Bankruptcy of Your Student Loans

Bankruptcy of Your Student Loans

Sunday, August 28, 2016

RIGHT WING, LEFT WING, CHICKEN WING CONSPIRACY THEORIES!

Corruption and "Pay for Play" at the Department of Education!


When I prevailed against the Department of Education and their legal representative, an assistant U.S. Attorney working for the U.S Department of Justice and I won a full discharge of nearly $130,000.00 in student loan debt, I believed that my successful bankruptcy under the undue hardship provision was in part due to the fact that I included as my defense, the July 7, 2015 Policy Letter written by Lynn Mahaffie, Deputy Assistant Secretary for Policy, Planning and Innovation Office of Post Secondary Education. 


The 23 page letter captioned as DCL ID: GEN-15-13, Subject: Undue Hardship Discharge of Title IV Loans in Bankruptcy Adversary Proceedings, in short, was written by the Department of Education as a directive to lenders and guarantee agencies to... and I quote: "protect the integrity of taxpayer dollars"....  


The letter describes the handling of adversary proceedings in undue hardship bankruptcy cases by stating "Department regulations currently allow loan holders the ability to consent to and/or not oppose a borrower's claim of undue hardship in appropriate cases if they follow a two-step analysis".

Step one of the analysis is the evaluation of the borrower's undue hardship claim.  If the lender decides that requiring the borrower to repay the loan(s) would be an undue hardship, then the lender can consent and not oppose the discharge of the loan(s).

The letter then makes the statement: "If, however, the holder (i.e. lender) determines that requiring the repayment would not impose an undue hardship, the holder must then evaluate the cost of objecting to the borrower's claim in court."  (emphasis added)

What is clear in the full context of this letter is that the Department of Education (DOE) is indicating that they are telling the loan holders (lenders and service agencies) that alarm bells are being sounded by some folks higher up on the food chain, and that too much money is being spent to try and disprove bankruptcy cases of student loan debt under the undue hardship provision of U.S.C. 11 §523(a)(8).

SO WHAT HAPPENED?  THE BELLS ARE SILENT NOW!


While I am very happy that my debt was discharged, the facts remain that there are tens of thousands of student loan debtors who continue to struggle as I was with the inability to pay their loans!  As I spent over a year preparing myself to go to court and file a chapter 7 bankruptcy that would include an Adversary Proceeding (AP) citing the Undue Hardship Provision, I became deeply aware of the injustices that occurred to thousands of people who in some instances were in much worse circumstances than I was.  

My win, which, as my friend Richard Fossey said, was a miracle... but that miracle was in part due to the fact, that just prior to my filing my case, I found the DOE's July 7th Policy Letter.  In fact, as I realized the potential significance of this letter, I immediately edited my Adversary Complaint to include the Policy Letter and made it a key defense within my AP.

At the time of my filing my AP I was living within 5 miles of Washington, D.C. and within 3 blocks of the U.S. District Courthouse, home of the U.S. Attorney for the United States of America, located on the same street adjacent to my apartment complex in Alexandria, Virginia.  So to put that in perspective I was in the enemy territory, and was feeling a bit outgunned at the time.

And yes, I did prevail, however... the outcome of my victory was not going to be the bell-ringing victory I had hoped it would be.  The reason I say that is even though my case was won using the DOE's own Policy Letter, they silenced the celebration through the actions of a quick discharge without a trial. The U.S. Attorney and the D.O.E. moved quickly to close this case, which got me to wondering why?  

Why did they not take this case to trial? Well I have a theory as to why, and I wrote about those thoughts.  You can read my thoughts on this here: http://www.unduehardship-povertyrequired.com/2016/06/the-discharge-of-130000-was-settled.html.  

My case was settled without a trial and to me that has only further exasperated the student loan crisis and continues the suffering for tens of thousands of student loan debtors!  Not having my trial resulted in no formal decision being recorded for others to cite as case law precedent!

What has happened is that predatory lawyers for the DOE lenders continue to run up huge legal tabs in pursuit of loan holders with the same veracity and aggressiveness as before!   

Take a look at what my friend Richard Fossey recently wrote in this article on his blog site:

"In a letter dated July 7, 2015, Lynn Mahaffie, a Department of Education bureaucrat, issued a letter advising creditors like ECMC not to oppose bankruptcy relief for student debtors if the cost of fighting a bankruptcy discharge did not make the effort worthwhile.

But that letter was just bullshit. The Department of Education and its loan collectors almost always oppose bankruptcy relief for student-loan debtors--whether or not it is cost effective to do so.  For example, in Acosta-Conniff v. Educational Credit Management Corporation, an Alabama bankruptcy judge discharged Alexandra Acosta-Conniff's student loan debt. Conniff was a single mother of two children working as a school teacher, and the court reasoned quite sensibly that Conniff would not be able to pay off her student loans.

ECMC dispatched six attorneys to appeal the bankruptcy court's decision: David Edwin Rains, Kristofer David Sodergren, Rachel Lavender Webber, Robert Allen Morgan, Margaret Hammond Manuel, and David Chip Schwartz. Six attorneys--and Conniff didn't even have a lawyer!

Not surprisingly, ECMC won its appeal.  Six lawyers against a single mother of two who can't afford an attorney--it was hardly a fair fight."  (emphasis added).  
All I can say is WTF.... 

There we have it, back to the same game... Pay-for-Play with DOE operatives like ECMC who continue making millions of dollars taking impoverished and in many cases disabled debtors through hell.  The corruption in our Government is so blatant.

The July 7th DOE Policy Letter might as well be left in the DOE restrooms....  At least it may get used for 'something' if it is left next to the toilets!

