Showing posts with label Jason Iuliano. Show all posts
Showing posts with label Jason Iuliano. Show all posts

Friday, February 2, 2018

Massachusetts Attorney General organizes volunteer lawyers to represent indigent college debtors in bankruptcy: This is A VERY BIG DEAL

Maura Healey, Massachusetts Attorney General,  announced last month that her office is partnering with the Massachusetts Bar Association and the Greater Boston Chamber of Commerce to organize volunteer lawyers to represent distressed college debtors in bankruptcy.

This is a VERY BIG DEAL for a least four reasons:

Dispelling the myth that student loans can't be discharged in bankruptcy

First, as Steve Rhode pointed out, AG Healey's initiative gives the lie to the myth that student loans cannot be discharged in bankruptcy. The Department of Education and the student-loan industry want college borrowers to believe their student loans are not dischargeable, and they have been successful in  perpetuating that falsehood.

As scholar Jason Iuliano wrote in a law review article, almost a quarter of million student loan debtors filed for bankruptcy in 2007, but only a few hundred even tried to discharge their student loans. But the Massachusetts Attorney General's initiative demonstrates that competent attorneys believe these loans can be wiped out in bankruptcy, and that is welcome news.

Legal representation means that more college borrowers will win their bankruptcy cases

Second, having experienced and committed lawyers representing student-loan debtors in bankruptcy court means more college borrowers will be successful. I once thought student-loan debtors could win their cases against the Department of Education and their agents even if they went to court without lawyers.

And indeed a few debtors have gotten relief from student loans in the bankruptcy courts, even though they went to court without attorneys. Richard Precht, Jaime Clavito, and George and Melanie Johnson come to mind.  But the debt collectors--and Educational Credit Management Corporation, in particular--have appealed their losses in the appellate courts, where it is very difficult for debtors to defend their interests.

In the Hedlund case, for example, a student-loan creditor fought Michael Hedlund in the appellate courts for 10 years!  And creditors often got debtors' victories reversed by appellate courts. In a heartbreaking loss, George and Melanie Johnson got their victory snatched away after a bankruptcy judge reversed his earlier decision to discharge their loans. The judge backtracked after his original decision was vacated by an appellate judge.

With competent attorneys, however, college borrowers can fight DOE and its venal agents until hell freezes over. And eventually some of debtors' victories in the bankruptcy courts will be upheld at the federal circuit court level.  Once the federal appellate courts endorse a more humane approach to handling student-loan bankruptcies, we will see more deserving debtors get relief.

Attorneys can defend college borrowers from dastardly creditor tactics

Third, if energetic and competent lawyers begin representing college borrowers in the bankruptcy courts, debtors will have able advocates to fend off what Rafael Pardo labeled "pollutive litigation" by the debt collectors.  Indigent debtors cannot counter unscrupulous tactics by creditors' lawyers unless they themselves have lawyers. In the Bruner-Halteman case, for example, ECMC repeatedly garnishing the wages of a bankrupt student debtor in violation of federal law. Had Bruner-Halteman not had an attorney, she would have been crushed.

A State Attorney General is now in open conflict with Betsy Devos and the Dept. of Education

 Finally, Massachusetts AG Maura Healey is now in open conflict with our federal government's heinous policy of fighting bankruptcy relief for college borrowers who are truly suffering. In the Myhre case, DOE opposed bankruptcy relief for a quadriplegic student-loan borrower who was working full time and yet unable to survive financially. In the Abney case, DOE fought bankruptcy relief for Michael Abney, a man in his forties who had a record of homelessness and who had a monthly income of about $1100 a month. In Roth, ECMC fought Janet Roth all the way into an appellate court. Poor Ms. Roth was living on Social Security income amounting to less than $800 a month.

Conclusion

For the first time, we will soon see a state attorney general's office and aggressive and competent lawyers going on the attack against Betsy DeVos' Department of Education, which has become nothing more than a shill and a lackey for the corrupt student-loan business.  Hurrah for AG Maura Healey!

AG Healey has introduced a model for progressive state governments to attack a vicious federal agency and bring relief to millions of college borrowers who have their backs against the wall.  California, I call on you to rally to AG Healey's standard. New Jersey, New York, Illinois, Texas and Florida: respond to Healey's bugle call and join the fight.

