Showing posts with label Richard Precht. Show all posts
Showing posts with label Richard Precht. Show all posts

Wednesday, August 9, 2017

Disabled Veteran wins stipulated discharge of student loans in a California bankruptcy court: "Snap out of it!"


The Department of Education has said publicly that it will discharge student-loan debt of people who are disabled. Unfortunately, the right hand sometimes does not know what the left hand is doing. Thus, some disabled people who defaulted on their student loans are still being hounded by the Department of Education or one of its debt collectors.

Jaime Clavito, a disabled veteran of Filipino descent was one of those people. Jaime filed for bankruptcy in California without a lawyer in order to get his student loan debt discharged (about $100,000). DOE opposed him in bankruptcy court, and a trial date was set.

At some point, however, DOE looked closely at Mr. Clavito's evidence and agreed to a stipulated discharge of his student-loan debt.

It is not clear from the record why DOE agreed to a discharge of Jaime Clavito's loans just a few days before trial. DOE's short stipulated agreement to a discharge is only two sentences long and says this:
Pursuant to the agreement of the parties, the United States Department of Education consents to entry of judgment granting a discharge of the plaintiff's student loans pursuant to 11 U.S.C. sec.523(a)(8), each party to bear their own attorney fees and costs. The parties request an order from the Court approving the stipulation and taking the trial (set for 8/14/2017) off calender.
I think, however, the DOE attorneys became convinced that Jaime was entitled to a discharge when they saw the evidence he filed showing that he is disabled.

It is unfortunate that Jaime Clavito's case was resolved so close to the trial date. Being in litigation against the federal government is undeniably stressful, and Jaime Clavito must have endured months of anxiety before finally obtaining his discharge.

Jaime Clavito's victory is similar to the victory Richard Precht won last year, when DOE stipulated to a discharge of his student loans. Like Mr. Clavito, Mr. Precht had a very strong case. He was living on only $1200 a month and his Social Security checks and small pension payments were being garnished.

DOE's first response to Mr. Precht's lawsuit was to file a motion to strike his complaint. Eventually, however, a DOE attorney looked at Richard Precht's voluminous evidence and signed a stipulation agreeing to a discharge of Richard's student loans.

What doe these two cases tell us? Two things.

First, people who have been officially determined to be disabled and people who are living below the poverty line on Social Security income are entitled to have their student loans discharged.  DOE is on record that it will discharge student loans by people who are disabled. As far as I know, DOE has no official policy to consent to discharges for impoverished Social Security recipients, but these people's cases are so strong, I don't think DOE will fight them.

Second, disabled people and people whose Social Security checks are being garnished may have to get DOE's attention in order to get their student loans discharged. DOE initially opposed student-loan discharges for both men, and they both had to file adversary proceedings in bankruptcy court before DOE woke up and agreed to discharge their loans.

People in Mr. Clavito and Mr. Precht's position remind me of that famous scene in Moonstruck, when Ronny Cammareri (played by Nicholas Cage) professes his undying love to Loretta Castorini (played by Cher). Loretta reminds Ronny that she is engaged to be married to Ronny's brother Johnny, but Ronny persists.

Finally, Loretta slaps Ronny hard across the face and yells, "Snap out of it!"

That's basically what Mr. Clavito and Mr. Precht did. By filing for bankruptcy, they figuratively slapped the DOE lawyers across the face and yelled, "Snap out of it."

So if your financial situation is similar to that of Mr. Precht and Mr. Clavito, you need to gather your evidence and file for bankruptcy. Then you need to file an adversary lawsuit against DOE or the debt collector who holds your debt and ask the bankruptcy judge to discharge your student loans.

When you do that, you will be slapping the Department to Education hard across the face. "Snap out of it,!" you will be saying. And I think that will feed pretty good.

References

Jillian Berman. Why Obama is forgiving the student loans of almost 400,000 people. Marketwatch.com, April 13, 2016. Accessible at http://www.marketwatch.com/story/why-obama-is-forgiving-the-student-loans-of-nearly-400000-people-2016-04-12


Clavito v. U.S. Department of Education, Adv. Proceeding No. 16-02238-B (E.D. Cal. Aug. 8, 2017) (Stipulation For Entry of Judgment Against The United States Department of Education).

Clavito v. U.S. Department of Education, Adv. Proceeding No. 16-02238-B (E.D. Cal. Aug. 8, 2017) (judgment signed by Bankruptcy Judge Christopher Jaime).