I have to quit here....  I am lost for words in my rage!



Feel free to comment, or ask a  question.... when I cool down I will try and address them.

God Help America, before there it is no more!

Richard Allan Precht












Saturday, August 20, 2016

2016 Presidential Candidate calls for student loan cancellation!


I heard somewhere the other day that Green Party candidate Dr. Jill Stein has advocated 'canceling student loan debt'?


On Wikipedia (under her political positions) the Subsection "EDUCATION" Presidential Candidate Dr. Stein has the following statement of her idea on dealing with student loans, and I quote:

"Stein has spoken in favor of cancelling all student debt, arguing that it could be done "using quantitative easing" and without raising taxes.[125][126] She says that quantitative easing "is a magic trick that basically people don't need to understand any more about than that it is a magic trick."[125] Stein says that her plan would be "the stimulus package of our dreams to put to work a whole generation of young people that's held hostage in debt".[126] She has said that her campaign will do for the "43 million young people trapped in predatory student loan debt" what "our mis-leaders saw fit to do for Wall Street when they bailed them out to the tune of 16 or 17 trillion dollars using so called quantitative easing".[125] She opposes school privatization.[127]. "


So...  As I am reading through this I asked myself, 1st of all what is "Quantitative Easing (QE)" ? and 2nd since she is saying QE "is a magic trick that basically people don't need to understand any more about than that it is a magic trick" and if she is saying no one needs to know what it is", how is that going to help anyone?

Student Debts = Financial Assets!


Next I did a look-up of Quantitative Easing.... WOW!  No wonder she says "people don't need to understand any(thing)" about it!  I sure could not!

In short... It sounds to me like that the Central Bank (i.e. The Fed) buys up the (student loan) debt, then floods the market by printing more electronic cash based on the so-called "financial assets". 

Wikipedia describes this so-called purchase of these assets like this: "A central bank implements quantitative easing by buying financial assets from commercial banks and other financial institutions, thus raising the prices of those financial assets and lowering their yield, while simultaneously increasing the money supply."

ECON 101 = "Magic Trick"



Now I will be honest.... I never learned too much in all of those "Econ" classes I had to take, but this for sure does not make anymore sense to me than ECON 101. 


No wonder Stein calls it a "magic trick" and that nobody would understand it!


That being said, I doubt very seriously if she could get that policy implemented if "and if" she could pull a rabbit out of her hat and win the Presidency in 2016. Meanwhile, we wait to hear any substantive solutions from either of the leading candidates.  


Cancel ALL student debt? Great idea -- or wait a second... 


Cancelling ALL student loans via a "bailout" like they did for Wall Street sounds great, the only problem is who's debts do you cancel.. everyone's? those in default?  those who's social security or wages are being garnished? Just who's debts do you cancel?

What about those currently enrolled?, what about those planning to start college this fall? or those future kids? Do you cancel just the Federal Loans?  What about the private loans?  And what about Parent Plus Loans?  Who decides which loans qualify and what would the qualifications be?  WOW that is a lot to figure out!


As for me... I think there is no quick solution to the education debt crisis. 

 

But if you ask me.... My "LEMON LAW" for student loans made a hell of a lot more sense than trying to convince the FED or Central Bank to buy up all of the debts.  You can read my "What We Need For College Loans Is A Lemon Law" and see what I propose.

And along with my Lemon Law, I would push for a top down review of salaries and benefits being dolled out to Administrators who act like more like Prima Donnas and self-proclaimed Kings and Queens!

Additionally, tuition and fee reviews would also need to be performed and made to be reasonable based on the quality of the education provided and the outcomes of actual job placements.  

It is time that colleges be held responsible for the failures graduates and non-completing students suffer due to the inflated and over-sold promises of success, enslaving those same students to a lifetime of debt with limited or in many cases, no benefits! 

Meanwhile, we wait to hear any substantive solutions from either of the leading candidates!

If you have any comments or questions, feel free to post them, I will be happy to address them.  Until next time, God Bless YOU and America, regards, Richard Allan Precht


Thursday, June 23, 2016

THE AMERICAN DREAM - OR THE AMERICAN NIGHTMARE?

The American Dream: graduate college, start your career, buy a house, start a family!

My friend and fellow student loan and education blogger, W. Richard Fossey wrote me an email this week which included a request to help a young woman who has realized that her college education debt of nearly $80,000.00 and growing everyday has become the "nightmare under her bed"!  That is how Alison Walton describes her dream of going to college, getting a degree and starting a career, which we have been led to believe is the ALL AMERICAN DREAM.

As I read her story which I am going to re-post in it's entirety here, I knew exactly what she felt; I had the same dreams and hopes when I returned to college at age 40.  What I ended up with was a Master's degree and upon graduation, I was not able to find a job in my field of study.  Twenty seven years later I found myself with a debt of close to $130,000.00, my life in dire financial shape - the answer for me was filing bankruptcy without an attorney and trying to prove Undue Hardship!  Fortunately I was successful.  My life's purpose now is to try and help others deal with student debt that has taken their dreams and turned them into nightmares! 

HERE IS ALISON'S STORY - A BROKEN DREAM!

My DeVry Experience
By Alison Walton

The American Dream: graduate college, start your career, buy a house, start a family. Most everyone has this vision for their lives, or something very similar. College is supposed to be that magic ingredient that will help you achieve your full potential in life. College is the gateway to put you ahead of the masses, helping you to stand out to employers and give you a solid foundation for your future. In my case, college is the beast that is holding me back. College is the nightmare under my bed, haunting my dreams. College has put me over $80,000 in debt.

