Showing posts with label Ronald Joe Johnson. Show all posts
Showing posts with label Ronald Joe Johnson. Show all posts

Friday, April 14, 2017

Bankrupt student-loan debtors need GOOD LAWYERS: The sad case of Ronald Joe Johnson v. U.S. Department of Education

We often hear that student loans cannot be discharged in bankruptcy---don't even try. But in fact, quite a few people have gotten relief from their student loans in the bankruptcy courts. And a few student-loan debtors have gone to bankruptcy court without lawyers and been successful.

But if you go to bankruptcy court to shed your student loans, you should bring a good attorney because the Department of Education or one of its agents will be there to meet you, and DOE and its proxies have battalions of skilled lawyers who will fight you every step of the way.


The Sad Case of Ronald Joe Johnson v. U.S. Department of Education

Johnson v. U.S. Department of Education, decided in 2015, illustrates why student-loan debtors should have good lawyer to represent them in the bankruptcy courts.  In that case, Judge Tamara Mitchell, an Alabama bankruptcy judge, refused to discharge Ronald Joe Johnson's student loans even though he and his wife were living on the edge of poverty. If Mr. Johnson had been represented by a competent attorney, I think he might have won his case.

In 2015, Johnson of filed an adversary proceeding in an Alabama bankruptcy court, seeking to have his student loans discharged. The U.S. Department of Education opposed a discharge (as it almost always does), and a lawyer from the U.S. Attorney's Office in Birmingham, Alabama showed up to represent DOE and make sure Johnson lost his case.

Johnson had taken out student loans in the 1990s to enroll in some sort of postsecondary program, which Judge Mitchell did not bother to describe in her opinion. Johnson testified that he had enrolled for four semesters but had only completed one of them,  He testified further hat his studies had not benefited him at all.

In 2000, Johnson obtained a Direct Consolidation Loan  in the amount of about $25,000, with interest accruing at 8.25 percent per year. Although he paid approximately $10,000 on the loan, mostly through wage garnishments and tax offsets, he hadn't reduced the principal by even one dollar. In fact, when Johnson appeared in bankruptcy court in 2015, his debt had grown to over $41,000.

Mr. Johnson desperately needed relief from his student loans. He testified at trial that he made about $2,000 a month working at two jobs; he was a municipal employee and also an employee at a local Walmart. His wife suffered from diabetes, which required expenditures for insulin and other supplies; and of course some of his income had been garnished by the government.

Unfortunately for Mr. Johnson, he signed a formal stipulation of facts that a DOE lawyer had cunningly prepared. In that stipulation, Johnson affirmed that it would not be an "undue hardship" for him to repay his student loans.

Although Mr. Johnson did not know it at the time, he lost his adversary proceeding the instant he signed his name to DOE's prepared stipulation. Debtors cannot discharge their student loans in bankruptcy unless they can show undue hardship; and Mr. Johnson admitted in writing that paying back his loans would not be an undue hardship.

If Ronald Joe Johnson had been represented by a lawyer, he would never have signed that document. Moreover, a lawyer would have told him to bring evidence to court documenting his wife's medical expenses.

In short, Johnson was a sitting duck when he walked into Judge Mitchell's bankruptcy court without legal counsel. Judge Mitchell noted that he admitted that his loans did not present an undue hardship and that he had not brought any evidence of the expenses he had incurred to treat his wife's diabetes.

And then Judge Mitchell walked Johnson through the the three-pronged Brunner test and concluded that he failed all three prongs.  He was able to pay back his loans and maintain a minimal standard of living, Judge Mitchell ruled; and he had not shown any additional circumstances indicating he could not pay back the loans in the future.

Finally, Judge Mitchell ruled that Johnson failed the good faith test because he had made virtually no loan payments other than payments made through income-tax offsets and wage garnishments.

Mr. Johnson had gone to court to argue reasonably that he believed he had paid down his loans through income-tax offsets and wage garnishments. All he asked for was relief from the interest and penalties that had been added to his debt.

But Johnson's arguments fell on deaf ears. He and his wife are stuck with a debt that grows larger every day that they will never be able to pay off.

Why can't student debtors find good lawyers?


Why can't people like Ronald Joe Johnson find good lawyers to represent them in bankruptcy court There are at least three reasons:

First, lawyers are expensive, and people who go to bankruptcy court don't have money to hire a good lawyer.

Second, bankruptcy lawyers are not keeping up with recent trends in the bankruptcy courts  and many believe--incorrectly--that it is impossible to discharge student loans in bankruptcy. Thus, even if Mr. Johnson had had money to pay a lawyer, a bankruptcy attorney might have told him that it would be pointless to try to shed his student loans in bankruptcy.

Third, legal aid clinics and poverty law centers, which should be representing people like Mr. Johnson, aren't interested in the student-loan crisis. They would prefer to provide pro bono legal services in landlord-tenant disputes or fight courthouse battles over traditional civil rights issues.

In fact, I called the Southern Poverty Law Center, which maintains an office in Alabama, and asked if the Center would help desperate student-loan debtors. I was told the SPLC does not do that kind of work.

Distressed student-loan debtors need legal representation in the bankruptcy courts, but they are not likely to get it. Nevertheless, some bankruptcy judges have begun issuing sensible, compassionate, and well-reasoned decisions on behalf of people like Ronald Joe Johnson.  Unfortunately for Mr. Johnson, Judge Tamara Mitchell is not a a compassionate bankruptcy judge.

