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Bankruptcy Law Blog

Tuesday, February 11, 2020

Fluke or Trend? Student Loan Driven Bankruptcy Sparks Debate

Almost all of the 2020 presidential candidates have a plan for dealing with student debt. It has become a major issue on the campaign trail because a huge chunk of the electorate is struggling to pay off their student loans. According to data compiled by the Federal Reserve, Americans hold $1.6 trillion in student loan debt.

One of the reasons student debt is such a burden is that it is generally not dischargeable through bankruptcy. Meaning your student loans are unlikely to be forgiven, even if you file for bankruptcy.

However, this may be changing. Earlier this year, a bankruptcy judge ruled that U.S. Navy veteran Kevin Rosenberg’s six figure student loan debt could be discharged through Chapter 7 bankruptcy.

How Kevin Rosenberg’s Student Loan Could Be Discharged

According to Yahoo Finance, Rosenberg’s “journey with student debt began in 1993… when he took out student loans for his undergraduate degree. He kept up healthy financial habits, repaying his loans faithfully, until he served in the United States Navy on active duty for five years. After completing his tour of duty, he started law school at Cardozo in New York, for which he took out additional student loans.”

“After he graduated in 2004, Rosenberg consolidated his loans and held a little more than $116,000 in student debt as of April 2005. That number ballooned to about $221,000 over the next 14 years.” Rosenberg struggled to make payments while working at a small law firm, only to decide that the practice of law was not his calling. He opened a couple of different businesses, but realized he would not be able to make a real go of it with his student loan debt holding him back professionally and personally.

The bankruptcy judge that heard Rosenberg’s case applied what is known as the Brunner test in order to determine if his student loan debts were dischargeable. Under the Brunner test, three requirements must be met:

  • The debtor cannot maintain, based on their current income and expenses, a “minimal” standard of living for themselves and their dependents if forced to repay their loans;
  • Additional circumstances exist indicating that this situation is likely to persist for a significant portion of the repayment period of the student loans; and
  • The debtor has made good faith efforts to repay their student loans.

While these are fairly straightforward criteria, the courts have been reluctant to decide that student loan debt is forgivable. The judge in Rosenberg’s case bucked this trend. She said judges should not force debtors to prove that they are hopeless when the test only requires a showing of hardship.

Why This Case Matter

This case could be a tipping point. Other judges may start applying the Brunner test in the same straightforward manner the judge in Rosenberg’s case did. We will be keeping our eye on cases here in Alabama to see if this decision is a fluke or the beginning of a nationwide trend.

If you are struggling to pay back your student loans, or wrestling with other debts, or firm may be able to help. Please contact our office today to schedule an initial consultation.


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Padgett and Robertson assist clients with Bankruptcy, Personal Bankruptcy, Consumer Bankruptcy, Chapter 7 Bankruptcy, Chapter 13 Bankruptcy and The New Bankruptcy Law in Mobile, Alabama and throughout southern Alabama. Alabama State Bar Association Regulations require the following: "No representation is made that the quality of the legal services to be performed is greater than the quality of legal services performed by other lawyers." 11 U.S.C. 528 of the U.S. Bankruptcy Code requires the following: "We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.”



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Alabama State Bar Association Regulations require the following: "No representation is made that the quality of the legal services to be performed is greater than the quality of legal services performed by other lawyers." 11 U.S.C. 528 of the U.S. Bankruptcy Code requires the following: "We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.”