High School is nothing I look back on with fond memories. I just wanted to do my time and move on. I never dreamed of furthering my education, all I wanted was to graduate and join the work force. My parents had a much different idea for my future, they wanted better. They wanted me to not have to know their struggles, so they pushed me towards higher education. Near the end of my senior year a recruiter from DeVry University visited my high school campus. This recruiter came promising the world on a silver platter: a Bachelor’s Degree in two and half years instead of four, a course schedule that consisted of degree specific classes, and a Career Center that helped place graduates in careers of their degree field. I called and scheduled a recruiter to meet with me and go over all the details of a DeVry education. This person came into my home, sat at my kitchen table, told my parents and I what a great choice I was making and how wonderful my future would be. The contract contained two totals for the degree program I entered into; the main contract stating a cost of $49,850 and a California Addendum for $55,365. Both of these figures were well outside my family’s means. When we questioned how we'd be able to afford it the recruiter assured us student loans would be no problem and I'd have my funding. I had recently turned 18, and my first big step as an adult was to sign the contract that would haunt me the rest of my foreseeable future.

I started DeVry University in Sherman Oaks, Ca (originally West Hills Campus) in August 2005. I graduated with my Bachelor’s of Science Business Administration Degree in June 2012. It took me seven years, as a part time student, to complete my degree program. The last two years of my education was by far the most difficult, not academically but emotionally. I found out in the summer of 2010 that I was officially maxed out on my FAFSA loans. I had no idea that was possible to do. Up until this point I had had very little interaction with the Financial Aid office. I would go in every semester, file my FAFSA and that was it. On occasion I was told I had a financial aid hold on my account. When I asked why I was told 'just pay $100 and the hold will get removed,' so I did. I had faith in the advisor that I was being looked after and directed in the right path. After being told I had no more funding I starting digging into the finer financial details of my education and what I learned floored me.  I learned that I was paying more per unit by maintaining only a part time status. DeVry had a unit ranking for their classes, as most colleges do. One class could be anywhere from 3 units to 4units, and on rare occasions 5 units. If I had carried a full load I would have had an out of pocket expense every semester, but part of that load would have been discounted. I had always taken two classes a semester (part time status, roughly 6 to 8 units), as that is what my financial aid would cover in full.

Both my parents worked full time jobs, and there was just enough money to keep the house running. Extra money for my education was not an option; it was just one example of why they pushed me to better myself. I worked mostly part time trying to support myself through school, but I did not make enough to cover full time status. At one point I got lucky enough to find a full time job paying me $12.00 an hour. Unfortunately this was just after the campus was moved 15 miles further away from home. I was already driving over 30 miles one way to get to campus. My new job would not allow me to alter my schedule so I could continue on-site classes, so I ended up having to quit and go back to part time work. At this time my Academic Adviser suggested online courses, which allowed me the freedom to do my classes around work and saved me a lot of money in gas. It wasn't until that Financial Aid meeting in 2010 that I learned the online courses were significantly more expensive than campus classes.

Sitting in the Financial Aid office that day I learned I would need roughly $20,000 to finish my education. How could this be happening? I had already completed so much of my degree program, and had incurred so much debt that there was no way I could start over at a different school. I was told I had to apply for a private loan and only after it was denied could I apply for a loan through the DeVry ECSI Program. I took one loan in May 2011, and a second in March 2012. In addition to the loan, I asked what other options I had to reduce the remaining cost. I was told I could submit an appeal to transfer credits from a community college. Again I was shocked. I was specifically told when I started at DeVry that credits were non-transferable, so I never tried pursing that course of action. Had I known that I could in fact transfer credits, I would have looked into this option much sooner as I live less than 5 miles from my community college. I filed the appeal and took four classes at Moorpark Community College. While I was relieved at this opportunity, I was heartbroken as well. Those four classes, with all the books and fees, cost me less than one unit credit at DeVry. This made me realize just how big of a mistake I made when I chose to pursue my education with DeVry University, and how much they took advantage of my lack of knowledge regarding the student loan process.

The appeal to transfer credits would not be my last. When I returned to DeVry after taking my community college courses, I would have to write two more appeal letters before I received my diploma. To get the funding for my final semester I had to apply for a second loan through the ECSI Program. In order to get the total amount needed I would have to overload my units, taking 2-3 units more than the maximum DeVry would allow. I wrote a very simple appeal letter, consisting of one paragraph that in short stated “please allow me to overload my course units, so I can apply for this loan as it is my only option to be able to afford to complete my education”. It was denied by the Dean of Students. When I inquired as to why my appeal was denied I was told the Dean ‘wanted to know how I was going to be successful’ if the request was allowed. During my time at DeVry I had the following against me: I had only taken two classes a semester, I had failed one class, and I had taken an entire semester off. My appeal then became a two page paper on my projected study habits and explanations of the above stated offenses. It was approved and I was able to get the loan to finish my course load. During my final class I received notification from the Administration Office that my application to walk in the graduation ceremony was denied, on the grounds I was missing 3 units of elective credits. I already had the Dean’s approval in writing to allow a course I had accidentally taken twice to count as this ‘missing’ elective. My Academic Adviser, who helped me schedule my classes, had not noticed I had already taken the course under the previous course code. I had to write yet another appeal to the Dean, which fortunately was approved with no hassle, so I could finally complete my education and receive my diploma.

One of the things that drew me to DeVry University was their promise of career placement. The school boasted their Career Center helped their graduating students find jobs in their new fields of education. Roughly six months after I graduated I was contacted by the Career Center with a prospective job opportunity. They had found me a 20 hour a week, $9.00 an hour position. That’s what seven years of study and tens of thousands of dollars in student loan debt got me, an offer for a position that was suited for a High School Junior or Senior. I turned the position down as I was currently working 40 hours a week, making $14.00 an hour with full benefits. I asked the Career Center to please let me know if they found anything meeting or exceeding my current situation. As I type this letter it has been three and a half years since I graduated, and I have not heard from the Career Center at DeVry University since.

