This article is part of my ongoing look at the possibility of discharging student loans in bankruptcy. It is a followup to my article here where I looked at federal student loans that received a modification, settlement or elimination as part of a bankruptcy adversary proceeding filing in 2012.
This time I’m taking a look just at the cases in the adversary proceedings that ended with some sort of judgment resolution that would provide us with a very definitive guide to what was ultimately the outcome or successful.
The purpose of this article is to understand what types of situations primarily result in a specific outcome in hopes the results might paint a likely picture if eliminating student loans in bankruptcy is or is not possible.
While the search criteria for these loans was to find loans that involved Sallie Mae, a number of other student loan lenders were included in the individual cases examined.
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It appears to have been far easier for individuals to represent themselves in a bankruptcy adversary proceeding and achieve some for of resolution.
In the self represented cases below:
2:12-ap-02220 – Viramonte – Pro Se – Discharged
6:12-ap-00176 – Mejias – Pro Se – Settled $66,980 for $42,500. A 37% reduction in debt.
1:12-ap-01067 – Gair – Pro Se – Settled $109,509 for $90,000. A 18% reduction in debt.
1:12-ap-01220 – Thornsburg – Pro Se – Discharged
6:12-ap-06038 – Duncan – Pro Se – Discharged
1:12-ap-01042 – Koenig – Pro Se – Settled $130,788 to $15,000. A 89% reduction in debt.
2:12-ap-09028 – Miller – Pro Se – Discharged
2:12-ap-01883 – Hanning – Pro Se – Discharged
This is a far better result than I witnessed in cases involving federal student loans.
The examination of the private student loan cases shows those who are most likely to have their student loans fully discharged are those that have a sufficient underlying medical situation that would make repayment of the loans either impossible or subject the debtor to a below minimal standard of living.
One case in particular, 2:12-ap-00039 – Opp, was interesting because the consumer said the cost of their education in their field of study did not allow them to earn enough money to repay the loans.
Opp went to The Art Institutes and University of the Arts. The debtor had $183,639 in student loans. Of that amount, $52,539 was completely discharged, Sallie Mae settled a $94,100 balance for $60,000 at 3% interest, and RBS Citizens settled $37,000 at 0% interest payments at $75 per month. I call that a substantial reduction in debt and terms.
There appears to be substantial benefits available for consumers who have a good reason why they can’t pay their private student loans to file an adversary proceeding. While they may not get a full discharge of debt it appears those who did not received favorable settlements or repayment terms.
It also appears those who had been trying to get full disability forgiveness but who were unable to for some reason, were able to get the attention of the right parties and get those discharges agreed to in an expedited way.
Those people who attended trade school, vocational school, pilot training, etc, were able to swiftly and quickly completely discharge their private student loan debt since the underlying school was not an “eligible education institution” and thus not protected debt from discharge. I doubt this is a nuance of private student loan debt that many consumers or attorneys are looking for.
This will be the subject of an upcoming article on that very interesting issue.
Below you find the details and supporting documentation of the cases I identified when searching 2012 bankruptcy adversary proceeding records for cases involving Sallie Mae.
From what I hear from consumers they believe their student loans can never be discharged in bankruptcy, which is clearly not true in all situations. And bankruptcy attorneys tell me they are afraid to take on adversary proceeding to fight for a discharge because consumers can’t afford them and they will cost to much to prosecute.
Based on the 2012 Sallie Mae cases it became clear that those attorneys that filed cases where the debtor was clearly unable to repay the loan had some documentation exchanges with lenders but almost none of the cases went to trial. They were primarily settled before any trial took place.
It appears that if more attorneys were aware of an easier process to deal with the adversary proceeding they would be less afraid to take on these cases.
Regardless, any consumer who has vocational student loans with a private lender should have their attorney go for a full discharge if the school they went to was not an “eligible education institution” under 26 USC 221(d)(1) and (2) means that the debts are not “qualified education loan(s)” under 11 USC 523(a)(8)(B), and therefore are dischargeable.”
Debtors’ total educational loan debt at the time this case was commenced was approximately
Debtors’ total monthly payment obligations for their combined educational loan debts, at the time this case was commenced, was almost $2,500.
Debtors filed the petition and related documents initiating the underlying bankruptcy case on
At the time Debtors commenced this case, their average monthly income was approximately
$1,700 less than their average monthly expenses, without consideration of their educational loan obligations.
At the time Debtors commenced this case, their annualized monthly income was less than the applicable median family income for their household size.
At the time Debtors commenced this case, they were unable to maintain a minimal standard of living if compelled to pay their educational loan obligations.
Debtors current average monthly income is approximately $1,700 less than their average monthly expenses, without consideration of their educational loan obligations.
In 1970, Diane was diagnosed with systemic lupus erythematosus, which responded to treatment until approximately May 2010.
Diane began to suffer from increased joint and muscle pain and stiffness, and in January 2011, she was advised that her systemic lupus erythematosus was no longer responsive to treatment.
In January 2011, Diane was diagnosed with chronic arthritis of the knee joints.
In January, 2011, Diane was advised that her systemic lupus erythematosus and her arthritis were chronic physically debilitating conditions limiting her daily living activities and precluding her from full time employment.
Debtors made their first payment on an educational loan in or about September 2006, and made their last payment on an educational loan or about May 2012.
In or about April 2011, Debtors entered into a settlement agreement with EduCap, Inc., regarding the payment of their LEARN TO LOAN obligation, but have been unable to comply with the terms of that agreement.
At the present time, Debtors are unable to maintain a minimal standard of living if compelled
to pay their educational loan obligations.
Debtors’ financial condition is probably permanent, as they are each 55 years of age, and
Diane’s medical condition has been diagnosed as chronic and disabling.
Debtors have made a good faith efforts to pay their educational loan obligations, in that they made payments on five of their educational twelve loans, and entered into a agreement for a repayment plan regarding their LEARN TO LOAN debt.
Debtors will suffer undue hardship if they are compelled to pay their educational loan
obligations. – Source
That the Debtor obtained from the Creditors educational loans made, issued, or guaranteed by a governmental unit, or made under a program funded in whole or in part by a governmental unit or a nonprofit institution, as defined in 11 USC 423.
That these debts became due within the required time before the filing of the Petition.
That excepting these debts from discharge will impose an undue hardship on the Debtor.
That at the time of filing his Petition, the approximate amount due and owing Sallie Mae was $20,838.76.
That at the time of filing his Petition, the approximate amount due and owing The Student Loan Corporation/Citibank South Dakota was $133,885.08.
That these loans were used to obtain a bachelor’s degree.
That these loans were further obtained based upon the cosigning of Debtor’s deceased father. Upon information and belief, had Debtor’s father not cosigned, the Debtor would not have been able to obtain the loans.
That the Debtor has been unable to secure a job with his degree. – Source
Sallie Mae holds a claim against the Plaintiff in the amount of $69,898.16.
The student loan herein is a debt incurred for an educational benefit rendered to her daughter, Meredith Ginsberg, or an overpayment or loan made, insured or guaranteed by a governmental unit or nonprofit institution, or for an obligation to repay funds received as an educational benefit, scholarship or stipend, and excepting such debt from discharge under §523(a)(8)(B) will impose an undue hardship on Plaintiff.
Despite Plaintiff’s anticipated discharge, the monthly loan payments required on the student loans above described are excessive and impose an undue hardship upon the Plaintiff and the Plaintiff’s dependents.