It is time for state governments to fight the corrupt and sleazy student-loan industry and to bring it down.  AG Healey and the Massachusetts Bar Association have shown the nation the path toward justice.



References

Bruner-Halteman v. Educational Credit Management Corporation, Case No. 12-324-HDH-13, ADV. No. 14-03041 (Bankr. N.D. Tex. 2016).

Hann v. Educational Credit Management Corporation, 711 F.3d 235 (1st Cir. 2013).

Jason Iuliano. An Empirical Assessment of Student Loan Discharge and the Undue Hardship Standard. American Bankruptcy Law Journal 86 (2012), 495.

Natalie Kitroeff. Loan Monitor is Accused of Ruthless Tactics on Student Debt. New York Times, January 1, 2014. Accessible at http://www.nytimes.com/2014/01/02/us/loan-monitor-is-accused-of-ruthless-tactics-on-student-debt.html?_r=0

Rafael Pardo. The Undue Hardship Thicket: On Access to Justice, Procedural Noncompliance, and Pollutive Litigation in Bankruptcy. 66 Florida Law Review 2101 (2014).

Steve Rhode. Mass AG and Bar Association Lead Way to Help Student Loan Debtors to Help File Bankruptcy. getoutofdebtguy.org (blog), January 29, 2018.

Roth v. Educational Credit Management Corporation490 B.R. 908 (9th Cir. BAP 2013). 








Friday, September 22, 2017

Student-Loan Debtors Desperately Need Bankruptcy Lawyers

Too many Americans are going to court without lawyers. As Lauren Sudeall Lucas and Darcy Meals noted in an essay in The Conversation, 80 to 90 percent of people in some states are litigating their cases without attorneys, even when their opponents have legal counsel. In Georgia, the authors assert, courts heard 800,000 cases last year involving self-represented litigants.

Lucas and Meals maintain the United States has "far too few lawyers," but I disagree. As Paul Campos and others have written, there has been a downturn in the legal-services market; and law schools are churning out thousands of new attorneys who graduate with six-figure student loans and no job prospects.

The United States has enough lawyers; in fact, we have too many. The problem is this: practicing lawyers are not representing middle-class people and the poor.

Why? Because most Americans can't afford to pay an attorney to guide them through protracted litigation.  Lawyers leave law school with an average debt load of $140,000; and they must make at least $100,000 a year just to service their student loans. Consequently, attorney fees are too high for most Americans to pay.

Student debtors desperately need lawyers

Lucas and Meals didn't mention the plight of student-loan debtors, but this is a special class of people who need good bankruptcy attorneys. In 2012, Jason Iuliano wrote an important law-review article in which he reviewed bankruptcy filings in 2007. Iuliano found that 238,446 student-loan debtors filed for bankruptcy in 2007, but only a few hundred filers even attempted to discharge their student loans. This is unfortunate because Iuliano estimated that 39 percent of the student borrowers who filed for bankruptcy that year "would have been good candidates to obtain relief."

Remarkably, a few student debtors have gotten their student loans forgiven in the bankruptcy courts  even though they were not represented by a lawyer. Richard Precht in Virginia and Jaime Clavito in California filed adversary actions against the Department of Education and obtained stipulated discharges of their student loans without going to trial. These are amazing victories.

Self-appointed experts assert again and again that student loans cannot be discharged in bankruptcy, but this is not true. In recent years, several people have wiped out their student loans in the bankruptcy courts. Moreover, without a doubt, the federal bankruptcy judges are becoming more sympathetic to distressed student borrowers; and the courts are increasingly willing to rule in favor of student-loan debtors when the Department of Education or one of its rapacious debt collectors opposes bankruptcy relief.

What needs to be done?

As I said, the United States has plenty of lawyers, but not enough of them are concerned about justice for the poor. Dozens of public advocacy groups joined lawsuits in support of transgender students who demanded the right to choose their toilet facilities, which is commendable. But 20 million Americans are being crushed by student-loan debt, and very few lawyers have come to their aid.

Where is the Southern Poverty Law Center? Where is the ACLU? Where are the legal aid clinics? Why haven't these agencies joined the fight to bring debt relief to deserving student borrowers?