In 2015 I had a consultation with a lawyer to see if I had any legal grounds to stand on, in terms of getting my loans reduced due what I saw as unethical and less than forthright business practices by DeVry University. I did not. The contract is so well written by DeVry that I would have been facing an even more expensive and most likely pointless legal battle if I went down that road.  It is now the start of 2016. I have worked my way up through a few different companies to become an Accounts Receivable Specialist. I work a full 40 hours a week at $21.00 an hour, have full benefits, and pay back almost $400 a month in student loan debt.

I consolidated my federal student loans in 2014, at which time the consolidated total was $72,460.73. When I consolidated I applied for, and was granted, an Income Based Repayment plan that I must re-qualify for every year. My monthly payment is $170; since 2014 I have paid $4,234.43 towards this loan. The current balance is now $75,822.85; my payment does not cover the interest I am accruing every month, so my loan balance has increased. Until such a time as I can pay off the accrued interest and make a substantially larger monthly payment, this balance will continue to grow. My loans through the DeVry ECSI Program totaled $13,260.41 and currently have a payoff balance of $8,949. I have paid back $5,815.20 in interest alone since 2011.


Every day I struggle with the financial position I am in due to my education. When I started college I looked forward to one day owning a home. That dream was the light that kept me going and made me never give up achieving my degree. Today that dream feels like an impossible task. I look at my student loans and wonder how my dream will ever become reality. My parents see me struggle and feel immense guilt, as it was their urging that put me on the path to DeVry. I want people to know my story so they can be fully aware of the potential situation they are entering in to. I want young high school graduates, like I was, to be spared the feeling of hopelessness that I now struggle with. Please help me stop DeVry University from robbing even one more person of the future they have stolen from me.

THANK YOU ALISON - YOU ARE NOT ALONE!

Alison's story is just one of tens of thousands!  While she found that DeVry University personally let her down, I have found that there are any number of colleges and universities that are just as guilty of "failing" enrollees and graduates!  The facts are overwhelming.  Colleges seem to have one goal in mind and that is the PROFIT they are bringing in, and "To Hell" with the student!


If you have any comments, questions, or suggestions for this blog, please let me know.  By choosing to follow my blog, you will be informed of my latest posts - just complete by posting your email in the form on the upper right of this page.

Until next time, God Bless America!
Richard Allen Precht




Saturday, June 4, 2016

THE DISCHARGE OF $130,000 WAS SETTLED WITHOUT A TRIAL! HERE IS MY THEORY OF WHY!

AT A MOTION HEARING, THE DEPT. OF ED. MOVED TO STRIKE MY COMPLAINT. 
BY COUNTERING THAT MOTION, THE DEPT. OF ED. SAW I WAS NOT GOING TO FOLD!

THE JUDGE GAVE THE DEPT. OF ED. JUST THREE DAYS TO ANSWER MY COMPLAINT. WHAT THE DEPT. OF ED. DID NEXT LEFT ME THINKING WHY DIDN'T THEY WANT A TRIAL?


I HAVE A THEORY! 

Ever since I won a full discharge of my student loan debt in February of this year, I have had this recurrent thought "why did the Department of Education (D.O.E.) agree to discharge my $130,000 loan debt without going to trial?"  Why was it that the D.O.E. could possibly be so eager to end my Adversary Proceeding here at the Bankruptcy Court in Alexandria Virginia?

Let me begin by sharing a brief overview of my situation.  At 67, retired, disabled unemployed, living on social security and a small federal pension, (both of which were being "garnished" by the D.O.E.), I was living with my youngest child and her husband on just $1,200.00 a month.  My income was being offset by the U.S. Treasury in an attempt to pay the interest on my consolidated and defaulted 27-year old student loan.  A debt which originally was $55,000.00 borrowed when I returned to earn a bachelors degree when I was 40 years old.

Of that debt, I had paid back nearly $14,000.00 in spite of the fact that from 2002 until I turned full retirement age, the Social Security Administration was deferring my loan due to my being awarded SSDI (Social Security Disability Insurance/Income).  Once I reached what was described as "full-retirement status" my SSDI was changed over to "a straight social security annuity".  Then I was notified that my student loan was now due in full and had grown to nearly $130,000.00.  And then I was notified that my monthly annuities were going to be garnished.  The reality is that the 15% they are allowed to garnish was not enough to cover the interest, that keep growing adding to the principal each and every day!

IN ANSWERING THAT QUESTION ---- I PROPOSED MY THEORY

Sometimes when we have an idea or in this case a theory, it helps to share those thoughts with a friend and get an opinion.  So I wrote my friend W. Richard Fossey an email and proposed my theory to him as follows:

"Richard,

Something that has come into my thoughts on more than one occasion is the fact that the DOE moved so quickly in my particular case to settle without a protracted trial.  I have a theory, perhaps you can consider this idea that I keep having and provide your thoughts?

OK... As you know, my preparation made a huge difference.  And the fact that I had all of my documents and exhibits ahead of the discovery phase and filed the AP in a very timely and methodical way, also made a huge difference (in my opinion).

But what has peaked my curiosity as I think back on this, is why did Coulter and the DOE move to settle without seeking a "trial judgement" or "decision" from Judge Mayer?  Here is my theory....

