Student Loan Borrower Obtains $ 178,000 Student Loan Cancellation Against Navient
This student loan borrower obtained $ 178,000 student loan cancellation against Navient.
Here’s what you need to know – and what it means for your student loans.
A 68-year-old student loan borrower got $ 178,000 in discharged student loan debt in US bankruptcy court in Maryland. Terry Randall owed more than $ 500,000 in student loans, including $ 190,000 to Navient, one of the largest student loan managers in the country. Although he has several degrees, Randall has worked for several years at a job that pays $ 13 an hour. According to Randall, after paying her living expenses and even working overtime, she doesn’t have enough money to pay off her student loans. Navient, the defendant, disagrees and says Randall is able to work and pay off at least some of his student loans. Randall argued in court that paying student loans was creating undue financial hardship. So Randall, a Chapter 7 debtor, initiated adversarial proceedings (a lawsuit in bankruptcy court) to pay off her student loans under section 523 (a) (8) of the US Bankruptcy Code. United. The court ruled in favor of Randall. Why?
Cancellation of the student loan is possible in court
There is a general presumption that student loans cannot be discharged in bankruptcy. The United States Bankruptcy Code treats student loans differently from other consumer debt such as credit cards or mortgages. However, it is possible for a student loan borrower to overcome this presumption. When a court considers the possibility of being released from student loans, the court must consider all the evidence presented. For example, it is not enough to just say that you cannot pay your student loans. In that case, the United States bankruptcy court applied a legal standard known as Brunner test, which is the legal test in all shorts except 8th and 1st circuit. Therefore, most student loan borrowers who apply for student loan cancellation in bankruptcy must meet the Brunner test. The Court found that Randall satisfied all three parts of the Brunner test:
- the student loan borrower has extenuating circumstances creating a hardship;
- these circumstances are likely to persist throughout the life of the student loan; and
- the borrower made a good faith attempt to repay the student loan.
The court concluded that it would be unreasonable to force Randall to work more than his current hours and overtime. Why? The court found that even with overtime, Randall did not own any major assets, tried to work diligently, and did not overspend. Interestingly, the court did not grant Randall the full cancellation of the student loan. On the contrary, the court recognized that Randall could afford to repay at least part of his student loans – namely $ 12,000 – which means that the court granted a partial cancellation of the student loan.
Another victory for student loan cancellation, but has the burden of student loan cancellation just got harder?
This victory for the cancellation of the student loan comes at a critical time. Why? The United States Supreme Court recently refused to hear a case involving student loans, bankruptcy and student loan cancellation. As a result, a decision in a United States Court of Appeals case for the Second Circuit may make it more difficult for student loan borrowers to get their student loan canceled in bankruptcy. In tingling, the second circuit – which is the same tribunal that created the Brunner Standard – affirmed the reasonableness of the Brunner test and that there is a high burden to pay off student loans in bankruptcy. This has important legal implications, as it signals to student loan borrowers that it is not easy to get their student loan canceled. This is potentially bad news for student loan borrowers who were hoping the Second Circuit could relax its application of the Brunner test so that more student loan borrowers can be discharged from their student loans in bankruptcy.
What this means for your student loans
Will your student loans be canceled? Some student loan borrowers feel like their student loan cancellation has been put off and all hope has vanished. Others say student loan cancellation is alive and well, especially since President Joe Biden has canceled $ 3 billion in student loans since becoming president. The reality is that it is still possible to get a discharge from student loans in bankruptcy. In addition to Randall, a Navy veteran lost $ 220,000 in student loans and a doctor got $ 430,000 in student loan cancellation. Still, it’s different from the student loan cancellation that most student loan borrowers are looking for: full-scale student loan cancellation. Senate Majority Leader Chuck Schumer (D-NY) this week renewed his call for Biden to cancel $ 50,000 in student loans. However, new research shows that large-scale student loan cancellation could disproportionately benefit richer student loan borrowers. While there is no guarantee that there will be a full-scale student loan cancellation, student loan borrowers will get over $ 90 billion in student loan cancellations when student loan relief takes hold. end September 30, 2021. While it’s possible Biden could extend this student loan relief beyond September 30 – and provide more student loan cancellations of around $ 5 billion per month – Biden doesn’t made no announcement.
If you have student loans, make sure you understand all of your options for paying off student loans. Before going bankrupt, first consider these popular options: