More Things Student Loan Lawyers Ask Borrowers Who File Bankruptcy

Categories: Bankruptcy Law Overview, Student Loans & Bankruptcy

This post stems from an article in the Wall Street Journal entitled, “5 Things Student Loan Lawyers Ask Borrowers Who File For Bankruptcy.” As one of the few lawyers in this country to recently take on such lawyers for the creditors, I’ve got a few more questions to add to this list.

Why didn’t you adjust your lifestyle before the loans were even due?

In a historical line of questioning in my client’s case, Schaffer v. ECMC, 2:10-bk-64135-RN , counsel for Defendant, Educational Credit Management Corporation (“ECMC”) began questioning my clients about their lifestyle prior to the Parent Plus loans they took for their son’s education even became due. After my objection, counsel explained that the debtors should have been adjusting their lifestyle in advance of the loans becoming due.  The court responded that they had no such legal obligation.

Your current health conditions were caused by past behavior, weren’t they?

The Ninth Circuit in United Student Aid Funds, Inc. v. Pena (In re Pena), 155 F.3d 1108 (9th Cir. 1998) has adopted the test set forth in Brunner v. New York State Higher Educ. Svcs. Corp. (In re Brunner), 831 F.2d 395 (2nd Cir. 1987) as the test to be applied in determining whether a student loan is dischargeable under Section 523(a)(8).

Under Prong 2 of the Brunner test, the debtor must prove circumstances beyond their reasonable control.  Generally, medical conditions that are likely to persist can satisfy this burden.  In the Schaffer case, counsel for ECMC began questioning my clients about their past lifestyle in a futile attempt to connect current health conditions to past lifestyle choices.  Their point, the debtors past lifestyle choices were within their reasonable control and therefore the current conditions were self-induced and thus not beyond their control.  The debtor’s husband was totally and permanently disabled suffering from liver cancer and on a liver transplant list at the time of trial.

Are “those” expenses really necessary?

This is a usual and customary strategy for creditor’s counsel because much of the arguments are about whether the borrowers have the ability to pay their student loan debts.  Back to the Schaffer case, the debtor held life insurance policies; two on her husband.  Not only did opposing counsel argue that she should cut this expense, if it wasn’t cut, he wanted the proceeds to pay the debt.  It may not have been so difficult borrowing the money, but this unconscionable attempt to collect on a debt borders on “disgusting.” Needless to say, her husband was dying and that money would be required for her future financial support after losing her husband’s household contributions.

Also, it didn’t matter in this case, how many ways the creditor’s attorney were to try to “slice” the budget, these debtors had a net monthly income of $-739.42.  Not only would opposing counsel need to cut the budget to eliminate this deficit, he would need to generate and additional $197.05, per month, which constituted an income sensitive repayment plan, which most Parent Plus loans do not qualify. Dining out at Taco Bell when you’re exhausted from caring for your family after a full-time job is not unnecessary.  A cell phone can be medically necessary when you’re not at home and your ill family member may need you, or doctors wanting to reach you for appointments and updates.

I advise all debtors seeking to discharge student loans in bankruptcy that they need to be ready to testify at trial.  A great student loan lawyer for the consumers will properly prep their cases and clients by really learning and understanding their clients.  Consumer lawyers need to be ready for the audacity of the creditor’s counsel and the lengths they will go to keep those pesky student loans from being discharged.

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