St. John’s Law Student
In
In re Krieger,
[1] the Bankruptcy Court for the Southern District of Illinois permitted a discharge of federal student loans despite the debtor’s failure to apply for an Income Contingent Repayment Plan (“ICRP”).
[2] Under an ICRP, a borrower’s annual loan payments can be reduced after applying a formula that takes into account poverty guidelines and the borrower’s adjusted gross income.
[3] However, if the borrower has no discretionary income, the monthly payment due will be zero.
[4] Here, the debtor, a twice divorced, fifty-two year old woman had been unemployed for over ten years despite countless attempts to secure employment.
[5] She lives with her elderly mother and her sole income is a monthly government assistance check for $200.
[6] She is unable to afford health or dental care, a cellular phone, or her car payments.
[7] The court held that application for an ICRP would be nothing more than a formality because the debtor was currently destitute, and was likely to remain that way for rest of her life.
[8] As such, application was not dispositive of a good faith attempt to repay her loans.
[9]
