Federal Court Judge Rules Woman Living Off $10,000 Income Can’t Cancel Student Loan Debt
A federal judge ruled that an unemployed woman whose income is only about $10,000 a year doesn’t qualify for cancellation of $37,000 in student loan debt because she doesn’t meet the test of “undue hardship” and didn’t make a “good faith attempt” to repay her loans. The woman, Monica Stitt, made nine voluntary payments, which were $10 each, in 1997, but did not make any payments since then, according to court documents.
Stitt is 45 years old with no dependents and receives Social Security disability benefits and public assistance. She hasn’t held a job since 2008. She borrowed $13,250, four student loans disbursed between 1989 and 1990, when she attended Howard University, which all defaulted in either 1991 or 1992.
But after interest accumulated over the years, it amounted to $37,400 by the time she filed for bankruptcy. Because they are issued and guaranteed largely by the federal government, student loans are very rarely discharged in bankruptcy, meaning that bankruptcy court treats student loan debt like tax liens or child support. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, which closed some loopholes to students trying to discharge private student loan debt, made it even more difficult for students to pursue “undue hardship.”
To discharge student debt, you have to prove undue hardship for Chapter 7 or Chapter 13 bankruptcy for student loans. Because “undue hardship” is not defined by bankruptcy law, judges must make their own judgments through case law. Because the test is so fact-specific and requires a lot of meticulous documentation, most people who want to discharge student debt will have to pay for a lawyer.
http://thinkprogress.org/education/2015/06/22/3672597/federal-court-judge-rules-woman-living-off-10000-income-cant-cancel-student-loan-debt/
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