Just a few able and committed lawyers could completely change the legal landscape for student-loan debtors. I estimate that 25 or 30 competent lawyers, defending a few clients in several federal circuits, could persuade the federal courts to reinterpret the "undue hardship" standard that has been applied so harshly against desperate student borrowers over the years.

In my view, the federal courts are willing to ruling in favor of student borrowers who file bankruptcy if only they are presented with good legal arguments. Many--perhaps most--bankruptcy judges are liberal minded. They know it is their job to provide a fresh start to "honest but unfortunate" debtors. Moreover, I think many are offended by the way the Trump administration has handled the student-loan catastrophe; or at least they would be offended if they were educated by student-loan debtors' attorneys.

The bankruptcy courts provide the best avenue for relief for distressed student-loan debtors

It is time to face harsh facts. Millions of Americans have committed financial suicide by taking out student loans they can't pay back. The student loan program has driven legions of people out of the national economy, preventing them from buying homes, getting married, or saving for their retirement.

Congress has not done anything to provide relief. In fact, the House of Representatives recently approved a bill that will make it almost impossible for defrauded student debtors to sue the for-profit colleges that swindled them. The Department of Education, now run by the wicked witch of the east, Betsy DeVos, is doing everything it can to advance the venal interests of the for-profit college industry.

The bankruptcy courts provide the only hope for relief from oppressive and unpayable student-loan debt. Good lawyers need to represent oppressed student debtors in the bankruptcy courts, educating the judges about the Tenth Circuit's Polleys decision, the Seventh Circuit's Krieger decision, the Eighth Circuit Bankruptcy Appellate Panel's Fern decision, and the Ninth Circuit BAP's Roth decision. The judges need to understand that federal case law now often favors the student-loan debtor.

In sum, we have enough attorneys; but we do not have enough lawyers who are willing to go toe-to-toe against the U.S. Department of  Education, the debt collectors, and the sleazy for-profit college industry.

Betsy DeVos: No friend to student-loan debtors


References

Richard Fossey. Why students need better protection from loan fraud. The Conversation, August 24, 2017.


Jason Iuliano. An Empirical Assessment of Student Loan Discharge and the Undue Hardship Standard. 86 American Bankruptcy Law Journal 495-525 (2012).

Lauren Sudeall Lucas and Darcy Meals. Every year, millions try to navigate US courts without a lawyer. The Conversation, September 21, 2017







Friday, March 31, 2017

Student Debtors in the Bankruptcy Courts and the Battle of Britain: "Never have the few come from the ranks of so many"

The Battle of Britain was perhaps the most thrilling episode of the Second World War. During the summer and autumn of 1940, Hitler sent the Luftwaffe to bomb London, hoping to pummel the British into submission.

But Hitler failed. A handful of young pilots in the Royal Air Force clawed their way into the skies day after day and inflicted unacceptable casualties on the German Air Force. Before the year was out, Hitler gave up, and the Battle of Britain was won.

You may think it inappropriate to attach a military analogy to the ongoing battle between oppressed student borrowers and the federal government's debt collectors that is taking place now in the bankruptcy courts. But the comparison is apt.

Eight million people have defaulted on their student loans and at least 15 million more aren't paying them back.  If these people were indebted for any other reason than college loans, they would get relief from their debt in the bankruptcy courts.

But most oppressed debtors don't even try. Jason Iuliano reported that almost a quarter of a million people with student loans filed for bankruptcy in 2007, but only a few hundred even attempted to discharge their student loans.

But a few brave souls have filed adversary proceedings, where they've fought the U.S. Department of Education and its loan collectors--notably Educational Credit Management Corporation. Incredibly, some of them have been successful, and important appeals are now in the federal appellate courts.

Alexandra Acosta Conniff, an Alabama school teacher, acting without an attorney, defeated ECMC in 2015. ECMC appealed, but Alexandra is now represented by an eminent attorney, retired bankruptcy judge Eugene Wedoff.  I believe Alexandra will ultimately prevail.

Alan and Catherine Murray, a Kansas couple in their late 40s, beat ECMC last year, winning a partial discharge of their student loans, which had ballooned to almost a third of a million dollars. They were ably represented by George Thomas, a Kansas lawyer and ex-Marine.  Again, ECMC appealed, but I am confident Mr. Thomas and the Murrays will win through.