Consider this --- Had the DOE persisted on going to trial, and with the fact that I was challenging the DOE with their own July 7th policy directive, is it possible that the DOE and Coulter were reluctant to go to trial BECAUSE they were afraid that Judge Mayer would rule in my favor and write a decision brief that would be the key to opening a Pandora's Box for other courts to rule with?

By NOT writing an official public trial decision, there is not that much publicity or factual case information that gets posted to the legal networks.  Therefore the DOE continued to cover over the  results of my case, and in the process continued to avoid a landslide from taking place?

My case is not out there like (a mutual debtor who won his case - and wants to remain anonymous) or any of the others who's student loan cases went to trial and were decided upon, is there something to my theory? 

What are your thoughts?"  Richard P.

My friend's reply....

Hi, Richard.

I think you are exactly right. Your thorough preparation was definitely a factor, and when DOE received that opposition to their motion to strike, Coulter knew you were ready to fight for as long as it would take.


But your other hypothesis is a big part of it as well. I agree that Coulter was afraid of a written decision that could be published in the Bankruptcy Reporter that would alert everyone in a similar position that the July 7th letter could be a huge asset.  DOE couldn't risk it. So your victory doesn't go down in the records like (our mutual friend's) did.


(Our mutual friend) thinks that the combination of the Roth decision and your victory means that anyone whose Social Security checks are being garnished can win an adversary proceeding.  In other words, your victory could apply to about 155,000 people!  In other words, all these people would have to do is to follow the template you laid out and they would almost certainly win.


That's why I would like to see your victory publicized as widely as possible and why I think your blog is so important.

And although I am not certain, I also think your case might have been a factor in DOE's decision to forgive student loans for everyone who is categorized as disabled.  They too would fit under the July 7 letter.

I'm thinking someone considered your case and could see that disabled people could do just what you did. To avoid the publicity and the court precedent that would surely come, DOE got pro-active and signaled it would forgive loans by all disabled people. As I recall, that is almost 380,000 people--people who may have gotten relief because of what you did with that letter.

You are kind of the Rosa Parks for the student-debtor class!"



In her autobiography, My Story (Rosa Parks) said:

People always say that I didn't give up my seat because I was tired, but that isn't true. I was not tired physically, or no more tired than I usually was at the end of a working day. I was not old, although some people have an image of me as being old then. I was forty-two. No, the only tired I was, was tired of giving in! (emphasis added)
Me.... the Rosa Parks for the student-debtor class!

Well I have actually been in the bus that Rosa Parks made famous, it was in the Henry Ford Museum in Dearborn, Michigan, and I can tell you that it was a somber experience.  


For my friend to compare me to Rosa Parks is a great compliment.  It would be a great honor to know that others find hope and answers to their personal student loan "crisis" by something I have shared!  If you are struggling with a student loan that will never be paid off in your lifetime, there is a glimmer of hope. When I nearly despaired and was ready to quit, I was encouraged by my friends to press on.  I decided I was not going to "move to the back of the bus" and I was not going to be intimidated by the unfair laws that were against me.

There is a change coming!  I pray I have become one of the agents of change?  But there are thousands of people in crisis just like I was who need a "fresh start", please help me and others like me, get the word out that the current laws that prevent bankruptcy or forgiveness of inflated and corrupted student loan debt need to be changed.  Feel free to pass my writings along.  



If you enjoy my posts here, please let me know.  And if you have any questions I will be happy to answer them.  You can receive email notice of my latest posts by inserting your email information in the box on the upper right of this page. 

Thank you!  Sincerely, Richard Allan Precht


Sunday, May 29, 2016

43 YEAR OLD SINGLE MOM WINS PARTIAL DISCHARGE OF STUDENT DEBT

IDAHO JUDGE JIM D. PAPPAS GRANTS PARTIAL DISCHARGE
BASED ON UNDUE HARDSHIP - BRUNNER TEST PASSED

My friend and fellow student loan informationalist, Wm. Richard Fossey, emailed me to share a recent undue hardship victory which I want to discuss this week. The case was decided on May 3rd, 2016, in the U.S. Bankruptcy Court in the District of Idaho.  The link to the full context of the decision is here: http://business-finance-restructuring.weil.com/wp-content/uploads/2016/05/McDowell-5-4-2016.pdf

The plaintiff, a 43 year old twice divorced mother of a 23 year old and a 15 year old, proved undue hardship under the three-pronged Brunner Test. The plaintiff passed the first prong in spite of having a seemingly modest income and being employed, because her monthly expenses were consistently higher than her monthly income, which satisfied prong one which requires: "Based on current income and expenses, the Debtor cannot maintain a minimal standard of living if forced to repay the student loans".

Prong two of Brunner requires "additional circumstances,indicating that the first prong circumstances will persist through a significant portion of the loan repayment period" in this case the additional circumstances involved the plaintiff's health, and a large portion of the case summary by Judge Pappas was spent on discussing the testimony of a number of Doctor's regarding the health conditions of the plaintiff.  

The defendants here, the Department of Education and ECMC (Educational Credit Management Corp.) went to the level of bringing in "expert witnesses" (a Doctor paid to examine and then testify) to challenge the testimony of the plaintiff's doctors (plural - due to her difficult to diagnose conditions).

In spite of the challenge to dis-prove the plaintiff's "additional circumstances" Judge Pappas found for the plaintiff in prong two.   Pappas summed up prong two this way: "the opinions offered by the experts leads the Court to find that Plaintiff’s medical issues are indeed serious and likely of a permanent nature. Because of that, Plaintiff’s medical and other expenses are likely to remain elevated, and her earnings capacity will likely remain limited.

