Student loan debt is tough to dodge: Unlike other forms of debt, it typically can’t be discharged in bankruptcy.
Some judges within the past year seemed to take a softer stance toward struggling law school graduates carrying tens of thousands of dollars in loans. But during this month alone, federal judges in two states slapped down attempts by law graduates to discharge their student loans through bankruptcy:
• In Michigan, U.S. Bankruptcy Judge James Gregg denied a request by Nathan Maas to discharge four private loans totaling $47,000 that he took out as a student at the Thomas M. Cooley Law School between 2000 and 2002.
• Judge Karen Caldwell of the U.S. District Court for the Eastern District of Tennessee on July 11 affirmed a bankruptcy court’s denial of Robert Bentley Marlow’s attempt to discharge $250,000 in student loan debt. Marlow graduated from the Samford University Cumberland School of Law in 2009 and obtained a master’s degree in social and political philosophy from the University of Tennessee a year later, according to the opinion.
Although Marlow passed the Tennessee bar exam in 2010, state examiners decided in 2011 not to license him because of his history of alcohol and motor vehicle citations, as well as failed attempts at monitoring through a lawyer’s assistance program, according to court records. Marlow has also sued the Tennessee Board of Law Examiners.
Marlow has not held steady employment since finishing school in 2010, according to the opinion, and has worked sporadically as a landscaper, construction worker and collector of aluminum cans and scrap medal in addition to receiving financial assistance from family members. He has made less than $1,000 in loan payments, the opinion noted. Marlow filed for Chapter 7 bankruptcy in 2011 seeking to discharge his educational loans.
Caldwell found that Marlow had not established that repaying his loans would represent an undue hardship. Rather than intensely looking for a job, Marlow spent the bulk of his time filing pro se lawsuits against the Tennessee bar examiners and other government entities, she noted. Moreover, she said, he did not prove that outside forces made it likely that his financial situation will not improve.
“In this case, Marlow is not suffering from any illness or disability, and he has no dependents,” she wrote. “At the time of the bankruptcy proceedings, he was 31 years old. He is clearly well-educated. He has useable job skills, including his training as a paralegal.”
In the Michigan case, Maas sought to discharge $47,000 in private loans he took out while at Cooley. He argued that the loans were actually “unsecured cash advance loans” that he used to cover living expenses during and after law school, and not the typical educational loans. Additionally, he claimed that lender Northstar Education Finance Inc. could not prove that it owned the loans because a different lender’s name appears on the original loan documents.
Gregg rejected both arguments, ruling that the loans were indeed intended for educational purposes and that the law makes no distinction in how educational loans are actually spent. He also found that Northstar provided documents to prove it had purchased the loans from the initial lender.
“None of the arguments raised by the Debtor are sufficient to overcome the plain language of the loan application documents, which specifically and repeatedly reference the educational nature of the loans,” Gregg wrote in his July 8 ruling.
“For instance, the Debtor has asserted, both in his complaint and at oral argument, that the loans were general cash advances to cover living expenses during law school and immediately after graduation. The Debtor has offered no evidence to support this argument.”
Both Maas and Marlow represented themselves.
By contrast, in May the U.S. Court of Appeals for the Ninth Circuit upheld the discharge of $53,000 in educational loans taken out by a 1997 graduate of Willamette University College of Law who was earning just $40,000 a year as a juvenile probation officer.
And last June, a federal bankruptcy judge in Maryland discharged $340,000 in student loans, some of which was acquired by the plaintiff’s short stint at the University of Baltimore School of Law during the early 1990s. Her Asperger’s syndrome made repaying the loans an undue hardship, the judge ruled.