Bankruptcy Court Discharges Student Loans
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Bankruptcy Court Discharges Student Loans

In re Jones,_ B.R. _ , 2013 WL 1882252 (Bankr.E.D. Pa. 2013)(per Frank, J.)
A 45 year old single woman with no serious medical problems sought to discharge her student loan under §523(a)(8).
The debtor, who had two children, worked part time to care for her emotionally disabled 16 year old daughter.  In 2006
she co-signed a student loan for her elder daughter who was attending Widener University and then signed a parent plus loan for the same daughter.  Within 2 years of the disbursement of the loan, it went into default.  The balance of the loans was over $21,000.   The student lender started garnishing the debtor’s wages which prompted the bankruptcy filing.   Applying the three part Brunner test, the Court noted that ”maintaining a minimal standard of living” does not mean that a debtor has to live at a poverty level to repay a student loan.    Given the absence of  bright lines, a minimal standard of living lies between poverty and mere difficulty.  Courts should allow necessary to ensure that the debtor’s needs for food, shelter, clothing and medical treatment are met.    Since the family income only slightly exceeded the poverty level the Court ruled that she could not maintain a minimal standard of living if required to make a repayment of her student loans.  The Court accepted cable and phone expense of $293 as reasonable.  The Court noted that there are as many as 19 factors to determine whether the debtor met the second prong – whether her circumstances would continue  for a significant period of the repayment period.    The debtor established
that her earning potential will not improve in the future.    In spite of the fact that the debtor made no voluntary payments (the only payments were involuntary wage attachments) the Court ruled that the debtor met the third prong of “acting in good faith.  Good faith determination depends on the reason why the debtor did not make the payments.  There is no evidence the debtor was ever in the financial position to make voluntary payments while maintaining a minimal standard of living.   The Court held that the student loans were  discharged.

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Scott F. Waterman
110 West Front Street
Media, PA, 19063 USA
610-566-6177