Precht v. U.S. Department of Education, AD. PRO. NO. 15-01167-RGM (E.D. Va. 2016) (consent order).

Press Release of U.S. Department of Education, U.S. Department of Education to Protect Social Security Benefits for Borrowers with Disabilities, April 12, 2016, accessed August 9, 2017.

Michael Stratford, Feds May Forgive Loans of Up to 387,000 BorrowersInside Higher Ed, April 13, 2016.

Friday, February 19, 2016

Let Justice Roll On Like A River: Richard Precht, A Virginia Man Living on $1200 a Month, Won Bankruptcy Discharge of Nearly $100,000 in Student-Loan Debt

But let justice roll on like a river, righteousness like a never-failing stream!
Amos 5:24
On July 7 2015, the Department of Education issued a letter outlining guidelines for determining when the Department and its student-loan collection agencies would not oppose bankruptcy relief for distressed student-loan debtors. DOE listed 11 factors that it would consider, including these:

1) "Whether a debtor is approaching retirement, taking into account the debtor's age at the time student loans were incurred and resources likely to be available to the debtor in retirement to repay a student loan . . ."

2) "Whether a debtor's health has materially changed since the student loan debt was incurred . . . ."

Frankly, I thought DOE's letter was insincere and that DOE would continue to oppose bankruptcy relief for nearly everyone and that it would persist in insisting that virtually every distressed student-loan debtor must be placed in a long-term income-based repayment plan. But perhaps I was wrong. 

In October 2015, Richard Precht, age 68, filed for bankruptcy and asked to have his student-loan debt discharged.  Mr. Precht as it turned out was the perfect person to test whether DOE meant what it said in its  July 2015 letter.  He was living in retirement and was in ill health and was burdened with almost $100,000 in student-loan debt.

In fact, his circumstances were desperate. Mr. Precht was living on a small pension and a small Social Security check, but both were being garnished by the federal government. His total income was only $1,200 a month and he was forced to live with his adult daughter because his income was not sufficient for him to afford housing.

Precht filed for bankruptcy in Virginia, and the federal court system quickly issued a scheduling order that put his case on track for a trial before a bankruptcy judge. Fortunately, Mr. Precht was ready to proceed with his case without delay. He had prepared nearly a thousand pages of exhibits outlining his financial circumstances, his health status, and his loan payment history over the years.

Initially, DOE opposed Precht's petition for relief. DOE's lawyer filed a motion to strike, asking the bankruptcy judge to order Precht to refile his complaint on technical grounds. But fortunately for Mr. Precht, the bankruptcy judge had read DOE's July 2015 letter. 

At the hearing, the judge pointedly asked DOE's attorney what DOE planned to do about that letter. The attorney's candid reply was, "We don't know."

But apparently, the policy makers at DOE considered the matter and decided to do the right thing. A few days after the hearing on DOE's motion to strike, the DOE attorney called Mr. Precht and said the Department would not oppose bankruptcy relief. DOE prepared an order for the bankruptcy judge to sign that relieved Mr. Precht of all his bankruptcy debt--a miracle of almost biblical proportions.

As the prophet Amos said: "Let justice roll on like a river." Mr. Precht won a life-altering victory for himself, and his case points the way for hundreds of thousands of people similarly situated. More than 150,000 elderly student-loan debtors are having their Social Security checks garnished, and millions of people are now in long-term income repayment plans that obligate them to pay on their student-loans until they are in their 70s, their 80s, and even their 90s!

Personally, I don't think Mr. Precht's victory signals a change of attitude at the Department of Education. I think he was able to prevail because he was prepared to go to trial and his case was so strong.  As of this writing, DOE still opposes bankruptcy relief for almost all student borrowers.

Nevertheless, Mr. Precht's victory is significant. His case demonstrates that truly deserving student-loan debtors who prepare good cases can prevail in bankruptcy court, even if they are not represented by an attorney.

References


Lynn Mahaffie, Undue Hardship Discharge of Title IV Loans in Bankruptcy Adversary Proceedings.  U.S. Dep’t of Educ., July 7, 2015, DCL ID: GEN-15-13.

Precht v. United States Department of Education, AD PRO 15-01167-RGM (Bankr. E.D. Va. Feb. 11, 2016 (Consent Order).