Plaintiff has made good faith efforts to achieve the financial security which would allow her to repay the loans, and in fact, has reached the top of her profession and is unable to earn additional money. Plaintiff has made a good faith effort to pay on the loans at issue herein; in fact, all payments made on the loan have been made by Plaintiff and none by her daughter, Meredith Ginsberg.
Additionally, Plaintiff is approaching retirement age and for that additional reason repayment of such loan will result in an undue hardship on Plaintiff. – Source
Plaintiff/Debtor attended The Art Institutes in Philadelphia from 2001 to 2003 and subsequently transferred to the University of the Arts (“U of A”) from 2004 to 2007 where she received a degree in Bachelor of Fine Arts in Graphic Design.
Since graduating from the U of A, she has worked a variety of low paying jobs ranging from $10.00 an hour to $18.00 an hour.
Plaintiff/Debtor currently is employed as a Graphics Arts Associate earning approximately $41,000.00 and will most likely earn this approximate amount for the significant portion of her career.
Plaintiff/Debtor’s present indebtedness on all of her student loans with the Defendants is approximately $185,000.00.
It is unlikely that Plaintiff/Debtor will be in a position to repay these loans during the duration of the repayment period. Although her financial position has improved in the few years since she incurred the loan obligations and based on the earning potential in her career field, it seems highly unlikely that her financial situation will improve to a level where she could afford to repay her loan obligation. – Source
Plaintiff alleges, and National Collegiate stipulates, that repayment of the Loan would cause an undue hardship on her, the parties now stipulate:
Plaintiff’s financial condition is not likely to improve.
Plaintiff has made a good faith effort to repay the Loan.
Based on the facts above, Plaintiff and National Collegiate stipulate that requiring
Plaintiff to repay the Loan would impose an undue hardship on the Plaintiff, and the Loan is therefore dischargeable under 11 U.S.C. § 523(a)(8), only as to Plaintiff. – Source
Plaintiffs are obligated to Great Lakes for student loans in the estimated amount of $302,681.11.
Plaintiffs are obligated to KeyBank USA, for student loans in the estimated amount of $11,792.17.
Plaintiffs are obligated to Sallie Mae, for student loans in the estimated amount of $58,032.72.
Plaintiffs are obligated to University of Nevada, for student loans in the estimated amount of $5,000.00.
Plaintiffs are obligated to US Department of Education/GLELSI, for student loans in the estimated amount of $95,748.00.
Plaintiffs Robert Hale and Mercedi Hale are currently unemployed. Mr. Hale was six weeks away from completing his Endodontic Residency when he suffered an arteriovenous malformation (“AVM”) rupture and stroke which required brain surgery and hospitalization for 1-1/2 months. Mr. Hale is permanently disabled and requires extensive cognitive rehabilitation along with speech, occupation and physical therapy. His doctors do not believe that he will ever be able to practice his chosen profession of Endodontics on a full-time basis, the profession for which the student loans were incurred.
Plaintiffs have two minor children. Their current household income is approximately $3,954.00 per month. See Schedule I and J. Plaintiffs’ only income is from private disability insurance payments and Social Security disability income each month.
Plaintiffs do not anticipate their financial position will improve substantially in the near future. Failure to discharge the above referenced debts will impose an undue hardship on the Plaintiffs and the Plaintiffs’ dependents. – Source
Debtor is a 56 year old female (turning 57 on October 12, 2012) who incurred student loan debt primarily between 2004 and 2009. There are $98,268.84 in student loan claims filed in the present case among 4 claimants. Debtor attended Everett Community College and Edmonds Community College, and earned her Associates of Technical Arts (2 year) in Accounting with a bookkeeping certificate. However, debtor suffers from medical conditions including Fibromyalgia that interfere with work, and she was unable to find employment in that field.
Debtor works full time as she is able as a licensing agent for a vehicle licensing service in Seattle. Debtor was able to finish her Chapter 13 and obtain her discharge.
Debtor’s budget shows gross income of $2106.23 per month, net of $1766.97 and expenses of $1617.05 for net disposable income of $149.92. However, debtor is having additional health issues that may lower her ongoing disposable income, as well as attorney fees for this adversary. Debtor submits there are no funds available for creditors at this time.
It will be impossible for debtor to service the outstanding $98,268.84 in educational loans moving forward, and with her health issue and age, there is little chance her income will substantially improve in the future.
The filed and allowed loans believed at issue under 11 USC 532(a)(8) are:
Claim #02 – Northwest Education Loan Association – NELA Amount: $11,836.96
Claim #03 – Wells Fargo Education Financial (assigned to) Educational Credit Management Corporation Amount: $11,471.95
Claim #08 – VL Funding, c/o Sallie Mae Inc Amount: $14,154.51
Claim #09 – Salle Mae ECFC Amount: $60,805.42 – Source
Plaintiff is indebted to Defendant, Sallie Mae, in the sum of $37,861.00 for loans made by Defendant, Sallie Mae. – Source
Plaintiff co-signed these student loans for her children.
At the time Plaintiff signed these loans she was not collecting Social Security disability benefits as her sole source of income.
Plaintiff is now disabled and her income consists solely of Social Security disability benefits in the monthly amount of $2,178.
Plaintiff received notice she was eligible for Social Security disability benefits by Notice of Decision dated November 20,2007, stating the onset of her disability was June 1,2004.
As a result of her medical condition Plaintiff experienced financial problems and was forced to file Chapter 7 bankruptcy.
Debtor was forced to sell her house in 2011 as she could not afford it. At the time of the sale she was approximately one year in arrears on her mortgage.
Debtor has or is working on installment payment arrangements with the Internal Revenue Service and the New York State Department of Taxation and Finance for income tax arrears.
Plaintiff has no accumulated wealth or assets of any substantial value.
Debtor is permanently and fully disabled.
Debtor’s future income will consist solely of Social Security disability benefits.
Debtor is incapable of making payments to Defendants on loans she cosigned.
To require Plaintiff to make payments on these co-signed loans would cause undue hardship to Plaintiff. – Source
The defendants are ITT Technical Institute/NCO Financial located at P.O. Box 15630 Department 99 Wilmington, DE 19850 for the amount of $500.00; Sallie Mae P.O. Box 9500 Wilkes-Barre, PA 18773 for the amount of $17,344.00; Sallie Mae/USA Funds P.O. Box 9460 MC E2412 Wilkes-Barre, PA 18773 for the amount of 36,953.00; American Fducation Services/National Collegiate Trust/Sentry Credit, Inc, 2809 Grand Avenue Everett, WA 98201 for the amount of $24,974,
[plaintiff] holds and Associate of Science Degree in Computers and Electronics Engineering Technology. I testify that my current earnings are $774.00 dollars monthly from Social Security Disability Insurance from the State of California and began receiving SSDI since the beginning of 2010, Attached is a SSDI award letter shown to the courts shown as (Exhibit 3) which proves that I have been unemployed since this time and received SSDI since this period. I have yet to maintain current employment since 2009 and also admit that I am behind in child support payments. The amount owed to the Child Support Services Department is at an approximation of $55,000.00 dollars for my two boys.
