Showing posts with label Judge Elizabeth Katz. Show all posts
Showing posts with label Judge Elizabeth Katz. Show all posts

Wednesday, August 11, 2021

Insanity 101: Medical Doctor with $650,000 in Student Debt Will Pay $80 a Month Under Income-Based Repayment Plan

Tamara Parvizi, age 51, sought to discharge $653,743 in student-loan debt in a Massachusetts bankruptcy court. That's a lot of debt--just shy of two-thirds of a million dollars. 

For 15 years, Parvizi took out student loans to pursue several degrees, and she became fluent in at least four languages. Nevertheless, Parvizi never made a single payment on her student debt other than offsets to her income tax refunds--which totaled less than $4,000 (Parvizi v. U.S Department of Education, slip opinion, p. 4).

Parvizi obtained a bachelor's degree from Clark University in 1990. In 1991, she enrolled in medical school at the University of Rochester but dropped out in 1995 without getting a degree.

Later, Parvizi enrolled at the University of Massachusetts, where she received a master's degree in public health.

In 2006, Parvizi made a second attempt to become a medical doctor. She enrolled at St. George's University School of Medicine, located on the Caribbean island of Grenada.  This time, she completed the program and graduated with a medical degree in 2012.

After obtaining her M.D. degree, Parvizi began a psychiatric residency at the University of Vermont, which she did not complete. She left the residency program in 2013 after being put on a remediation plan (p. 2).

At the time of her adversary proceeding, Parvizi owed $478,000 in unpaid principal on her student loans plus $175,000 in interest. Her annual income was less than $29,000.

The Department of Education opposed Parvezi's request for bankruptcy relief. DOE argued that Parvezi was qualified for REPAYE, an income-based repayment program that would only require her to pay $80 a month over 25 years (based on her current income).

But Parvizi was unwilling to sign up for REPAYE, testifying that she had "suffered enough." She placed most of the blame for her financial predicament on personnel at the University of Vermont. "[W]hy should I pay for the mistakes of a residency program director whose behavior cost me my life, my pursuit of happiness," she asked (p. 4).

Based on Parvizi's eligibility for the REPAYE plan, Judge Elizabeth Katz denied Parvizi's request to discharge her student loans. However, the judge ruled that she would discharge any student-loan debt Parvizi might owe after completing a REPAYE plan.

Who would quarrel with Judge Katz's decision? It is hard to sympathize with a woman who ran up almost half a million dollars in student debt to get a master's degree and a medical degree and who never made a single voluntary payment on her student loans.

On the other hand, I have great sympathy for Dr. Tamara, who undoubtedly did her best to get an education and build a satisfying career. And she may well have been right when she argued that her financial predicament was mainly due to people who made unfair decisions while in her residency program.

Nevertheless, Tamara Parvizi's case demonstrates the insanity of the federal student loan program. Why is the federal government loaning money to a person who left one medical school program without a degree and then pursued another program at a medical school outside the United States?

And what is the point of requiring Dr. Parvizi to pay $80 a month for 25 years while interest on her student loans continues to accrue--probably at a rate of at least $30,000 a year?

This is crazy. And who benefits from all the money the federal government loaned Tamara Parvizi? I suspect the primary beneficiaries are the people who own a private medical school in the Caribbean.

References

Parvizi v. U.S. Department of Education, Adversary Proceeding No. 19-3003 (Bankr. D. Mass. May 13, 2021).



St. George's University School of Medicine: A "Second-Chance Med School"




Wednesday, July 18, 2018

Schatz v. U.S. Department of Education: A 64-year-old student-loan debtor is denied bankruptcy relief because she has equity in her home

Audrey Eve Schatz, a 64-year-old single woman, attempted to discharge $110,000 in student-loans through bankruptcy, but Judge Elizabeth Katz, a Massachusetts bankruptcy judge, refused to give Ms. Schatz a discharge. Why?  Because Schatz had enough equity in her home to pay off all her student loans.

This is Ms. Schatz's sad story as laid out in Judge Katz's opinion.

Schatz graduated from the University of Massachusetts in 1977 with a bachelor's degree in psychology. Over the years, she held a variety of low-skill jobs: repairing used clothing, selling items at flea markets, working part-time for a school district, etc.  As Judge Katz acknowledged, none of these jobs were lucrative; and more than 25 years after completing her bachelor's degree, Schatz decided to go to law school.

Schatz studied law at Western New England College School of Law, a bottom-tier law school; and she took out student loans to finance her studies. She graduated with a J.D. degree in 2009, but she failed to find a high-paying job. According to the court, Schatz's net income after graduating from law school never exceeded $15,000.

The U.S. Department opposed Schatz's petition for relief on three grounds:

First, DOE argued that Schatz had not "maximized her skills to increase her earning potential." And in fact, Schatz worked as a volunteer at the Berkshire Center for Justice, a legal aid center she had founded while in law school. But Schatz explained she was working as a volunteer to gain experience as a lawyer while she looked for a paying job; and it seems unlikely she would have worked for free if she had been offered a good attorney's job.

Second, DOE argued that Schatz had not substantiated her claim that health issues hindered her job prospects. DOE said she should have called a medical doctor to testify about her health.

Finally, DOE pointed out that Schatz had equity in her home--enough equity, in fact, to completely pay off her six-figure student-loan debt.

Judge Katz  found DOE's last argument persuasive. By the judge's calculation, Schatz had at least $125,000 of equity in her home, more than enough to cover her student-loan debt.  According to Judge Katz, Schatz could sell her home, pay off her student loans, and still be able to maintain "a minimal standard of living." In Judge Katz's view, the burden was on Schatz to produce evidence that the home she lived in was necessary to maintain "a minimal standard of living," and that no alternative housing was available at a price similar to her current mortgage payment.

Given the facts of Audrey Schatz's financial circumstances, which Judge Katz verified in her opinion, I found the judge's decision to be shockingly callous.  Schatz is 64 years old--near the end of her working life. As Judge Katz noted in her opinion, Schatz had never made more than a modest wage even after she graduated from law school.

Moreover, Schatz testified at trial that she expected to get a Social Security check of less than $900 a month and that her retirement account contained only $1,800. And Judge Katz wants Ms. Schatz to sell her house!

The Schatz case illustrates just how much depends on the personal qualities of the bankruptcy judge who hears student-loan bankruptcy cases. Remember Judge Frank Bailey, another Massachusetts bankruptcy judge who decided a student-loan case earlier this year?

Judge Bailey expressed frustration with the traditional tests bankruptcy judges are using in student-loan cases: the Brunner test and the "totality-of-circumstances" test. "I pause to observe that both tests for 'undue hardship' are flawed," he wrote. In Judge Bailey's view, "[t]hese hard-hearted tests have no place in our bankruptcy system."

Judge Bailey then went on to articulate a more reasonable standard for determining when a debtor's student loans should be discharged in bankruptcy.  "If a debtor has suffered a personal, medical, or financial loss and cannot hope to pay now or in the reasonably reliable future," the judge reasoned, "that should be enough."

Unfortunately for Audrey Schatz, her bankruptcy case was assigned to Judge Elizabeth Katz and not Judge Frank Bailey. Had Judge Bailey been her judge, Ms. Schatz might have discharged her six-figure student-loan debt and kept her house. Surely this would have been some comfort to her when she enters old age and begins living on a Social Security check of $856.




References

Schatz v. U.S. Department of Education, 584 B.R. 1 (Bankr. D. Mass. 2018).

Smith v. U.S. Department of Education (In Re Smith), 582 B.R. 556 (Bankr. D. Mass 2018).