Respectfully, something is wrong with a law that won’t allow a 68-year-old woman to discharge all of her student loans quickly and easily when her $43,000 annual income won’t cover her basic living expenses without working substantial overtime.
Something is also wrong with a law requiring Bankruptcy Judge Michelle M. Harner of Baltimore to hold a lengthy trial and write a detailed, 20-page opinion to justify discharging most of the debtor’s student loans. How many destitute debtors have the capacity to navigate the byzantine legal world pro se just to obtain the relief to which they are entitled under today’s law?
This writer submits that discharging student loans should not be adversarial. Why can’t we have an agency-like process? Let a government functionary interview the debtor and make a determination under a law where discharge of student loans is within the realm of possibility?
Living Hand-to-Mouth
The 68-year-old debtor filed a chapter 7 petition and received a general discharge. Pro se, she filed an adversary proceeding to discharge about $500,000 in student loans.
At age 51, the debtor earned her bachelor’s degree in psychology and obtained a master’s degree in human services four years later. She began but did not complete an MBA program.
The debtor was unable to obtain employment in the field for which she studied. Most recently, her hourly wage rose from $9 to $13. In the last year, her annual income topped $43,000 because the nature of her job allowed her to work substantial overtime due to the pandemic.
Under Section 523(a)(8), student loans may be discharged only if repayment would impose an “undue hardship,” a term the statute does not define. In her June 21 opinion, Judge Harner explained that the Fourth Circuit adopted the Brunner test for discharging student loans.
The Frugal Debtor
Judge Harner found that the debtor was not wasting money or buying luxury or extraordinary goods. The lender argued that the debtor should find a more inexpensive apartment, but Judge Harner said she was “not willing to require a debtor to move into unsafe or substandard living conditions just to repay a student loan debt.”
Judge Harner easily concluded that the debtor could not maintain a minimal standard of living if she were required to repay all of her student loans. Resembling a treatise, she cited authorities both ways on the question of whether the court may discharge some but not all of a debtor’s student loans.
Judge Harner found that the debtor was able to pay all of her living expenses only because she recently had been able to work overtime. The judge said it was “unreasonable” to require a 68-year-old debtor to work 80 hours a week “for a significant time.” She therefore found that the debtor’s financial condition was “unlikely to improve or even stay the same for the foreseeable future.”
Requiring the debtor to repay her student loans in full “would impose an undue hardship,” Judge Harner said. She agreed with courts allowing a partial discharge of student loans “when the debtor has established undue hardship.”
Judge Harner discharged all but $12,000 of the debtor’s student loans. She is allowing the debtor to repay the $12,000 over 10 years with interest at the federal judgment rate.
Curiously, Judge Harner said that the reduced “monthly payments are likely feasible for the Plaintiff now, but may not be so in a few years depending on the Plaintiff’s circumstances.” The statement recalls the debtor’s testimony, mentioned in the opinion, that the debtor’s income would fall to $1,500 a month were she to retire at age 70 in two years.
One wonders whether Judge Harner was inviting the debtor to reopen the case to eliminate the remainder of the loans after she retires. Indeed, courts might consider explicitly permitting a debtor to reopen a case if the debtor’s financial condition deteriorates.
Respectfully, something is wrong with a law that won’t allow a 68-year-old woman to discharge all of her student loans quickly and easily when her $43,000 annual income won’t cover her basic living expenses without working substantial overtime.
Something is also wrong with a law requiring Bankruptcy Judge Michelle M. Harner of Baltimore to hold a lengthy trial and write a detailed, 20-page opinion to justify discharging most of the debtor’s student loans. How many destitute debtors have the capacity to navigate the byzantine legal world pro se just to obtain the relief to which they are entitled under today’s law?
This writer submits that discharging student loans should not be adversarial. Why can’t we have an agency-like process? Let a government functionary interview the debtor and make a determination under a law where discharge of student loans is within the realm of possibility?