George Leef asks in his latest Martin Center column whether it’s good or bad that a court recently helped erase student debt.
[A] decision by federal bankruptcy judge Cecilia Morris on January 7 has people rethinking the conventional wisdom that there’s no escape from student loan debts short of death.
The case involved Kevin Rosenberg, who accumulated $116,000 in debt to earn degrees from the University of Arizona and then Cardozo Law School. After completing his law degree in 2004, he worked briefly in the legal profession, but soon decided that he wanted to become an entrepreneur. He met with some success, but since 2008 has suffered from financial hardship. Rosenberg couldn’t pay down his student loans, which had ballooned to over $221,000 by 2019. Facing a negative cash flow every month, he petitioned for bankruptcy.
His case came before Judge Morris, who concluded that he should be allowed to discharge his student loan debts since they did impose undue hardship on him. In her decision, Judge Morris argued that the courts have made bankruptcy relief for student debtors much harder than Congress intended. She wrote, “Brunner has received a lot of criticism for creating too high of a burden for most bankruptcy petitioners to meet. The harsh results associated with Brunner are actually the result of cases interpreting Brunner.”
With that ruling, Judge Morris set off a wildfire of discussion about using bankruptcy to eliminate student loan debts.
Commenting on the Rosenberg decision, New York bankruptcy lawyer Peter Frank was quoted, “All of us have been discouraged from attempting to discharge student loans because it appeared that the law was too high to climb for most debtors other than those with disabilities.”
Professor Richard Fossey, writing on his “Condemned to Debt” site, stated, “Hundreds of thousands of student loan debtors who do not qualify for relief under the bastardized Brunner standard will be eligible under the Rosenberg ruling.”
