Judge Wipes Out a Student Loan Tab

$220K decision reflects the rethinking of standards for helping borrowers
By Bob Cronin,  Newser Staff
Posted Jan 9, 2020 4:30 PM CST
Updated Jan 12, 2020 4:20 PM CST
Judge Overturns Myth, Wiping Out a Student Loan Tab
Stock photo   (Getty/BrianAJackson)

Kevin J. Rosenberg borrowed about $116,500 between 1993 and 2004 to get him through the University of Arizona, where he earned a history degree, and Cardozo Law School. With interest, that debt grew to $221,400, the Wall Street Journal reports. In 2018, Rosenberg filed Chapter 7 bankruptcy, unable to repay the loans. A bankruptcy judge this week told him not to worry about it. In wiping out Rosenberg's debt, Judge Cecelia G. Morris said that paying back the money would be an undue hardship for the Navy veteran. Educational Credit Management had argued that Rosenberg didn't meet that standard because he has no disability, isn't unemployable, and isn't using his law school education—he hasn't worked much as a lawyer. The company is a nonprofit that handles the government's Federal Family Education Loans. "I'm thankful that I get to recover from a crushing financial blow and have a chance to get up, dust myself off, and keep going," Rosenberg said.

Judges are becoming more willing to help borrowers awash in student debt, per the Journal, and Morris said she was acting to dispel the myth that it's "impossible to discharge student loans." She applied a different standard, the Brunner test, that's based on whether the borrower has tried to repay their loan but can't do that and keep a decent standard of living. The New York judge's ruling doesn't establish a precedent, but reflects the trend of rethinking how to apply bankruptcy standards. "If the district court affirms Chief Morris' order," a bankruptcy lawyer told the Times-Union, "there will be a lot more filers for bankruptcy all over the country." (More student loans stories.)

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