I have been diagnosed with Schizophrenia of the paranoid type and depression. Since diagnosis, it has been near impossible to convince any employer that hiring a Schizophrenic is the way the company should go but have yet to have any luck since diagnosis. There are in evidence a number of medical reports that prove that I have been treated for Schizophrenia at Department of Mental Health. An attached medical report and diagnosis has been entered as (Exhibit 4). I also have been put on medication that include; Prozac (anti-depressant), Geodon (anti-psychotic) and Hydroxyzine (anxiety medications). I am currently taking these medications in order to stabilize moods, depression conditions and anxiety conditions.
Income for 2009 was $5,632 and in the year 2010 income was $8974.14 and unemployed for the year of 2011. 2009 and 2010 tax returns have been attached to the complaint as (Exhibit 5). I, the debtor, confess that this has been the only income until 1 started receiving SSDI since the beginning of the year of 2010 and $1384.99 is my current average monthly living expense and considering that $774.00 is the only income received it has been difficult for me to maintain a healthy standard of living since 2009. – Source
Upon information and belief, Defendants AES, PO 69184, Harrisburg, PA 17069 holds a claim against Plaintiff, Jonathan Goings, in the following amount, to wit: $31,629.00; Chase, PO 7013, Indianapolis, IN 46207 holds a claim against Plaintiff, Jonathan Goings, in the following amount, to wit: $26,900.00; and Sallie Mae, 1002 Arthur Dr., Lynn Haven, FL 32444 holds a claim against Plaintiff, Renee Goings, in the following amount, to wit: $47,985.00 (the student loans).
Plaintiffs have made good faith efforts to repay the Student Loans Plaintiffs requests this Court to determine that the Student Loans are dischargeable in bankruptcy – Source
Plaintiff and his wife struggle on a day to day basis to provide basic necessities to their three young children and themselves.
At the moment, the Sealy family barely survives on food stamps and other small benefits from the program called W.I.C. (“Women, Infants, and Children). The two oldest Sealy children receive free lunches at their schools and Bahiyyih and all three children are on Medicaid.
The Sealy family’s 2012 income has been $2,550.60 to date and their adjusted gross income was only $26,357 in 2011. According to the U.S. Department of Human & Health Services, the poverty line for a family of 5 in 2011 was $26,170.
In addition, the Sealy family was forced to move to Florida in 2011 in order to reside with Bahiyyih’s parents because Aaron and Bahiyyih could not afford to pay rent for their own home or small apartment.
However, Bahiyyih’s parents will be moving to Oklahoma sometime this summer and the Sealy family will effectively be homeless.
The Sealy family receives no other assistance other than the roof over their heads provided by Bahiyyih’s parents and the food stamps and W.I.C. benefits previously mentioned.
Aaron and Bahiyyih are presently unemployed and have made heroic efforts to obtain employment, any employment, in order to try to bring in some income for their children.
Aaron was previously working at a call center, but his employment was terminated in February of this year.
Bahiyyih was previously working as a seasonal worker at Costco while she was pregnant, but she was let go in December when the season ended.
The youngest Sealy child is only a few months old and Bahiyyih has been forced to stay at home to care for her infant child while Aaron spends all his waking hours looking for any employment.
Unfortunately, Aaron suffers from a number of medical conditions that prevent him from driving a vehicle, typing, and standing for long periods of time. These conditions include, but are not limited to, various autoimmune issues and the aftereffects of a devastating car accident when Aaron was a teenager.
At least one of these medical conditions requires a treatment in Michigan every eight weeks that costs approximately $16,000 per treatment. These treatments are presently covered by COBRA as a benefit through University of Michigan, but COBRA’s coverage for Aaron and these absolutely necessary treatments runs out this year.
The dire circumstances that the Sealy family find themselves in are even more exacerbated by their collective and crippling student loan debt in the approximate amount of $140,000.
Although Aaron is the named borrower with respect to the loans through the U.S. Department of Education via its William D. Ford Federal Direct Loan Program and a Federal Perkins Loan, and Bahiyyih is the named borrower with respect to the loan through Sallie Mae, the Plaintiffs submit that there may be co-obligations such that the Defendants are creditors of both Aaron and Bahiyyih. – Source
Therefore, final judgment of non-dischargeability is hereby entered in favor of the University as to $2,000 of Mr. Sealy’s student loan debt.
The remaining balance, including principal or interest, of Mr. Sealy’s student loan debt owed to the University that is in excess of the Non-Dischargeable Balance is dischargeable under 11 U.S.C. §523(a)(8), and that remaining balance shall be the subject of the general discharge that Mr. Sealy received on April 19, 2012. Therefore, final judgment of dischargeability is hereby entered in favor of Mr. Sealy as to the amount of his student loan debt owing to the University that is in excess of the Non-Dischargeable Balance.” – Source
The Non-Dischargeable Balance remains eligible for administrative debt repayment and forgiveness programs, including but not limited to, the income-based repayment or income contingent repayment options available in the William D. Ford Direct Loan Program.” – Source
This loan was used to pay expenses and tuition at Full Sail Real World Education (educational
The Debtor incurred in around $75,000.00 for an Associate Degree.
Once graduated, Debtor realized that the institution did not properly provide him with the tools and knowledge to be competitive in the workplace. He has not been able to find a meaningful position on which he could apply this acquired knowledge.
This educational institution also failed to comply with their promise to locate and place him into a position. He has not even interviewed once by a prospective employer.
In order for the Debtor to be somewhat competitive, he should go back and finish at least a Bachelor, thus resulting in an additional 50-70K.
Due to his inability to find a meaningful employment, Debtor has been working since graduation as an entry level employee barely making 522,000.00 a year.
Debtor is married with 3 children and living in a rented house, unable to provide a quality lifestyle to his family and his salary barely suffices for the necessities of life.
Debtor has attempted to repay this student loan in several occasions, but his financial situation does not allow him to do so. – Source
The debtor(s) filed this case under Chapter 7 of the Bankruptcy Code in 2009. This court has jurisdiction over this action under 28 U.S.C. sections 1334. This proceeding is a reopening of the case and is an adversary proceeding.
One of the unsecured debts owed by the Debtor and listed in Schedule F is a student loan owing to Nelnet. No representatives from Nelnet were present at the discharge hearing. After the loan(s) was discharged Nelnet abandoned collection efforts for three years then tumed the case over to New York State Higher Education Services Corporation (NYSHESC) who began collection efforts in early 2012.
The Defendant listed as New York State Higher Education Services Corporation was retained the original lender (Nelnet Student Loans) after the discharge of the student loan(s). NYSHESC was advised by Debtor of the discharge, but have refused to honor the court’s ruling.
This loan was incurred by Debtor to complete college and become a teacher.
Debtor was employed at a Title V low-income school and requested “Public Service Forgiveness” of all or parts of the loan. She was denied, however, because she had graduated fiom college one year before the deadline set by Congress.
After the final bankruptcy hearing and discharge of debts, the Debtors got a divorce. She is now a single mother with two children, living in a house with an upside down mortgage, unable to refinance, owes back taxes to theIRS and FTB, and as a public school teacher, is extremely limited in her earnings.
Her ex-spouse is on disability and limited in the amount of monetary support he can give. WHEI&FORE, Debtors prays this Court enters an Order declaring the student loan debt of the Debtor be be dischargeable in the bankruptcy case and Defendant ordered to pay $2650.00 for wages garnished. – Source
Plaintiff/Debtor, Amy Renee Bishop, owes a government secured student loan obligation to Sallie Mae, with a principal sum balance of approximately $6,896.15.
Since taking out the loan, Plaintiff and her co-debtor husband had their second child, Caitlyn, born May 25, 2011.