Overburdened student-loan debtors have been hounded and harassed by the U.S. government and its predatory agents for years, but some are now fighting back and they are beginning to find sympathetic bankruptcy judges.

Winston Church, in one of the immortal sentences in the English language, paid this tribute to the pilots of the RAF. "Never was so much owed by so many to so few."

And Boris Johnson, author of The Churchill Factor, pointed out that most of the RAF pilots came from the English working and middle classes. Few Oxford men climbed into those Hurricane fighter planes during the summer of 1940. And so Johnson added this fitting epitaph to Churchill's tribute: "Never have the few come from the ranks of so many."

So here is a message for the millions of oppressed student-loan debtors: Hang on! A few courageous individuals, aided by sturdy lawyers, are fighting for you in the federal courts. And they will ultimately win. The bankruptcy laws are going to change and become more compassionate toward honest but unfortunate individuals who were victimized by our corrupt and unjust student loan program.


"Never have the few come from the ranks of so many."


References



Acosta-Conniff v. Educational Credit Management Corporation, No. 12-31-448-WRS, 2015 Bankr. LEXIS 937 (M.D. Ala. March 25, 2015).

Cloud, R. C. & Fossey, R. (2014). Facing the student debt crisis: Restoring the integrity of the federal student loan program. Journal of College and University Law, 40, 101-32.

In re Roth, 490 B.R. 908 (9th Cir. BAP 2013).

Iuliano, J. (2012). An Empirical Assessment of Student Loan Discharges and the Undue Hardship Standard. American Bankruptcy Law Journal, 86, 495-525.

Murray v. Educational Credit Management Corporation, Case No. 14-22253, ADV. No. 15-6099, 2016 Bankr. LEXIS 4229 (Bankr. D. Kansas, December 8, 2016).




Thursday, November 5, 2015

Suicide and Student Loans: Is There a Link?

Death rates among white, middle-aged Americans have gone up significantly in recent years. According Anne Case and Angus Deaton, two Princeton economists, death rates for people in the 45 to 54 age group began rising in 1999. For middle-aged white people with a high school diploma or less, the mortality rate rose 22 percent between 1999 and 2013.

Why are relatively young white Americans dying at a higher rate than they did 15 years ago? Case and Deaton say most of the rising mortality rate can be attributed to suicide or deaths related to alcohol or drug abuse.People in this age group are experiencing a lot of stress, including economic stress; and they are turning to alcohol and drugs to deal with it. “What we see here is a group that’s in quite a lot of distress,” said Ms. Case in a Wall Street Journal interview.

As Case and Deaton said in their report:
Although the epidemic of pain, suicide, and drug overdoses preceded the financial crisis, ties to economic insecurity are possible. After the productivity slowdown in the early 1970s, and with widening income inequality, many of the baby-boom generation are the first to find, in midlife, that they will not be better off than were their parents. Growth in real median earnings has been slow for this group, especially those with only a high school education. 
As everyone knows, Americans' accumulated student-loan debt has been going up steadily for the past 20 years. Could there be a  link between student-loan debt and rising mortality rates among middle-aged white Americans?

Deaton and Case did not examine student-loan indebtedness in their study, and any attempt to link student loans to rising death rates would be speculative. Moreover, Case and Deaton found that middle-aged people with college degrees had not experienced higher mortality rates.

Nevertheless, suicide rates for the Baby Boomer generation have gone up dramatically in recent years. According to a report by Katherine Hempstead and Julie Phillips, the suicide rate  for people in the 40-64 age group has gone up 40 percent since 2007.

Hempstead and Philips suggest that economic problems may have contributed to the rising suicide rate among Baby Boomers, and that "adverse effects of economic difficulties on psychological well-being may have been greater for those who did not anticipate them; this may well have been the case for those who were educated and wealthier . . . ."

One thing is certain: Our federal government has constructed a student-loan scheme so heartless that it almost seems to have been designed to plunge millions of Americans into long-term clinical depression.  So isn't it reasonable to conclude there is a connection between crushing student loans and rising suicide rates among middle-aged people?

