Bankruptcy of Your Student Loans

Bankruptcy of Your Student Loans

Sunday, February 25, 2018


Department of Education Asked For Input

And No One (almost no one) Cared!

Last time, I wrote and shared the Department of Education's Feb 22nd, 2018 Request for Information (RFI) entitled: 

Request for Information on Evaluating Undue Hardship Claims in Adversary Actions Seeking Student Loan Discharge Bankruptcy Proceedings.

Thanks to fellow Student Loan and Debt advisor Steve Rhode "The Get Out of Debt Guy", , for emailing me and informing me of this RFI.

To be honest I was actually shocked to learn that the Department of Education (DOE) was actually seeking public input on the subject of Undue Hardship!  After all, up until this RFI appeared, I had thought the DOE and it's new Secretary Betsy DeVos were either reverting back to business as usual - which means to me they could care less - or they were going about "pretending they cared, but doing nothing to show it"!

Actions I Undertook Regarding This Request

When I read the RFI, I took immediate action to reply!  As some of you know who follow my blog, I am passionate about Student Debt and what I perceive as abuses against student loan holders.  If you think for a second that the DOE is looking out for the welfare of students when they loan money for college well... you are still asleep at your desk!

While I could go on for days talking about the abuses and corruption perpetrated on, not only aspiring college students but parents alike by the DOE and their partners in crime, the banks and loan serving agencies, I will avoid that discussion for now only because it still makes my blood boil to think about.  (By the way - yes, I have written about it in the past).

OK back to what I proceeded to do having gotten this information.  In reading the DOE's RFI I saw that they were looking for "public comment" regarding the subject I base my Blog Posts on and that is "Undue Hardship Exception" and the use of an "Adversary Proceeding".

Here's the crux of the RFI:

The U.S. Department of Education (Department) seeks to ensure that the congressional mandate to except student loans from bankruptcy discharge except in cases of undue hardship is appropriately implemented while also ensuring that borrowers for whom repayment of their student loans would be an undue hardship are not inadvertently discouraged from filing an adversary proceeding in their bankruptcy case. Accordingly, the Department is requesting public comment on factors to be considered in evaluating undue hardship claims asserted by student loan borrowers in adversary proceedings filed in bankruptcy cases, the weight to be given to such factors, whether the existence of two tests for evaluation of undue hardship claims results in inequities among borrowers seeking undue hardship discharge, and how all of these, and potentially additional, considerations should weigh into whether an undue hardship claim should be conceded by the loan holder.


Responses must be received by February 22, 2018.

Time? Please!

I would like to point out that the DOE's RFI was posted on Feb 21st and ALL replies must be submitted by the very next day Feb 22nd by 11:59 pm.  ONE DAY? Seriously?
One day to send in "input" about "factors to be considered in evaluating undue hardship claims asserted by student loan borrowers in adversary proceedings filed in bankruptcy cases...."  Does that seem fair?
Well, that did not stop me!  I got busy and wrote out my comment and in addition to my several paragraphs of sharing what I had gone through with my own student loan discharge via Bankruptcy, but I also attached 16 separate file uploads of what I felt were pertinent documents to underscore the need for the DOE to take a hard look at what they have done (or should I say failed to do) in regards to student loan holders who suffer all types of hardships and are being unduly penalized by the DOE and the predatory lending agents and servicers that the DOE uses.  I also emailed several of my friends, followers and others - and shared the link to the RFI, and asked them to also submit input to the DOE.  I was pleased that some of them did in fact complete the process and send in input to the DOE.


Just a little while ago I went back to the DOE website where the RFI was posted.  I was looking to see if by chance any new information was listed there.  I was also interested to see if by chance they had extended the deadline for sending in the input.  Well...  neither of those things was different.  The deadline had not been extended and no notable new information was there... EXCEPT FOR the posting of the number of replies sent in!


Seriously! ??

What a disappointment!  Only 66 responses for input? How sad!  Could this low number of replies have been due in part to the DOE only providing a mere 24-hour window of opportunity for parties to comply?
I also wonder what the reach was?  I mean how many organizations, attorneys, educators, students, parents, and individuals in the public sector actually got to even see this RFI?

Who were they targeting if anyone? Is it just me or does this sound a bit too disingenuous? One day to ask for input?  My question is WHO?  Who were they asking?  Or were they even trying to get input?

Betsy Devos = Year 1 = Failure 1

I was hoping when this new Administration came into power in Washington that we would see an appointment of a Secretary of Education who would do something to help resolve the massive student loan crisis we have in the country.  With close to $1.5 Trillion dollars in outstanding loans (billions which are in default - and not being paid on), that we would hear or see something said about this scourge on the backs of students and parents.  Instead, there has been a deafening silence from Madame Secretary, Betsy DeVos, the President and or anyone in Congress!

While the RFI discusses the July 7th, 2015 Department of Education's Policy Directive on the Undue Hardship it once again fails to make a clear statement as to how it should be interpreted and applied in a Bankruptcy.  It fails to provide clarification when a court should rule in favor of the plaintiff when they are claiming "undue hardship"
"The Department's current guidance to guarantors and educational institutions in defending bankruptcy proceedings is summarized in a July 7, 2015, Dear Colleague Letter (GEN-15-13 and provides for a two-step analysis when evaluating whether or not to object to a borrower's claim of undue hardship. The Department follows the same two-step analysis when defending bankruptcy proceedings for Direct loans. After receiving input from this notice, we will consider whether that analysis is still appropriate." (emphasis is mine)

Still Appropriate?

OK can anyone help me here?  Am I reading this correctly?  Is the DOE actually going to take this input and make a determination if the "analysis" of the so-called two-step evaluation laid out in the ambiguous (in my opinion) July 7th directive "is still appropriate"?
Again I ask... 'seriously'?

Am I wrong to conclude that the DOE is looking for a way to "UNDUE" the July 7th, 2015 policy --- thus going back to the time when there was even less chance for a discharge based on the Undue Hardship Exception?  Are they moving to go back to when Predatory Attorneys and Scrupulous Lenders prevailed in court and racked up thousands of dollars in legal fees to fight poverty stricken debtors many of whom are underemployed, disabled, aged, or having social security checks garnished to pay against accruing interest with "zero decrease" in the total loan amount?

That is where I was at!  My social security was being garnished at over $300.00 a month and that $300 did not even cover the interest charge each time!  I was lucky enough to win my case using that very July 7th, 2015 DOE Policy Directive!  But the DOE did not want anyone to know that I used their own policy as a motion to help win my case!  (read my article: ) 

So praytell what is the DOE up to here?  I "pray" that my feelings are dead wrong about the DOE and Betsy DeVos moving forward to rescind the July 7th, 2015 policy.  After all... in my opinion, it was a start in the right direction!  I also felt at the time it would open up the door for more favorable decisions by the courts, and allow many suffering under the weight of undue hardship to be free and enjoy the "fresh start" that bankruptcy is intended to provide! But sadly my win did not get published for others to use as precedent thus, the courts and plaintiffs barely know this policy exists. 


Meanwhile, we wait!  We wait and see if ANYTHING comes of our efforts to provide our own "input" to the DOE.  I want to personally thank those who did send in their comments to the DOE.  And again I thank Steve Rhode for posting his article about this RFI.

If you have any comments or questions, feel free to post them, I will be happy to address them. Please subscribe to this blog by providing your email in the box in the upper right of this page. Until next time, God Bless YOU and America, regards, Richard Allan Precht

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