Caitlyn was born with severe birth defects which require 24 hour medical care and supervision. The child has cardiomyopathy, has been on a heart and lung bypass machine, has had 9 operations in her 17 months of life, has been diagnosed with Turner’s Disease and cerebral palsy and other disorders which will disable her throughout her life, and from which she will never recover.
Medical care and supervision of Caitlyn, now 17 months old, requires almost daily occupational and physical therapy, and doctor appointments. In addition, the child is on a feeding tube, and must be monitored 24 hours a day to make sure she is breathing. The majority of the child’s monitoring, feeding, care, and transport to therapy, is performed by Amy Bishop.
After the birth of Caitlyn, the child was in the hospital on life support for 2 months, and Amy Bishop was unable to return to work after the birth of the child.
Amy Bishop attempted to return to work in April 2012, but after 2 weeks was not able to continue to work due to the constant monitoring needed by Caitlyn.
Debtors are not financially able to hire caretakers to monitor Caitlyn around the clock, and/or hiring such a person would be so expensive as to exhaust any earnings that Amy Bishop could bring in if she worked outside the home.
The two-earner family that the Bishops were prior to Caitlyn’s birth has been reduced to a one-earner family, causing financial crisis that led to this bankruptcy.
That the 24 hour care provided by Amy Bishop for her daughter will be needed, due to Caitlyn’s health condition, on an ongoing basis, throughout the child’s entire life.
That the requirement of Amy Bishop to pay back her student loan is an undue hardship, as defined under the meaning of 11 U.S.C. Section 523(a)(8). – Source
Plaintiff incurred student loan debts with Defendants in 2003 and 2006.
The sum total of Plaintiff’s indebtedness to Defendants is approximately $33,842.54. Plaintiff owes the following amount to each individual
a. Defendant American Education Services: $19,516.95; and
b. Defendants Sallie Mae and Department of Education: $14,325.59.
The aforementioned loans are loans for tuition or an educational benefit.
The aforementioned loans pose an undue hardship on Plaintiff for the following reasons:
a. Plaintiff is a 35 year old man with type 1 diabetes. Plaintiff became afflicted with diabetic retinopathy in July of 2010, and is now legally blind.
b. Plaintiff attended ITT Technical Institute in 2003 and 2004, concentrating his studies in electronics engineering. Plaintiff failed out in 2004 after his third semester.
c. Plaintiff attended ABC (d/b/a Decker College) and obtained his associate degree in interior framing and design from that institution in 2006.
d. Plaintiff’s eyesight began deteriorating in 2009, he was diagnosed legally blind in October of 2009, and Plaintiff lost total eyesight in July of 2010.
e. Plaintiff was forced to stop working due to his disability on or about September, 2009.
f. Prior to becoming blind, Plaintiff worked at Gas America earning $7.25/hr and Taco Bell earning $7.25/hr.
g. Plaintiff is unable to find work due to his disability and because he does not possess the basic skills a blind person needs in order to be employable, such as Braille and orientational mobility.
h. Plaintiff plans to go to Bosma Inc. (an organization empowering individuals who are blind or visually impaired with independent living skills) in 2012 to learn Braille and Independent Living Skills.
i. Plaintiff applied for Social Security Disability Benefits in September 2010. Plaintiff began receiving Social Security Disability Benefits on approximately November 1, 2010.
j. Plaintiff receives $867 per month in Social Security Disability Benefits.
k. Nevertheless, Plaintiff has made efforts to repay his loans. Plaintiff obtained numerous deferments from 2007 until November of 2010. In March of 2010, Defendant Sallie Mae intercepted Plaintiff’s 2009 tax refund in the amount of $1,200. Plaintiff has attempted to make regular payments on his student loans between November 2010 and August 2011, and had been paying $117 per month to Defendant American Education Services. Plaintiff had been paying $50 per month to Defendant Sallie Mae from July 2011 to September 2011. In October of 2011, Defendant Sallie Mae took $300 from Plaintiff’s bank account.
Plaintiff’s income is now limited to Social Security Disability Benefits in the amount of $867 per month.
Debtor filed this case under Chapter 7 offie Bankruptcy Code on April 3, 2012. This Court thus has jurisdiction over this action under 28 U.S.C. 1 314. This proceeding is a core proceeding.
One of the unsecured priority debts owing by the Debtor and listed on Schedule E- Creditors Holding Unsecured Priority Claims, is a student loan owing to Sallie Mae.
This loan was incurred to pay expenses at Indiana Business College in Indianapolis, Indiana for the Debtor’s daughter. The debtor has in no way benefited from the student loans nor received any of the funds from the student loans.
Based on the Debtor’s curent income and expenses. the Debtor cannot maintain a minimal living standard and repay the loan. The debtor is 87 years old and does not work.
The Debtor’s current financial condition is likely to continue lor the entire portion ofthe repalment period ofthe loan.
The Debtor has nade a good l’aith effort to repay the debt. – Source
The demand of repayment for the Private Student loans with Sallie Mae is making an economical hardship upon the debtor and his family. The debtor has made every attempt to work with Sallie Mae by asking them to lower the required payments to an amount he can pay, the debtor has also made several $100.00 payments which defer litigation and are non-refundable nor does this amount go toward the principal or interest making this a temporary fix. The debtor has given information to Sallie Mae that supports his 100% disability, has spoken with them about a repayment plan the debtor can meet but this company continues to pursue a payment in the amount of $568.06 monthly that in no-way the debtor can meet.
Billy Joe Duncan is requesting a total discharge of his Private Student loans with Sallie Mae due to the economical hardship being upon him 8i, family. The debtor used the “Brunner Test” and meets all their requirements within that case. (1) That the debtor cannot maintain, based on current income and expenses, a minimal standard of living for the debtor and dependents if forced to pay off student loans; (2) that additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period of
the student loans; and (3) that the debtor has made good faith efforts to repay the loans.
The debtor regrets as to having to request this type of relief, but finds himself in a situation that is not expected to better itself, nor does he see any other way to find a solution for these loans. The debtor is asking the court to discharge the Private Student loans with Sallie Mae based upon the information provided in this Caption. – Source
Plaintiff/debtor listed a disputed debt to defendant Sallie Mae, Inc. on Schedule F with account number [ ] in the amount of $29,774.00, and another loan with account number [ ] (believed to be the same account, under an abbreviated number).
The loan(s) alleged in Paragraph 4 were to Desert Sun Helicopter Academy, which is not an eligible education institution within the meaning of 26 USC 221(d)(1) and (2). Sallie Mae, Inc. has claimed in correspondence with debtor/plaintiff that the student loans described in Paragraph 4 are not dischargeable. The fact that the student loans in question were not to an “eligible education institution” under 26 USC 221(d)(1) and (2) means that the debts are not “qualified education loan(s)” under 11 USC 523(a)(8)(B), and therefore are dischargeable.
This loan was incurred to pay tuition and expenses for the Debtor’s participation in Co-Active
Coach Training Program and Co-Active Leader Program at the Coaches Training Institute (hereinafter “CTI”).
After completing CTI’s Co-Active Coach Training Program Debtor had her doubts about the quality of the program because a large portion of each seminar was devoted to selling the “students” attending the “class” on purchasing additional classes from the “school”, which is how Debtor ended up purchasing her second program from CTI, the Co-Active Leader Program.
