|ECMC & DOE are real-life bullies for student debtors.|
Scott Farkus, of course, is a fictional bully, but destitute student borrower are tormented by a real-life bully--Educational Credit Management Corporation. ECMC,a so-called fiduciary of the U.S Department of Education, gets well paid to hound student-loan debtors who naively try to shed their student loans in bankruptcy to get a fresh start.
Would you like some examples of ECMC's bullying behavior? Here are a few:
- ECMC opposed bankruptcy relief for Janet Roth, a woman in her 60s with chronic health problems, who was living on Social Security income of $774 a month.
- ECMC successfully blocked Janice Stephenson, a woman in her fifties, from discharging her student loans in bankruptcy--loans that were almost 25 years old. At the time Stephenson filed for bankruptcy, she was living on about $1,000 a month and had a history of homelessness.
- Last year, a bankruptcy judge slapped ECMC with punitive damages for repeatedly garnishing the wages of Kristin Bruner-Halteman, a bankrupt student debtor who worked at Starbucks. ECMC violated the automatic stay provision more than 30 times, the bankruptcy court ruled. And how much money was at stake? Ms. Bruner-Halteman only owed about $5,000.
So Scott Farkus, in a corporate form, is alive and well in American bankruptcy courts.
And Grover Dill, Farkus's little toadie, is also alive and well. The Department of Education itself bullies student borrowers in bankruptcy, almost as cruelly as ECMC. And here are a few examples:
- In Myhre v. Department of Education, DOE fought Bradley Myhre, an insolvent quadriplegic who tried to discharge a modest student loan in bankruptcy. DOE lost that one. The court commended Mhyre for his courage: he was working full time but he had to employ a caregiver to feed and dress him and drive him to work.
- DOE tried unsuccessfully to persuade a Missouri bankruptcy court to deny bankruptcy relief to Michael Abney, a single father in his 40s who was living on $1,300 a month and was so poor he rode a bicycle to work because couldn't afford a car.
- Just a few months ago, the Eighth Circuit Bankruptcy Appellate Panel ruled against DOE, which had tried to keep Sara Fern from discharging her student debt in bankruptcy. Fern is a single mother of three children who takes home $1,500 a month from her job and supplements her income with food stamps and public rent assistance.
Have I described bullying behavior by ECMC and DOE? Of course I have. Every single time DOE or ECMC shows up in bankruptcy court, the argument is the same: "This deadbeat doesn't deserve bankruptcy relief, your honor. Put the worthless son of a b-tch in a 20- or 25-year income-based repayment plan."
In the past, bankruptcy courts were persuaded by these callous arguments, but judges are beginning to return to their duty. I predict the day is soon coming when a federal appellate court will overrule the precedents that have favored ECMC and DOE--most notably the harsh Brunner ruling that most federal circuits have adopted.
But for now, the bullying goes on. Just like Scott Farkus and Grover Dill, ECMC and DOE lie in wait for hapless debtors who stagger into bankruptcy court. ECMC has accumulated $1 billion in unrestricted assets while engaging in this shameful behavior, and the federal government pays ECMC's legal fees.
Abney v. U.S. Department of Education, 540 B.R. 681 (W.D. Mo. 2015).
Bruner-Halteman v. Educational Credit Management Corporation, Case No. 12-324-HDH-13, ADV. No. 14-03041 (Bankr. N.D. Tex. 2016).
Fern v. FedLoan Servicing, 563 B.R. 1 (8th Cir. BAP 2017).
Myhre v. U.S. Department of Education, 503 B.R. 698 (W.D. Wis. 2013).
Robert Shireman and Tariq Habash. Have Student Loan Guaranty Agencies Lost Their Way? The Century Foundation, September 29, 2016. Accessible at https://tcf.org/content/report/student-loan-guaranty-agencies-lost-way/
Roth v. Educational Management Corp., 490 B.R. 908 (9th Cir. BAP 2013).
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