With two of the Brunner prongs satisfied, the third prong "a demonstration of good faith" or as stated in Brunner: "The debtor has made good faith efforts to repay the loan" , was the final step requiring passage.  Here the court's examination of the plaintiffs "good faith" resulted in opening the door for "a partial discharge".

WATCH OUT ON WHAT YOU PAY FOR!

Judge Pappas agreed with the plaintiff's claims "that she has acted in good faith in this case by trying to maximize, or at least to maintain her income, as well as by endeavoring to minimize her expenses". However, ECMC argued that some of the financial decisions made by the plaintiff demonstrated lack of good faith.  ECMC pointing out expenditures the plaintiff made for an overseas trip (for which she had borrowed money from her mother), and the purchase of a $10,000 Motor Cycle for one of her ex-husbands.

In the end, Judge Pappas concluded that although the plaintiff  "occasionally made bad financial choices (those) should not disqualify her from securing relief"... Yet based on the fact that the plaintiff's lack of financial discipline may have consumed $10,000 that would have otherwise been available to pay on her loans, Judge Pappas moved to not allow a full discharge of the total loan amount.  

CONCLUSION OF THE MATTER

While Judge Pappas ruled in favor of the plaintiff's proof of the three prongs of the Brunner Test, he made the decision to grant a partial discharge, stating: "the Code accommodates situations like this one.  The discharge of student loans is not an all or nothing proposition".

Pappas based his decision on precedent case law within Saxman v. Educ. Credit Mgmt. Corp. (In re Saxman), 325 F.3d 1168, 1173 (9th Cir. 2003), and Jorgensen, 479 B.R. at 86, along with Bossardet v. Educ. Credit Mgmt. Corp. (In re Bossardet), 336 B.R. 451, 457 (Bankr. D. Ariz. 2005). 

Daniel Gill, writer for the Bankruptcy Law Reporter, summarized the decision very well by writing: "Rather than use these improper spending instances as examples of bad faith, the court exercised its inherent powers of equity and carved out such expenditures from the amount of student loans it would order to be dischargeable. Importantly, the court concluded that these poor decisions of the debtor did not materially affect the bottom line of the debtor's reasonable expenses. 

Ultimately, the court ordered that the debtor's foolish or poor financial decisions did not value more than $10,000, so the creditor would hold a non-dischargeable claim for $10,000, plus interest at the contract rate; the remainder of the approximately $93,000 student loan would be discharged."  Source: http://www.bna.com/ch-debtor-wins-n57982071510/.

My summation is this...  I find that the courts are continuing to struggle with how to rule on undue hardship in a consistent manner when they are constrained by the confines of the now antiquated Brunner Test, and must continue to examine each "prong" on its merits, and then determine if the plaintiff passes all three before granting a discharge.
In this case I agree with the sound decision of Judge Pappas to "splitting the baby" as writer Gill called it. To those of you reading this, take caution, your spending habits may be reason enough to not win a full discharge.

The Honorable Judge Jim Pappas is best know for his precedent case Roth vs ECMC, and he has been very critical of the Brunner Test for many years. Unfortunately the test remains to be proven.  But as I demonstrated in my own successful discharge of $130,000 in February 2016, it is not impossible.









Friday, May 13, 2016

WHAT WE NEED FOR COLLEGE LOANS IS "A LEMON LAW"

WHY NOT A "LEMON LAW" FOR BAD COLLEGE LOANS?


From Wikipedia, the free encyclopedia
Lemon laws are American state laws that provide a remedy for purchasers of cars and other consumer goods in order to compensate for products that repeatedly fail to meet standards of quality and performance. Although there may be defective products of all sorts ranging from small electrical appliances to huge pieces of machinery, the term "lemon" is generally thought of as applying to defective vehicles such as automobilestrucksSUVs, and motorcycles.
These vehicles and other goods are called "lemons". The federal lemon law (the Magnuson-Moss Warranty Act) was enacted in 1975 and protects citizens of all states. State lemon laws vary by state and may not necessarily cover used or leased cars, and other goods. The rights afforded to consumers by lemon laws may exceed the warranties expressed in purchase contracts. Lemon law is the common nickname for these laws, but each state has different names for the laws and acts.
There are two types of warranties. Express warranties are usually statements in writing such as those provided by the manufacturers in owner's manuals and other written sales or advertising materials, or by a sample or model. Implied warranties are broader in scope and assure consumers that the retail product would meet certain minimum standards of quality whereby the product is fit for use for the purpose intended. In each type the manufacturer assumes the liability and responsibility to correct the defect or to repurchase or replace the product. Typically, the existence, scope and consequence of express and implied warranties is a matter of state law, usually covered by Article II of the Uniform Commercial Code.
Federal lemon laws cover anything mechanical. The federal lemon law also provides that the warranter may be obligated to pay the prevailing party's attorney in a successful lemon law suit, as do most state lemon laws.

CONSIDER THESE FACTS...


My good friend and fellow student loan blogger and published author, Professor W. Richard Fossey made a good point in his most recent blog where he stated: "... as everyone knows, the colleges and universities are charging more than their degree programs are worth and are often admitting far more students than the job market can absorb. This is particularly evident at the law schools, which are graduating about two new J.D.s for every job opening.  But it is also true in the field of education...." (emphasis added)

EMPTY PROMISES + COSTLY PROGRAMS = LEMON DEGREES

Fossey provided another striking point: "The universities are not penalized for charging too much for their programs or for admitting too many students. And state legislatures are not penalized for establishing more degree programs than the public needs. For example, Arthur Levine, in a scathing report on educational administration programs, estimated that more than half of them should be closed.

COLLEGES SHOULD BE RESPONSIBLE FOR BAD PRODUCTS!

