Bankruptcy of Your Student Loans

Bankruptcy of Your Student Loans

Saturday, June 4, 2016





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!


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:


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


  1. Richard, this is a great blog! Thank you for taking the time to write about your success story and especially for your excellent step by step instructions. I've been in touch with Richard Fossey and he mentioned your success in getting a discharge, but I hadn't seen your blog until now. I'll most definitely be following closely, so please keep it going! I'm at, I'd love to correspond with you.

  2. Dear Richard,
    Thank you for posting your story. I like 42 million other people according to the cover of the latest Consumer Reports "I kind of ruined my life by going to college". At 32 years of age I made the cross country move from NYC to San Francisco to go to The Academy of Art College now known as The Academy of Art University
    I choose the school because during a visit to SF to visit an Uncle I saw the school and went on the very glamorous tour of the campus. The claim to fame is that they produced "working artists with such companies as ILM and Disney,no portfolio required for admission and student aid. I believed them only because I had taken a couple of classes at SVA and Parsons in NY and found jobs in what I studied after that paid for the part time classes. So being a full time student with a degree seemed the proper investment in my future mind you I was already 32. I went for 4.5 years wanting to learn stop motion animation. I went for 4.5 years I made a point of taking my liberal arts classes first, as I was in school they kept changing the requirements so classes I'd previously taken no longer counted I was in every dept. but fashion and interior design. After 4.5 years I had no portfolio ,no degree , no job. I managed to pay back my bank loans but when I could not afford payments on fed loans my only options were to defer I have now defaulted and rehabilited, only found out I was in default when they took my husbands tax return, I did not marry until I was 45, needless to say almost lost him thanks to student loans. I'm now 52 and owe over $129,000 in fed loans earning $800 a month interest. I'm self employed picking up whatever work I can find from painting to cleaning to dog walking. If I lost my husband I'd be a homeless person. All because I thought I was doing the "right" thing for my future.
    In my research it seems bankruptcy is not an option and thank my lucky stars I am not disabled, except maybe mentally after worrying about this student loan hell. I agree with the "lemon Law for education" I will forever be in financial hardship because I trusted the Academy of Art College. I saw that there is a new claim added to federal student aid called "borrowers defense" there is not a "process "for it yet I am trying to figure out what type of legal council can advise me correctly. My girlfriend I met at AAC is also in the same boat as me.
    I hope that I might find a solution as you have.


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