Let's examine some of the evidence pointing to growing stress among student-loan debtors:
  • As the New York Times recently pointed out, ten million people are in default on their student loans or delinquent on their loan payments.
  • According to a recent report by the Brookings Institution, loan balances for a significant number of student-loan debtors actually went up after they entered the repayment phase  of their loans. Why? Because a lot of people have obtained economic-hardship deferments that exempt them from making loan payments due to dire economic circumstances.  But because they are not paying down accruing interest, their loan balances are getting larger, making them more difficult to pay off.
  • The percentage of elderly Americans with unpaid student-loan debt is going up. According to a report from the General Accounting Office, the percentage of people in the 65 through 74 age group with outstanding student loans grew from 1 percent in 2004 to 4 percent in 2010, a four-fold increase   And the amount of student-loan debt owed by elderly people is growing as well.  In fact, the amount of debt held by elderly Americans grew six fold between 2005 and 2013--from $2.8 billion in 2005 to $18.2 billion.
  • The federal government is  garnishing more and more Social Security checks to collect on unpaid student loans.   In 2002, only 31,000 people had Social Security benefits garnished because they had defaulted on their student loans. That number ballooned five fold in just 11 years. In 2013, 155,000 Americans saw their Social Security checks reduced due to unpaid student-loans.
Let's consider that last bullet from a more personal perspective. According to a story posed on Market Watch, the U.S. government is garnishing the Social Security checks of Naomia Davis, an 80 year old woman who is suffering from advanced Alzheimer's Disease. Ms. Davis's only income is her $894 Social Security check, and the feds take $134 of it to pay down on an old student loan.

In short, it is reasonable to conclude that crushing student-loan debt contributes to depression and even suicide among Baby Boomers who are struggling to pay off college loans they took out when they were young.  The student loan crisis is not only eroding Americans' sense of economic well being; it may be literally killing them.



References

Jillian Berman. When your Social Security check disappears because of an old student loan. MarketWatch, June 25, 2015.  Accessible at: http://www.marketwatch.com/story/when-your-social-security-check-disappears-because-of-an-old-student-loan-2015-06-25

Anne  Case and Angus Deaton. Rising morbidity and mortality in midlife among white
non-Hispanic Americans in the 21st century.  Accessible at: http://www.pnas.org/content/early/2015/10/29/1518393112.full.pdf

Editorial. Death Among MiddleAged Whites. New York Times, November 5, 2015.

Editorial. Why Student Debtors Go Unrescued. New York Times, October 7, 2015. Accessible at: http://www.nytimes.com/2015/10/07/opinion/why-student-debtors-go-unrescued.html?_r=0

General Accounting Office. Older Americans: Inability to Repay Student Loans May Affect Financial Security of a Small Percentage of Borrowers. GAO-14-866T. Washington, DC: General Accounting Office. http://www.gao.gov/products/GAO-14-866T

Katherine A. Hempstead and Julie A. Phillips. Rising Suicide Among Adults Aged
40–64 Years: The Role of Job and Financial Circumstances.  American Journal of Preventive Medicine 84(5):491-500 (2015). Accessible at: http://www.ajpmonline.org/article/S0749-3797(14)00662-X/pdf

Jason Iuliano. An Empirical Assessment of Student Loan Discharge and the Undue Hardship Standard. American Bankruptcy Law Journal 86 (2012), 495.

Gina Kolata. Deaths Rates Rising Middle-Aged White Americans, Study Finds. NewYork Times, November 3, 2015. Accessibe at: http://www.nytimes.com/2015/11/03/health/death-rates-rising-for-middle-aged-white-americans-study-finds.html

Betsy McKay. The Death Rate Is Rising for Midle-Aged Whites. Wall Street Journal, November 3, 2015. Accessible at: http://www.wsj.com/articles/the-death-rate-is-rising-for-middle-aged-whites-1446499495

Wednesday, September 9, 2015

You can't win if you don't play: More people should attempt to discharge their student loans in bankruptcy

It's a mess, folks. Seven million people are currently in default on their student loans. Millions more have stopped making payments but aren't counted as defaulters because they obtained economic-hardship deferments, which are given out like candy.  Almost 4 million people are making payments under income-based repayment plans that can last as long as 25 years. Twenty-five years!

Why don't some of these overburdened student-loan debtors file for bankruptcy?  I'll tell you why. Most people believe it is impossible to obtain relief from their student loans in the bankruptcy courts.