So there we have it... Colleges and educators alike over-selling college programs at the highest cost ever for tuition, with CEO's of both Public and Private Colleges making million dollar salaries while pushing the promise of a great job by becoming an "Alum".

Here is where a "Lemon Law" for getting a bad deal on your college degree program promises should come into play.  A Lemon Law for college loan holders could be something like this.... 

FIRST: If the graduate fails to get a job that they trained for within 12 months of graduating, they should not be forced to begin paying on the student loan debt for an additional 12 months, and the interest rate is zero and there would be no penalties for that 24 month period.

SECOND: If the graduate still is unable to obtain employment within their degree field after 36 months, then the student loan debt would be absorbed by the college or university, as part of the College Degree Lemon Law.  No penalties, no interest, no student loan debt!



THE END 

(OF OVERSELLING EDUCATION)

This week I did a slight diversion from my blog topic on informing on bankruptcy and adversary proceeding....  I will try and get back to that in the next post.  But today I just had this thought hit me and had to write about it.  I was oversold on my education, and ended up not finding employment in my degree field, then ended up owing nearly $130,000.00 for a degree that I was told by educators was going to get me a great job with excellent pay.  It never happened!  My only escape clause came after 27 years of trying to pay back my student loan, when I finally filed bankruptcy and won a full discharge of my student loan under the "Undue Hardship Clause".  If there was a lemon law for colleges, perhaps me and many other graduates would have proven there were bad products being pushed on us? 

Reference: 

W. Richard Fossey: "Educational Credit Management Corporation v. Acosta-Conniff; A lifetime of Indebtedness is the future for most college borrowers" Accessible at:
http://www.condemnedtodebt.org/2016/05/educational-credit-management.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+CondemnedToDebtTheStudentLoanCrisis+%28Condemned+to+DEBT%3A++The+Student+Loan+Crisis%29

Arthur Levine. Educating School Leaders. Education Schools Project, 2005. Accessible at http://www.edschools.org/pdf/Final313.pdf


Friday, April 22, 2016

CAN YOU PROVE UNDUE HARDSHIP? YES, BUT YOU NEED RECORDS!

STEP #8 – DOCUMENTATION


Just today I was reading one of my favorite blog sites “Get out of Debt Guy”, and someone wrote in for advice about getting a recent call about a 20-year old student loan which the person thought had long been forgotten, and for which they had stopped paying on.

While the person's question did not provide much detail and left the Get Out of Debt Guy with little to go on to provide good advice, my take was that the person needed to find out what was going on. And in my opinion they needed to do some research, find out who was calling them, and do some digging to find their records!

Which brings me to what I want to talk about today in the continuation of my discussion of some steps needed to discharge your student loans. Let's take a hard look at what documentation you need to discharge your student loans, from the point of bankruptcy and proving undue hardship.

At the point of my decision to do something about my student loan debt, I soon realized I was going to need some proof that I was never going to pay off the debt. I also realized that it was going to require a fair amount of work to come up with that proof. At first it seemed like an impossible task and that the deck was stacked against me by the Department of Education.

After all my loan was over 27-years old, and had grown out of control due to penalties and interest applied when I was no longer in a deferred status having been taken off of SSDI and in-voluntarily placed on straight Social Security. My loan was now nearly three times the amount I had originally borrowed and it was now due and the interest on that loan was being paid for under a garnishment offset by the Treasury Department.

I was in a bad place financially, and all I knew was I needed a way out. The way out meant I had to prove I could not ever pay the loan off, and that my situation was hopeless.

What I needed was documentation and records to back that up. Thus began a gathering of information. I hope by sharing what I needed, it will help someone here.

As I have stated before, in order to get out of debt and get rid of those student loans, you are going to have to file bankruptcy. Filing for bankruptcy requires you to fill out official forms, including a bankruptcy petition and a series of schedules that give the court an idea of your finances. In addition, you’ll submit documents that disclose the details of your financial affairs.

Whether you are filing for Chapter 7 or Chapter 13 bankruptcy, the documents you must file are usually the same, although guidelines and requirements may be different depending on the state and judicial district in which you live. Check with your bankruptcy clerk's office to make sure you are meeting your district’s requirements.

Chapter 7 Bankruptcy Documents

The bankruptcy courts require several documents. Here is a short list of the most common types of records that a Bankruptcy Chapter 7 requires:
  • Valid Proof of I.D. - Photo Identification Required – Most courts have security checks
  • Proof of Social Security Number – Generally a separate form is submitted w/chapter
  • Bank Statements – Checking and Savings accounts – probably the prior 6 months
  • Pay Stubs – Most courts require 6 months of pay stubs
    • If you’re employed, locate copies of your pay stubs from the six months prior to your bankruptcy. Also, secure copies of your last two W-2's. If you’re self-employed, a profit and loss statement (“P&L”) covering the six months prior to your bankruptcy, along with bank statements supporting the amounts on your P&L, will suffice.
  • Retirement Records (if applicable) – Social Security Account Statements, Others
  • Tax Records – Minimum of the prior year's filed tax returns - State and Federal
    • Locate copies of your tax returns or transcripts from at least the past two years. If you haven’t filed your taxes, you’ll either need to provide a valid reason for not filing, or you’ll be required to file your taxes and show proof that you did.
  • Property Valuations – if you own real property – or hold a mortgage or loan on same
    • If you own property, you need to show the amount of its value—either an online valuation, a broker’s price opinion, or a full appraisal is acceptable. You also need to submit a mortgage statement that includes your loan balance, deeds of trust, and proof that your home is insured.
  • Automobile Documentation
    • If you own a car, you must submit copies of your registration, proof of insurance, and information about how much your car is worth. If you’re still working on paying off a vehicle, submit a copy of your most recent auto loan statement.
  • Child Support or Alimony Documentation
    • If applicable, show proof of expenses such as child support or alimony.
  • Proof of Marriage or Divorce (may be required in some districts)
  • Bills and Loan Statements
  • Mailing Matrix” - A list of creditors, with addresses – (See local rules on format)
  • Statement of Compensation Paid to an Attorney – if applicable
    • Finally, you will need a statement disclosing compensation paid or to be paid to your bankruptcy petition preparer, if applicable.

