On January 17, student loan servicer Educational Credit Management Corporation (ECMC) filed a notice of appeal in the United States District Court for the Southern District of New York challenging the Chief Bankruptcy Judge’s decision. Celelia Morris, who entered summary judgment for a student debtor and discharged her student loan debt of $221,385.49. Rosenberg v. NY State Higher Education Services Corp., et al., Case No. 18-35379 (Bankr. SDNY January 7, 2020).
In order to pay off his student loan debt, the Brunner The test requires that the debtor demonstrate (1) that he cannot maintain a minimum standard of living if he is forced to repay the loans, (2) that his situation is likely to persist for a significant part of the repayment and (3) that he repaired faith’s efforts to repay student loans. In summary judgment, Morris J. concluded that the debtor had sufficiently satisfied each of the three prongs of the Brunner test. The court also found that the debtor had met the Bankruptcy Code‘s “undue hardship” standard, which requires the court to exclude student loan debt from discharge unless it imposes “undue hardship.” excessive” to the debtor. This decision challenges the notion that student loan debt is generally not dischargeable under Chapter 7 bankruptcy. Judge Morris notes this assumption, stating that “most people (bankruptcy professionals as well as lay people) think that repaying student loans is impossible.” In examining this assumption, Justice Morris said that many courts had misinterpreted the Brunner test over the past 32 years by adding a “punitive standard that [is] which is not there”, which, when applied, “subsumed the actual language of the [test].”
In his appeal, the ECMC argues that the bankruptcy court “dismissed 32 years of case law”. ECMC argues that the debtor failed to satisfy the Brunner test as he failed to pursue the career opportunities available to him in the legal profession in order to repay the loans. He also argues that the “[i]Inability to pay debts alone cannot establish undue hardship.
If confirmed, this case will likely have a significant impact on student loan servicers as more debtors may seek to pay off their student loan debt.