But that's not true. Three years ago, Jason Iuliano published an empirical study of student-loan discharges under the Bankruptcy Code's "undue hardship" provision. This is what he found:

  • Nearly forty percent of people who attempted to discharge their student loans in the bankruptcy process obtained relief.
  • People who attempted to discharge their student loans without an attorney were as successful in obtaining bankruptcy relief as people who hired bankruptcy lawyers.
The problem, according to Iuliano, is not that it is impossible to obtain a discharge of student loans in bankruptcy. THE PROBLEM IS THAT MOST PEOPLE DON'T TRY.

In 2007, Iuliano reported, almost a quarter of a million people with student loans filed for bankruptcy (238,446 to be exact). Of that number, less than 300 even attempted to discharge their student loans in bankruptcy. Apparently they assumed that it would be useless to try.

Iuliano constructed a model for predicting which factors were most important in obtaining a student-loan discharge. He estimated that 69,000  student-loan debtors  who filed for bankruptcy in 2007 were good candidates for discharge if they had only applied for relief.

In other words, based on Iuliano's research, more insolvent student-loan debtors should be seeking to discharge their student loans in bankruptcy because a fair percentage are likely to be successful. But you can't win if you don't play. 

Iuliano's article was published in 2012 based on 2007 bankruptcy data. I think the percentage of successful student-loan discharges would be higher today than it was during the period Iuliano studied. Several recent bankruptcy court decisions show that at least some courts are beginning to view student-loan debtors with more compassion than courts once did.

In the Roth case, for example, the Ninth Circuit's Bankruptcy Appellate Panel rejected a loan creditor's argument that Ms. Roth should be put in a 25-year repayment plan. "The law does not require a party to engage in futile acts," the court said.   Roth was a 68-year old woman with chronic health problems living on a Social Security check of less than $800 a month. It would be futile, not to mention callous, to put her on a 25-year income-based repayment plan.

Of course, the Department of Education and its student-loan debt collectors aggressively oppose student-loan discharge efforts in the vast majority of cases, often filing technical motions that make the  discharge process more expensive than necessary. I think  the creditors file these motions to discourage student-loan debtors who file adversary actions without the help of a lawyer. 

Of course, hiring a bankruptcy lawyer to fight the Department of Education can be expensive, and people in bankruptcy generally don't have the money to hire lawyers. Nevertheless, a lot more insolvent debtors should be trying to discharge their student loans in bankruptcy, even if they must do so without a lawyer.

And here are my suggestions for giving overburdened but honest student-loan debtors some bankruptcy relief:

1) Legal Aid clinics should get in the business of representing student-loan debtors. Legal aid clinics, including those that are attached to law schools, should have their attorneys become experts in bankruptcy law--especially the evolving law that relates to student loans; and the clinics should start representing student-loan debtors who seek to discharge their student loans in the bankruptcy courts.

2) Public interest organizations should develop free web sites that would provide useful information to people who are seeking to discharge their student-loans in bankruptcy without lawyers. The site should include sample pleadings and sample discovery motions, recent research on student-loan bankruptcies, recent court decisions, and sample briefs that could be used as models for debtors who are fighting the technical motions that DOE and the debt collectors file. 

Can you imagine the impact if 5,000 people tried to discharge their student loans in the bankruptcy courts rather than the mere 300 who tried in 2007? I think these people would find the bankruptcy courts are much more sympathetic than the debtors might have expected. More and more frequently, the bankruptcy judges are reviewing the details of these pathetic cases and seeing people who borrowed money in good faith to attend college and simply never made enough money to pay it back. Divorce, illness, unemployment, poor choices in deciding on a major, unscrupulous for-profit colleges--all kinds of unexpected things happened to people who simply wanted to get the training they needed to obtain better jobs so they could support their families and have better lives.

As I have said, the bankruptcy courts are becoming more and more sympathetic to these people.  But distressed student-loan debtors have got to ask for bankruptcy relief in order to get it.

References

Jason Iuliano. An Empirical Assessment of Student Loan Discharge and the Undue Hardship Standard. American Bankruptcy Law Journal 86 (2012), 495. 

Roth v. Educational Credit Management Corporation. 490 B.R. 908 (9th Cir. BAP. 2013