Debtor ultimately withdrew from the Co-Active Leader Program due to what she felt was a completely unprofessional atmosphere at the first retreat of the program she attended.
While attending the first retreat of the Co-Active Leader Program, Debtor was berated and insulted by the “instructor” who got in the Debtor’s face and swore at her as part of the “training.” The final straw for the Debtor was after the first day’s session the instructor told all of the students attending the program that there would be a clothing optional pool party for the attendees of the conference.
Debtor decided that she had to leave the program and made arrangements to return home the next day. She immediately ed CTI notified them of her withdrawal from the program and requested a refund of the unused portion of her fees.
Debtor’s participation in the program was officially terminated on or about February 27, 2009, and confirmed in writing by a letter to CTI.
Defendant’s Claim Does Not Meet Definition for Exemption Under §523(a)(8)
Despite having paid $941.26 in interest on the Defendant’s loans in 2009, $769.20 in 2010, and $1084.84 in 2011. Defendant’s loan servicer has informed Debtor that her loans were “ineligible for a tax deduction” see EXHIBIT A, attached hereto.
Upon further investigation by Debtor’s attorney, Debtor does not believe her loan to the Defendant meets requirements for the exemption from discharge provided under §523(a)(8) of the Bankruptcy Code.
Specifically, Debtor does not believe that her loan meets the definitional requirements for exemption because she does not believe the loan was made for “qualified higher education expenses”, that CTI was an “eligible educational institution,” and does not believe that she was an “eligible student” as those terms are defined by 26 USC 221(d) which is referred in §523(a)(8)(B) for the discharge of “qualified educational loans.” – Source
Debtor owes Chase Student Loan Servicing, LLC for two student loans, one for approximately $31,072 and the second for approximately $24,320. He owes approximately $57,830 to Key Bank National Association. He owes Nelnet, Inc. for two loans, one for approximately $10,476 and the second for approximately $7,621. Finally, he owes three student loans to Sallie Mae Inc., one for approximately $12,745, the second for approximately $6,287 and the third for approximately $4,111. All of this student loan debt totals to approximately $154,462.
Debtor, in his mid-40’s, is entitled to a hardship discharge for the following reasons:
(a) he has no practical way of repaying what is owed and maintaining a minimal standard of income;
(b) he has a major medical condition that hampers his ability to work more hours and to increase his earning power, including:
A heart condition known as a “left branch bundle block.” This causes an abnormality in his heart that makes him only capable doing light-duty work, and puts him in a non-deployable status for the military, of which he is employed.
In addition, Debtor will be losing $500.00 per month in income due to this medical condition.
The loss of this income will last for the foreseeable future, will make his living
expenses higher than his income, will barely allow him to maintain a subsistence living, and will make it impossible for him to repay the student loans.
11 USC §523(a)(8) excepts from discharge, loans guaranteed by a governmental unit or a qualified education loan as defined in section 221(d)(1) of the Internal Revenue Code of 1986 incurred by an individual debtor, unless excepting the loan form discharge would create an undue hardship upon debtor.
The loans of approximately $85,086.46 to American Education Services [ ], and of $27,952.97 Direct Loans, U.S. Dept. of Educations xxx-xx-2864 are believed to be such non-dischargeable loans.
Plaintiff. However would suffer an undue hardship if the ;loans were not discharged.
The basis of the hardship claimed include:
a) Suffering medical issues, thyroid cancer;
b) Inability to find employment in a depressed economy over which she has no control which would allow her to repay the loans during her lifetime;
c) Extraordinary monthly medical expenses to sustain her life – medical insurance $300; prescriptions $75; chiropractic care $350; vitamins and supplements $275, Physicians Personal Access fee $125; gym-exercise requirements $100, disability Insurance $175; or $1,400 per month against an annual income of $14,198.43 for 2010, and against net income at present of $3,400 which appears to be in the fixed range she can earn;
d) Undergoing a recent and financially adverse dissolution of marriage in October 2011.
10. Debtors net income is <$1,101.67> per Schedule J, scheduling $510 for monthly student loan payments.
Plaintiff did not make a choice to be or become poor, remain poor and made a good faith effort to repay the loans, and she requests discharge under the legal doctrines in Brunner and as set forth in the decision in Bene v. Educational Management Corporation, U.S. Bankruptcy Court, Western District of N.Y. Main Case 03-14328 K; Adv. Case No. 08-1167 K. – Source
Based on the Debtor’s current income and expenses, the Debtor cannot maintain a minimal standard of living and at the same time repay the loans. My current income is below the poverty line. I have fled for bankruptcy with a monthly average take home pay of six hundred dollars. I’m unable to pay my mortgage and have agreed to surrender my residence. I have no future place to live and cannot pay my other debts.
I cannot maintain a minimal standard of living if I repay the student loans and, this limitation is likely to continue. Excepting the student loans from discharge would impose an undue hardship on me. There is no way I can payments of over three to six hundred dollars a month. Even those will not substantially reduce my student loan debt. Continuing this debt does not give me the “clean slate” intended by bankruptcy.
Circumstances exist indicating that my employment status is likely to persist for a significant portion of the repayment period of the student loan. My employment future is dismal for several reasons. I have not worked full time sine June 2008, so I have no current references. I have applied for educational jobs as low as paraprofessional with no offer of employment. I’ ve applied to over 200 openings. I have little hope for the indefinite future as to any possibility of repayment.
In t he past my impulsive personal issues have been discussed in [ ] hearings in 2003, 2007 and 2008, with accusations of sexual addiction and alcoholic abuse. Employers have noted this, and discussed this. I’m sure it comes up when prospective employers call for reference checks. This personal history makes it unlikely that I can be gainfully employed and earn enough income to make payments on student loans
I’ ve indicated good faith in trying to repay the loans although my expected career has not materialized. Before I stopped making payments, I applied for and received deferments or forbearances on the loans. I appeared in several times Court to obtain the loan repayments promised by my ex-wife. Before filing for this bankruptcy, I have not been in default. I have sent multiple emails, letters and phone calls to Sallie Mae and USE Fund representatives.
The loan statements are difficult to understand and I have probably over stated them on Schedule F. I believe the original loans totaled about $89,000. Now Sallie Mae claims a base of $96,500, and a total just under $120,000. I ask the Court to include this amount in the discharge. – Source
Defendant Sallie Mae Student Loans A/K/A Sallie Mae, Inc. (“Sallie Mae”) is a financial services company specializing in private student loans with a mailing address of P.O. Box 9555 Wilkes-Barre, Pennsylvania 18773.
Defendant AES/PHEAA A/K/A American Education Services/Pennsylvania Higher Education Assistance Agency (“AES/PHEAA”) is a government formed entity.
AES was created to guarantee and service a variety of Federal Family Education Loan Program (FFELP) and private (alternative) student loan products for lending partners throughout the nation.
PHEAA is a national provider of student financial aid services established by the Commonwealth of Pennsylvania.
AES/PHEAA has a mailing address of P.O. Box 8157 Harrisburg, PA 17105-8157.
