ECMC and the Department of Education are a couple of bullies: The Scott Farkus affair that never ends

Fortunately, we only see Scott Farkus once a year. He comes around every Christmas eve, when TBS runs The Christmas Story for 24 hours. Farkus, you remember, is the yellow-eyed bully that picks on Ralphie Parker and his little brother Randy. Farkus is always accompanied by his pint-sized sidekick, Grover Dill.

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. 

References

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).

Stevenson v. Educational Credit Management Corporation, 463 B.R. 586 (Bankr. D. Mass. 2011). aff'd, 475 B.R. 286 (D. Mass. 2012).

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. ECMC, Case 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 Education, 503 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 Education, 541 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 Education, 540 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.