References

Johnson v. U.S. Department of Education, 541 B.R. 750 (N.D. Ala. 2015).



Friday, January 29, 2016

If I Had a Hammer! With great courage, distressed student-loan debtors all over America are going into the bankruptcy courts and petitioning for justice


If I had a hammer,
I'd hammer in the morning,
I'd hammer in the evening,
All over this land,
I'd hammer out danger,
I'd hammer out a warning,
I'd hammer out love between,
My brothers and my sisters,
All over this land.

It's the hammer of Justice,
It's the bell of Freedom,
It's the song about Love between my brothers and my sisters,
All over this land.

Peter, Paul & Mary

Our government has committed a grave injustice on working Americans--young and old--by dispensing student-money recklessly to millions of people who accepted the money in good faith in the hope that they could use their student-loan funds to educate themselves and have better lives.


In effect, the government has engaged in predatory lending--something you and I would go to jail for. It has spewed billions of dollars around the United States for the benefit of sleazy colleges--public, private, and for-profit--knowing that nearly half the people who got the loan dollars would not be able to pay off their student loans. And this money got sucked up by the college industry. 

After lending the money like a benevolent grandmother giving out Christmas checks to her grandkids, the government then morphed into a heartless monster. In fact, all three branches of our federal government have conspired to grind student-loan debtors into the dust.
  • Congress passed laws making it extremely difficult for people to discharge their student-loan debt in bankruptcy.
  • Congress enacted legislation that wiped out the statute of limitations for collection lawsuits against student-loan debtors--essentially destroying a key principle of the common law of equity.
  • The Department of Education allows for-profit colleges to insert "you can't sue me" clauses in their college-admissions materials.
  • The Supreme Court, an assembly of nine old geezers, upheld a federal law that allows the Department of Education to garnish Social Security checks of elderly people who defaulted on their student loans.
More than 40 million people carry student-loan debt, and 20 million can't pay it back. They are trapped like rats while the government and its collection agencies conspire to drive student-loan debtors out of the economy and out of the middle class into a dark world of hopelessness.  

Our government leaders pretend to be sympathetic. Senator Elizabeth Warren and Senator Charles Schumer coo soothingly about lower interest rates. President Obama spins out one long-term repayment plan after another.  Secretary of Education Arne Duncan issues press releases announcing lower default rates, knowing that DOE is cooking the books.

This scheme--driven by the greed and indifference of higher-education leaders--cries out for justice, for a return to common decency.

And a few people, like Peter Finch's character in the movie Network, have stood up and said, "I'm mad as hell, and I'm not going to take it anymore."  Going into the bankruptcy courts, often without attorneys, a few intrepid souls have applied to have their student loans discharged in bankruptcy. Not all of them have been successful, but all have shown great courage.

So in this posting, I pay tribute to the grit and the bravery of the people who filed adversary actions in the bankruptcy courts to throw off their student-loan debt:

Alethea Lamento, single mother of two, who was working full time but who was forced to live with relatives because she did not make enough money to house her family. A bankruptcy court discharged her student loans over the objection of the Department of Education.


Lamento v. U.S. Department of Education, 520 B.R. 667 (Bankr. N.D. Ohio 2014)

George and Melanie Johnson, a married couple with two children who lost their home in foreclosure and who defeated Educational Credit Management Corporation in an adversary proceeding in Kansas. And they did it without a lawyer!


Johnson v. ECMCCase No. 11-23108, Adv. No. 11-6250 (Bankr. D. Kan. 2015)

Bradley Myhre, a quadriplegic working full time but did not make enough money to support himself because he was required to pay a fulltime caregiver just to feed and dress him and transport him back and forth to work. The Department of Education refused to forgive his student loans, but Myhre beat DOE in an adversary proceeding.


Myhre v. U.S. Department of Education503 B.R. 698 (Bankr. W.D. Wis. 2013)

Alexandra Acosta-Conniff, an Alabama school teacher and single mother of two, who went into the bankruptcy court without a lawyer and discharged student-loan debt over the opposition of Educational Credit Management Corporation.  

Acosta-Conniff v. ECMC, 536 B.R. 326 (Bankr. M.D. Ala. 2015)

Ronald Joe Johnson, a grandfather in his early 50s who took out student loans in the early 1990s to pursue a college degree he was unable to complete and is now living with his wife on about $2,000 a month. Unfortunately, Johnson did not have a lawyer, and the Department of Education persuaded a bankruptcy judge not to discharge Johnson's student loans. 

Johnson v. U.S. Department of Education541 B.R. 759 (N.D. Ala. 2015)

Michael Abney, a single father of two with a record of homelessness who is living on less than $1200 a month, in spite of the fact he is working fulltime as a delivery driver. Acting as his own attorney, he defeated the U.S. Department of Education in a Missouri bankruptcy court.

Abney v. U.S. Department of Education540 B.R. 681 (W.D. Mo. 2015)

All these people are heroes, as brave in their own way as the farmers who defied the British army on Concord bridge in 1775, as brave as the heroes of the Alamo, as brave as the Okies who were driven off their farms during the Great Depression and took their families to Oklahoma in search of a better life.

Let us hope these heroes will inspire others to take the brave step of going into the bankruptcy courts to throw off their student-loan debt.  With each pasisng months, the bankruptcy courts are growing more sympathetic.