Mrs. Gleason cosigned four (4) educational loans (collectively referred to as “Loans”) for her grandson, Derek Gleason, with Sallie Mae and AES/PHEAA as follows:
a. Sallie Mae in the sum of approximately $43,233.00 for an educational loan made or insured by said agency. Said loan was listed on Amended Schedule “F” and Amended Schedule “H” of Debtor’s Schedules. See Amended Schedule “F” and Amended Schedule “H” of Bankruptcy Schedules.
b. AES/PHEAA in the sum of approximately $8,750.00 for an educational loan made or insured by said agencies. Said loan was list on Amended Schedule F and Amended Schedule H of Debtor’s Schedules. See Amended Schedule “F” and Amended Schedule “H” of Bankruptcy Schedules.
c. AES/PHEAA in the sum of approximately $6,750.00 for an educational loan made or insured by said agencies. Said loan was list on Amended Schedule F and Amended Schedule H of Debtor’s Schedules. See Amended Schedule “F” and Amended Schedule “H” of Bankruptcy Schedules.
d. AES/PHEAA in the sum of approximately $26,600.00 for an educational loan made or insured by said agencies. Said loan was list on Amended Schedule F and Amended Schedule H of Debtor’s Schedules. See Amended Schedule “F” and Amended Schedule “H” of Bankruptcy Schedules.
Federal Courts have applied 11 USC § 523(a)(8) to a debtor’s educational debts on a loan-by-loan basis where a debtor has multiple student loans, with the result of partial discharge of education loans where some of the debtor’s student loans may be found dischargeable while other may be found non-dischargeable. See Educ. Credit Mgmt. Corp. v. Kelly (In re Kelly), 312 B.R. 200 (B.A.P. 1st Cir. 2004); Grigas v. Sallie Mae Servicing Corp. (In re Grigas), 2000 BNH 31 (Bankr. D.N.H. 2000).
The “Brunner test” is the settled law in the Third Circuit in which a debtor seeking to discharge his or her student loans must prove that:
(1) based on current income and expenses, the debtor cannot maintain a “minimal” standard of living for himself or herself and his or her dependents if forced to repay the loans;
(2) additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period for the student loans; and
(3) the debtor has made a good faith effort to repay the loans.
In re Faish, 72 F.3d 298, 305-06 (3d Cir. 1995)(quoting Brunner v. New York Higher Educ. Servs. Corp., 831 F.2d 395, 396 (2d Cir. 1987) see also Roundtree-Crawley v. Educ. Credit Mgmt. Corp. (In re Crawley), 2011 Bankr. LEXIS 4059 (Bankr. E.D. Pa. Oct. 24, 2011).
Mrs. Gleason cannot maintain, based on her current income and expenses, a minimal standard of living for herself and her dependents if she is forced to repay the Loans.
Mrs. Gleason is currently seventy-nine (79) years old.
Mrs. Gleason suffers from physical ailments including recovering from open heart surgery and back ailments.
Mrs. Gleason’s physical ailments along with the costs of her medications have rendered her unable to maintain a minimal standard if she is forced to pay the Loans.
Mrs. Gleason’s husband, Mr. Gleason, is currently eighty-one (81) years old.
Mr. Gleason had a leg amputated and utilizes a wheel chair.
Mr. Gleason has various physical ailments which have required twelve (12) surgical operations as of the date of this bankruptcy filing.
Mr. Gleason’s physical ailments along with the costs of his medications restrict any possible contribution he could make to Mrs. Gleason if she is forced to repay the Loans.
Mrs. Gleason’s current income is approximately $900.20 derived from monthly Social Security benefits of $665.10 and 1/2 of a monthly reverse mortgage payment on her real property of approximately $470.20. See Schedule “I” of Bankruptcy Schedules.
Mr. Gleason’s current income is approximately $1,515.70 derived from monthly Social Security benefits of $1,279.60 and 1/2 of a monthly reverse mortgage payment on his real property of approximately $470.20. See Schedule “I” of Bankruptcy Schedules.
Mr. and Mrs. Gleason’s current expenditures average $2,332.00 a month. See Schedule “J” of Bankruptcy Schedules.
Mrs. Gleason received no educational benefit from the Loans which would increase her ability to repay the loans.
Based upon Mrs. Gleason’s age and medical conditions, Mrs. Gleason’s financial state of affairs is likely to persist for a significant portion of the repayment period of the Loans.
Based upon Mr. Gleason’s age and medical conditions, Mr. Gleason’s financial state of affairs is likely to persist for a significant portion of the repayment period of the Loans restricting any possible contribution he could make to Mrs. Gleason if she is forced to repay the Loans.
Mrs. Gleason has made a good faith effort to repay the Loans.
Mrs. Gleason has not willfully or negligently caused her inability to repay the Loans.
Factors beyond Mrs. Gleason’s reasonable control including her age and medical conditions along with the age of and medical conditions of Mr. Gleason have rendered Mrs. Gleason unable to repay the Loans.
No amount of personal or financial sacrifice would enable Mrs. Gleason to repay the Loans without subjecting her to severe medical hardships and a life below a minimal standard of living.
Mrs. Gleason requests that each and every one of the Loans should be deemed dischargeable by this Court pursuant to 11 USC § 523(a)(8). – Source
(“Plaintiff”) is indebted to Sallie Mae, Inc., United States of America Department of Education, and/or Texas Guaranteed Student Loan Corporation, pursuant to certain Stafford Loans made under the Federal Family Education Loan Program (FFELP) Loan numbers 1-01, 1-02, 1-03 and 1-04 identified under account number [ ].
According to a loan breakdown statement dated February 27, 2012, those loans are in the current principal amounts of $7,091.60, $4,888.95, $1,086.42 and $1,521.90 respectively; however, with accruing interest and other charges said loan amounts may be greater than the amounts stated on February 27, 2012. This adversary proceeding relates to all amounts owing under any of said loans, regardless of the amounts stated as of February 27, 2012.
According to documents supplied by Sallie Mae, Inc., the original lender on each of these loans was the United States of America Department of Education, and the guarantor was Sallie Mae, Inc.
Each of these loans is an educational benefit loan made, insured or guaranteed by a governmental unit, or made under any program funded in whole or in part by a governmental unit or nonprofit institution, within the meaning of 11 U.S.C. § 523(a)(8).
In addition to the above and foregoing loans, Plaintiff is also a borrower obligated to Sallie Mae, Inc. and to Texas Guaranteed Student Loan Corporation pursuant to Loan no. 1-13 and Loan no. 1-14 identified with account no. 9635755781, which said loans are consolidations of previous loans made by Sallie Mae Trust-LSC/FL, and SLM Education Credit Finance Corp. previously designated as Loans no. 1-10 through 1-12 (said loan numbers having been retired upon consolidation).
Loan no. 1-13 is assertedly in the amount of $11,992.13, and Loan no. 1-14 is assertedly in the amount of $8,322.70; however, this adversary proceeding applies to all amounts owing under said loans.
On information and belief, one or more loans, and loans further redesignated as Loans 1-16, 1-17, 1-18 and 1-19 (all under account number 9635755781) have been sold to the United States of America Department of Education, although said loans are being serviced by Sallie Mae, Inc. Said loans constitute an educational benefit loan made, insured or guaranteed by a governmental unit, or made under any program funded in whole or in part by a governmental unit or nonprofit institution, within the meaning of 11 U.S.C. § 523(a)(8).
The Plaintiff attended Michiana College (now known as Brown Mackie College) in Fort Wayne, Indiana, and received his associates degree (AS) in Medical Assisting, financed in part by the above-described education loans. He then continued his schooling for Health Care Administration (seeking an associates degree – AS) from said college. The education expense of pursuing said second degree was funded, in part, by the above-education loans.
