For many people, discharging student loan debt in bankruptcy has seemed like an impossibility. The fact that you could successfully complete a bankruptcy case and walk away still on the hook for the biggest category of debt you owe is enough to keep some borrowers from filing at all. Student loan debt is a nationwide hardship for many and has soared to an all-time high of $1.6 trillion.
A recent court ruling discharging student loan debt in bankruptcy has given borrowers a sense of hope. On January 7, 2020 a New York judge ruled that the $221,385.49 in student loan debt that U.S. Navy veteran Kevin Rosenberg owed for six years was considered a dischargeable debt in his Chapter 7 bankruptcy case.
Bankruptcy courts have viewed student loans differently from other types of consumer debt. To get your student loan debt discharged, you must meet a standard known as “undue hardship.” This test requires the filer show that they would face an undue hardship if forced to continue repaying their student loan debt.
Borrower, Kevin Rosenberg, faced this exact situation when he filed for Chapter 7 bankruptcy, asking the court to allow a discharge of his student loan debt. He made every effort to pay back the original loan of $116,000 but struggled to keep an income sustainable to pay off the debt in a period of 20 to 30 years. His loan balance skyrocketed to $221,000, double what he originally owed.
After a lengthy court battle, the bankruptcy judge found in Rosenberg’s favor. Cecilia Morris, the Chief U.S. Bankruptcy Judge in Manhattan, wrote in a 12-page opinion that Rosenberg had satisfied what is known as the “Brunner test” a three-pronged standard for discharging student loan debt in bankruptcy.
In her commentary, Morris said courts had been incorrectly interpreting the test for decades in such a way that it had become almost impossible to use a bankruptcy filing to get out from under student loan debt. This decision comes from only one of numerous bankruptcy courts, but it does show that there is hope that other judges will follow the same path.
So many of our clients struggle with their monthly student loan payments. My law firm has successfully wiped out student loans in bankruptcy, by filing an adversary proceeding in bankruptcy court proving the undue hardship standard has been met. Call me if you are having problems paying your debts. Having debt makes you stay up at night. It stresses you out. It ruins relationships. I went through it. Boldly, I mustered up the courage to call a bankruptcy attorney and I pressed the restart button in 2008. And even though more than ten years has passed since I made that decision to restart my life, I never forgot what it did for me and how it helped me start over. Remember, we are local in your hometown. We make our hours convenient for our clients and offer free consultations on Saturdays (9:00 a.m. – 3:00 p.m.) along with our normal business hours throughout the week. Go to https://www.407bankrupt.com/ or call 407-777-7777 to set up a free private consultation and learn more information. Because Life Has a Restart Button.