues in the student loan bankruptcy in the Supreme Court. Ultimately, Congress also has the power to change the law to level the playing field for everyone. “
Not everyone agreed this case would go all the way to DC
“The chances of a case going to the Supreme Court are low. The Supreme Court only accepts to hear about 3-4% of the cases brought before it, which is about 70 cases each year, ”said Robert M. Lawless, professor of law at the University’s College of Law. of Illinois, specializing in bankruptcy. and consumer credit, Yahoo Finance said. “This case is at the bottom of the bankruptcy appeals scale.”
He continued, “From here you would have to go to the Court of Appeal and then to the Supreme Court. In order for the Supreme Court to hear the case, the loser of the Court of Appeal would have to convince the Supreme Court that the decision of the Court of Appeal conflicted with the decision of other courts of appeal.