Subsequent to receiving the loans mentioned above, the Plaintiff suffered an onset of Chiari-Arnold Malformation, also known as Chiari I Malformation and, despite two surgeries, is still disabled and cannot find work. Plaintiff has also been diagnosed with arthritis, diabetes, obesity, degenerative disc disease, depression and anxiety, and suffers constant headaches, sharp, stabbing pain in his thighs and wrists, grinding bone-on-bone feeling in his knees, and other symptoms as more specifically set forth in attached Exhibit “A.” Plaintiff is disabled from working, and has been awarded Social Security Disability benefits. Such Social Security Disability benefits constitute his sole source of income.
Plaintiff has followed all physicians’ instructions, and has substantially reduced his weight (eliminating obesity as a concurrent cause of any of his symptoms), yet he continues to experience unexpected loss of balance (and falling), and cannot partake of anything other than sedentary activities.
The above-described medical conditions became fully disabling after graduating from Brown Mackie College (first degree) and while attending said college in pursuit of his second degree. The worsening medical condition led Plaintiff to undergo his first brain surgery, at which point he decided to discontinue any further education because of his disability.
Plaintiff has sought to reduce his expenditures, and has sought and obtained the assistance of relatives. He resides with his grandmother. His grandmother has supplied him with a subcompact motor vehicle to drive. His grandmother continues to support him for all needs not covered by his Social Security Disability payments.
The Plaintiff cannot maintain, based on current income and expenses, a “minimal” standard of living for himself if forced to repay any of these Loans.
Because the medical conditions which have caused the disability are permanent, circumstances exist indicating that his state of affairs is likely to persist for a significant portion of the repayment period of the educational loans in question.
The Defendants in this case have chosen to capitalize accruing interest, i.e., adding the interest to the various loans as additional principal, from time to time. As a result, the principal amounts owed under each loan have increased and will continue to increase.
Prior to the onset of Plaintiff’s disability, he made payments on the loans until 2010 consistent with his then ability to pay.
Plaintiff has no residual capacity to engage in compensated labor, and must rely on Social Security Disability payments as his sole source of support.
To except the education loan debts described in this Complaint from discharge would impose
an undue hardship on the Debtor. – Source
Plaintiff is indebted to Defendant in amount of $149,579.69, together with interest thereon, as a result of certain debts incurred by the Plaintiff herein with this Defendant. Plaintiff
estimates that approximately $90,000.00 of these loans are private loans, and that the balance if for federally guaranteed loans.
Pursuant to 11 U.S.C. Section 523(a)(8), an educational loan made, insured, or guaranteed by a governmental unit, or made under any program funded in whole or in part by a governmental unit or nonprofit institution is nondischargeable, unless the debtor is able to show that the payment of the loan would cause an undue hardship. Specifically, the Plaintiff (a) cannot maintain, based on current income and expenses, a minimal standard of living for herself and her dependents if forced to repay the loans; (2) that additional circumstances exist indicating that this state of affairs will likely to persist for a significant portion of the repayment period of the student loans; and (3) that the Plaintiff has made good faith efforts to attempt to repay the loans. See Brunner v. New York State Higher Education Services Corp., 831 F.2d 395.
Furthermore, most of the student loans held by Sallie Mae are private loans, and as to such loans, the Bruner test does not apply, and further, Plaintiff need not show undue hardship to obtain discharge of these private loans, if such loans are not qualified. Plaintiff alleges and states that the private loans were not “qualified” as that term is defined by 11 U.S.C. § 523(a)(8)(B), and that accordingly, such private loans are dischargeable in this proceedings. Specifically, and without limitation, Plaintiff will show that the private loans held by Defendant were not incurred “solely to pay qualified higher education expenses,” per 26 U.S.C. §221(d)(1), and were not “attributable to education furnished during a period during which the recipient was an eligible student,” as defined by 26 U.S.C. §221(d)(1)( C). Plaintiff has further reason to believe that the private loans held by Defendant were not “school certified loans” and as such did not satisfy the requirements of a “qualified educational loan” as defined by 11 U.S.C. §523(a)(8)(B).
Plaintiff alleges that any private loans held by Defendant which are not “qualified
educational loans” are dischargeable in this case without the need to show undue hardship. – Source
Debtor has made a good faith effort to repay each of the Student Loans.
Debtor cannot maintain, based upon his current income and expenses, a minimal standard of living for himself and his dependents if forced to repay the Student Loans.
Debtor is permanently disabled and his lack of income or resources with which to pay the Student Loans is likely to persist for a significant portion of the repayment period of the Student Loans so any payments could only be made at great hardship to Debtor and his dependants.
In order to further his own or his children’s higher education, Debtor borrowed from Defendant Sallie Mae, in the form of private loans not federally guaranteed (the “Sallie Mae Private Loans” ).
In order to further his own or his children’s higher education, Debtor borrowed federally guaranteed obligations (the “Federally Guaranteed Student Loan(s)”) from:
a. Sallie Mae
b. Illinois Student Assistance Commission (ISAC)
c. Utah Higher Education Assistance Authority (UHEAA)
It is Debtor’s understanding that pursuant to recent changes in law, the original lenders of the Federally Guaranteed Student Loans listed in Paragraph 7 transferred some or all of their holdings of Debtor’s obligations to:
a. Ed Financial
b. Federal Loan Servicing
c. Nelnet/TPD Servicing
d. Uni ted Student Aid Funds, Inc.
e. Illinois Designated Account Purchase Program (IDAPP)
Some or all of the Defendants listed in Paragraph 8 may have been original lenders of some Federally Guaranteed Student Loans, but Debtor’s records are insufficient to determine this accurately.
As more fully explained below, to the best of Debtor’s knowledge and belief, legal and beneficial ownership of all of the Federally Guaranteed Student Loans now reside in Defendant US Department of Education (” Education” ), pursuant to Education’s disability discharge procedure.
To the best of Debtor’s knowledge and belief, each of the Student Loans outlined above entered its respective repayment period and Debtor made a number of timely payments on each one.
To the best of Debtor’s knowledge and belief, Debtor was never in default in the payment of any of the student loans outlined above other than a possible occasional late payment made current either with a payment ( late fee) or the proper application of an available deferment until the occurrence of the disabling event described below.
On December 30, 2009 Debtor became permanently disabled as a result of complications from spine surgery (the “Disabling Event”), more particularly described below.
In Spring 2010 Debtor submitted an application for a disability discharge to each of the then holderso f the Federally Guaranteed Student Loans.
Each of the then individual holders of a Federally Guaranteed Student Loan reviewed Debtor’s medical records and determined that Debtor is disabled to the extent that he is entitled to a disability discharge of the obligations they held.
To the best of Debtor’s knowledge and belief, based upon discharge letters received from the then respective holders of the Federally Guaranteed Student Loans, legal and beneficial title to each of the Federally Guaranteed Student Loans was transferred to Education in Fall of 2010 pursuant to Education’s regulations.
It is Debtor’s understanding, based on phone calls with Nelnet (Education’s servicer) placed in or about August 2011, that Nelnet has reviewed Debtor’s medical records, that Nelnet has determined that Debtor is entitled to a disability discharge and that Nelnet has advised the Department of Education to that effect.
Debtor has not received a discharge letter from Education despite numerous phone calls to Nelnet which gave assurances that such a letter was soon forthcoming and Debtor is unable to access his Nelnet account online to see the status of any letter despite numerous phone calls to Nelnet technical help line to solve the problem of lack of access.
