Though Monica Stitt is unemployed, disabled, and living far below the poverty line, a federal district judge decided last week that she could not cancel more than $37,000 in student debt in bankruptcy, because she hadn’t made a good-faith attempt at repaying the loans, Bloomberg News reported today. Her entire income — about $10,000 per year, according to the judge — consisted of Social Security disability benefits and public assistance. She has been unemployed since 2008.Stitt had borrowed $13,250, which had increased with interest to $37,400 by the time she filed for bankruptcy. After the bankruptcy judge ruled she couldn't shake the debt, the woman appealed to the U.S. District Court in Maryland without a lawyer, where a District judge upheld the bankruptcy court's ruling on June 9. The debtor didn’t meet the “undue hardship” test required by the bankruptcy code, U.S. District Judge Peter J. Messitte said in his opinion. Judge Messitte did his own research and found that she was eligible for two federal loan-consolidation programs in which no payments would be required since her income was so low. After 25 years in the program, the debt would be forgiven even if she had made no payments, as long as her income hadn’t risen. Read more.
For more on bankruptcy and student loan debt, be sure to pick up a copy of ABI’s Graduating with Debt: Student Loans under the Bankruptcy Code.