Chapter 7 Bankruptcy Forms

Bankruptcy forms consist of lettered and numbered forms, some are statements and some are referred to as “schedules”. The U.S. Court website provides downloadable and most of the forms can be pre-filled on-line then printed out. Additionally, your local court may have additional forms which they require. You will need to submit the following Chapter 7 bankruptcy forms, available for download on the U.S. Courts website :
  • A voluntary petition, which includes names and addresses of all creditors.
  • Certificate of Completion of a Credit Counseling Course
  • Statement of current monthly income
  • Schedules of assets and liabilities
  • Schedules of current income and expenditures
  • Schedule of executory contracts and unexpired leases
  • Statement of financial affairs
  • Statement disclosing compensation paid (or to be paid) to your bankruptcy petition preparer
Discovered I had many records already!

So what did I have already? Well for starters I had statements that I got in the mail from both the Social Security Administration and my Federal Retirement agency which showed what was being withheld each pay period to pay a portion of the interest on my student debt. Now I admit I hate paperwork, and I was not really good about keeping stuff, but somehow, I had kept several years worth of these statements (most likely it was divine providence and not my doing as I am sure I did not think I would ever do anything with them years ago).

The other miracle I discovered was that even though I had recently moved and threw a ton of paper away at the local recycle bins, I still had in my possession some of my original student loan paperwork, including most of many receipts of money orders I had used to pay $90.00 a month for over three years towards my student loans.

I also had kept documentation of my Social Security Disability application along with other vital records regarding my medical conditions, and proof of payments from the time I was receiving SSDI, and other letters and correspondence related to my mental conditions and hospitalizations.

Other legal records, like my divorce papers (twice divorced here), and files that included my previous bankruptcies (twice before this last one) were what I found and were going to be part of my proofs! By some measure of God's grace I somehow had preserved and kept a lot of what I was going to use in proving my undue hardship case in bankruptcy number three.

I also learned that I could request records that I was missing or may need. 
 The internet age is amazing and I am now convinced that you can find anything you are looking for if you ask the right questions!

If you find you do not know your student loan history, try by doing a search on line. The link to see your loan history (for most Federal Loans) is: National Student Loan Data System for Students at https://www.nslds.ed.gov/nslds/nslds_SA/ When you are here, you can create an account (if you do not already have access to the site s information pages). “If you do not have an FSA ID, select the Create An FSA ID tab”.

When I logged into the FSA site today, I found all my loans still listed, but they NOW have a ZERO $ balance! Praise the Lord! Thanks to a full discharge under 11 U.S.C. §523(a)(8).

Make sure you copy the link(s) to this web site. I recommend keeping a separate file named student loan data hyper-links (or similar), you will need to go back over these sites several times during your case documentation and preparations.

My other method of getting records was to write to everyone! I wrote to Hospitals for my mental health records, I wrote to all of the loan servicers I knew I had dealings with and even to those I was not sure ever serviced my debt. I wrote to the Social Security Administration, the agency in charge of collecting the garnishments of my income and to several agencies who are part of the Department of Education.

When you draft a letter, write it so you can mail the same letter to several agencies and only have to edit the mailing address. Ask specific questions asking for details about your loan balances, payments made, interest rates, fees and penalties, and any other pertinent information relevant to your specific situation.

Keep a copy of the letters in a separate folder with a main folder. 
 Example would be “letters to lenders” within “my bankruptcy” folder.

When you get a reply from anyone, keep the paper copy but also “scan it” into your computer.
From now until you file your case every document is an important record and you will eventually include them as part of your case as “exhibits” within your Adversary Proceeding.

Records for an Adversary Proceeding

Next time I will continue with what other records and documentation you may need when you file an Adversary Proceeding. The documents to support your “complaint” are what the court calls “exhibits”. Exhibits must be submitted to the court according to their local rules and format. The guidelines for how to prepare and present exhibits is covered under a federal statute, but most courts will provide a written guideline as part of their local rules.

I had a list of 25 Exhibits in my case! The number of 8.5 by 11 inch pages was over 1,200 pages, and those 25 exhibits filled two 3-inch binders! The court required I submit the original and two copies and I also needed to give a copy to each of the defendants! That is a ton of paper and copying. And yes… it cost me money to provide the exhibits but I would not have won my case otherwise! More on this latter – but I was prepared and avoided the process called “discovery” and also won without a pretrial hearing or having to present my case in a protracted trial --- All because I had all of my documentation BEFORE I filed my case!

Until next time, begin to think about the documentation you have, and start to gather it into a secure place. I purchased several manila file folders and labeled them so I could easily find what I needed when the time came to pull all of the records together. I also scanned each document into a computer file. In my adversary proceeding, the defense attorney was willing to accept a thumb drive with all of my exhibits which where saved as PDF documentation. Having the U.S. Attorney accept a thumb drive saved me the cost of another set of three ring binders, and the cost of copying over 1,200 pages at the copy center.

Thanks for reading along. If you have any questions or comments please feel free to post them here. I will be happy to hear from you and to answer any questions or concerns.

Blessings, Richard Allan Precht