In Spring, Summer and Fall of 2010 Debtor repeatedly ed Sallie Mae and its debt collectors in an attempt to settle his obligations on the Sallie Mae Private Loans either by a lump sum payment (with cash from Debtor’s 401K plan) or by regular minimal payments until Debtor’s situation stabilized.
Despite repeated efforts and making offers that would have put Debtor in a very difficult financial situation, Debtor was unable to get Sallie Mae to agree to a settlement or payment plan with respect to the Sallie Mae Private Loans.
It is Debtor’s understanding that Sallie Mae does not have a disability discharge available for private loans issued prior to 2011, but Debtor has not heard from Sallie Mae since Fall of 2010, which, coincidentally, is when Sallie Mae reviewed Debtor’s medical records and determined that Debtor is entitled to a disability discharge with respect to the Sallie Mae Federally Guaranteed Student Loans. (It is Debtor’s understanding that Sallie Mae now offers disability discharges for private loans issued in 2011 or later.)
Debtor has suffered from back pain since high school.
Debtor is 56 years old and has spent most of his professional life as a transactional attorney, which allowed him to limit his physical activity and avoid pain.
Debtor had lower back surgery in 2000 which reduced the pain for several years but the problems returned and became worse by 2007.
Debtor retired from fulltime law practice in June 2007 and earned a modest amount of income on a part time basis from advising businesses on how to finance their activities, advising sellers of real estate how to find like kind exchange properties and from a limited amount of transactional legal work.
In Fall 2009 Debtor’s back pain had become more severe and he was losing use of his legs and arms so he traveled to the Mayo Clinic in Rochester, Minnesota for an examination.
Debtor was advised by the Mayo Clinic that his spine had not formed properly and that without a series of complicated and risky surgeries he would remain in pain and would lose use of his legs and arms and would become incontinent.
Debtor had the first surgery (on the cervical spine) on December 30, 2009.
When Debtor awoke from the December 30, 2009 surgery, he was unable to move either arm and he had little strength or balance in his legs. (Debtor had been advised that such deficiencies were a known risk of this particular surgery but had elected to have the surgery and take the risk.)
Debtor had a second cervical surgery five days later (January 4, 2010) to adjust some aspects of the first surgery.
Debtor spent twenty-two days in the hospital to deal with pain (using an IV) and regain enough strength in his legs that he would be mobile with his wife’s help.
Debtor had a third surgery at the Mayo Clinic in November, 2010, on his lower back.
Since the Disabling Event, Debtor has spent most of each day doing physical therapy, exercising, walking and resting to encourage the disturbed nerves to recover.
Debtor is only able to walk short distances without a cane and has limited strength and endurance in his legs.
Debtor has limited range of motion, strength and endurance in his arms.
Debtor still suffers significant pain in his back most of the time.
In December, 2011, Debtor was examined at the Mayo Clinic and advised that he is unlikely to see much additional improvement in his condition but that he should continue with the prescribed therapy, exercise, walking and rest in order to obtain as much improvement as possible.
In the next few years Debtor will need an additional surgery on his middle back to
complete the restructuring of his spine.
In addition to his spinal problems, Debtor was born with a bi-cuspid aortic valve which has lead to significant inefficiencies in blood circulation and the development of an aneurysm in his aortic artery.
As a result of Debtor’s heart condition, he has reduced energy and, after doing his daily therapy and exercise, must spend much of the remainder of the day resting.
To correct his heart condition, Debtor has been advised by the Mayo Clinic that he will require open-heart surgery in the next 2-8 years.
As a consequence of his arm and leg deficiencies, his near constant back pain and his heart condition, Debtor is rarely able to spend more than a few hours in any given day attending to business affairs and what time he does spend is broken up with frequent rest periods.
Debtor has been advised that his condition is not likely to improve significantly with time.
Since the Disabling Event, Debtor’s income has been primarily from Social Security Disability payments and he continues to receive them.
The Social Security Department conducts reviews of disability claimants to see if they remain qualified but has indicated, based on their review of Debtor’s medical records, that they will not conduct such a review of Debtor for 5-7 years, the maximum period possible (thus recognizing that Debtor’s condition is not likely to change).
Since the Disabling Event, Debtor has tried to work within the limits of his health constraints and come up with some way to earn money in a regular and reasonably predictable manner but has been unsuccessful, earning a very limited amount from just one isolated project.
Debtor’s current income is $2,351 per month from Social Security Disability, which is approximately $2,250 less than Debtor’s expenses of approximately $4,500.
Debtor’s church has been providing approximately $700 per month to pay Debtor’ s power bill and Debtor’s wife’s health insurance premium.
Debtor has not been making Debtor’s mortgage payments of approximately $1,500.
Debtor has not had any health insurance since December, 2011, but will qualify for medicare in June, 2012.
As more fully set forth above, Debtor has made a good faith effort to repay the Student Loans, his current income and resources are such that he is unable to maintain a minimal standard of living even without making payments on the Student Loans and it is unlikely that Debtor’s financial situation will improve significantly during the repayment period of the Student Loans. – Source
Two of the unsecured debts allegedly owed by Debtors and listed in Schedule F are Student Loans owing to Defendant SALLIE MAE. Specifically,
a. Sallie Mae, Account no. ending in 0930 in the amount of $28,728.00. This account was opened in 2005. Debtor Henry Velez believes this debt is for student loans obtained by his granddaughter. However, the debtor disputes this debt as he did not sign the promissory note nor any documents related to the student loan. Debtors are not the student loan recipient.
b. Sallie Mae Account no. ending in 1200 in the amount of $14,686.00. This account was opened in 2005. Debtors believe this debt is for student loans obtained by their granddaughter. However, the debtors dispute this debt as they did not sign the promissory note nor any documents related to the student loan. Debtors are not the student loan recipient.
Two of the unsecured debts allegedly owed by Debtors, and listed in Schedule F are Student Loans owing to Defendant, USA FUNDS. Specifically,
a. USA Funds, Account no. ending in 9729 in the amount of $14,620. This account was opened in 2009. Debtors believe this debt is for student loans obtained by their son. However, the debtors dispute this debt as they did not sign the promissory note nor any documents related to the student loan. Debtors are not the student loan recipient.
b. USA Funds, Account no. ending in 9729 in the amount of $7,078. This account was opened in 2009. Debtors believe this debt is for student loans obtained by their son. However, the debtors dispute this debt as they did not sign the promissory note nor any documents related to the student loan. Debtors are not the student loan recipient.
These loans were incurred to pay expenses for persons other than the Debtors. The Debtors did not receive the benefit of these student loans.
The Debtors are alleged to be solely co-signers on these debts. The Debtors are not the Student Loan recipients.
These Student Loan debts are not qualified educational loans under IRS Code 221(d)(1) because the debt expenses were not incurred by the Debtors.
The Debtors have no current or anticipated available income or resources with which to pay the aforementioned loans, and any payments on these loans could be made only at great hardship to the Debtors and the Debtor’s Dependants.
Mr. Velez, the only breadwinner, is retired and receives limited income. Debtors’ financial hardship and circumstances are likely to persist and will not improve in the future or at any time during the repayment period of the loan.
The debtors cannot maintain, based on their current income and expenses, a minimal standard of living for Debtors, nor their dependents, if forced to repay the loan.
Although Debtors do not believe they are liable for these debts, Debtors have made a good faith effort to make payments on the loans because the recipients of the loans are their son and granddaughter. – Source