Showing posts with label Richard Gaudreau. Show all posts
Showing posts with label Richard Gaudreau. Show all posts

Tuesday, March 21, 2017

Finally, More Bankruptcy Attorneys Getting on the Student Loan Discharge Bandwagon--article by Steve Rhode

This excellent essay by Steve Rhode originally appeared on the Personal Finance Syndication Network, PFSyncom.  Mr. Rhode also maintains a web site titled Get Out of Debt Guy that contains a variety of good advice and information about all manner of consumer debt problems, including student loans.  You can learn more about Steve Rodes here.

In addition to the attorneys listed in Mr. Rhode's article, I would like to commend George Thomas, a Kansas attorney, who did a great job representing Alan and Catherine Murray against Educational Credit Management Corporation  in a Kansas bankruptcy court. Mr. Thomas won a partial discharge of the Murrays' student loan debt. That case is now on appeal.

In addition,Eugene R. Wedoff, retired bankruptcy judge and incoming president of the American Bankruptcy Institute, is defending Alexandra Acosta-Conniff in an Alabama bankruptcy case now on appeal before the Eleventh Circuit Court of Appeals.


Finally, More Bankruptcy Attorneys Getting on the Student Loan Discharge Bandwagon

 by Steve Rhode

A recent MarketWatch piece by Jillian Berman did a great job of not only naming a bunch of attorneys I’m proud to call friends, but debunking this myth that there is nothing that can be done about student loans in bankruptcy.

I get so frustrated when consumers tell me they went to a bankruptcy attorney and was told there was no hope for dealing with their student loans, when there clearly was.

The article quotes four attorneys who all make the same point, there are legal options for dealing with student loans in bankruptcy. Don’t believe everything you’ve been told that there are no options – That’s Fake News! Want to learn more, here you go.

Attorney Richard Gaudreau is mentioned, “Nobody is doing anything for these people in terms of laws to benefit them,” said Richard Gaudreau, a New Hampshire-based bankruptcy attorney, who’s been working on student loan issues for the past few years. “We’re just forced to be creative.”

And when he says creative, what he’s really saying is applying some brain power and creative thinking to look at the law under new light to find where is already applies to dealing with student loans.

That’s what attorney Austin Smith is doing, and winning.

“Taking that logic one step further means that student loans from private lenders can be discharged in bankruptcy if they were made to students who didn’t attend an accredited program or were lent more money than the cost of attendance. Possible debts that fit into this category could include the aforementioned bar study loan or a loan to attend an unaccredited trade school, Smith said.

“A loan is not like a scholarship or a stipend and such a private loan cannot be included in this definition. If I were to interpret educational benefit to include loans that has some relation to attaining an education, it would render the other two provisions of [the bankruptcy code as it relates to student debt] totally superfluous,” the judge said, according to a transcript.

“I have yet to go in front of a judge who disagrees with my overall thesis, which is that not all student loans are not dischargeable,” Smith said. “I do think the tide is now turning on that.”

Then there is attorney Lewis Roberts, “Roberts’s intervention is to get judges and trustees to classify the federal student loan debt separately so that his clients can take advantage of special payment plans the government offers borrowers to manage their student loans.”

Attorney Jay Fleischman said, “This fight is just in its infancy,” he said. “We’re seeing the birth of it in many ways.”

Steve Rhode

Get Out of Debt Guy  Twitter, G+, Facebook

If you have a credit or debt question you’d like to ask, just click here and ask away. 

This article by Steve Rhode first appeared on Get Out of Debt Guy and was distributed by the Personal Finance Syndication Network

Monday, January 30, 2017

ECMC abuses the bankruptcy process: Hann v. Educational Credit Management Corp.

Last week I posted a blog about Bruner-Halteman v. ECMC, which was decided last April. In that case, a Texas bankruptcy judge awarded punitive damages against Educational Credit Management Corporation for repeatedly garnishing the wages of a bankrupt Starbucks employee in violation of her legal rights.  ECMC got slapped with $74,000 in punitive damages.

Brunner-Halteman is not the first case in which ECMC has been found guilty of abusing the bankruptcy process. In Hann v. ECMC, decided in 2013, the First Circuit Court of Appeals upheld a lower court decision  against ECMC for continually trying to collect on student loans it claimed were owed by Barbara Hann, even though a bankruptcy judge had ruled that Hann owed ECMC nothing.

Hann v. ECMC: Sanctions are imposed on ECMC for abusing the bankruptcy process

Here is a brief rendition of the facts. Barbara Hann filed for bankruptcy in November 2004, and she dutifully listed all her debts.  ECMC filed a proof of claim in the case, alleging Hann owed ECMC more than $54,000 for unpaid student loans (including accrued interest and collection costs).

Hann objected to ECMC's claim on the grounds that she had paid her student loans in full. The bankruptcy judge held a hearing on the matter, which ECMC did not attend.

At the hearing, Hann testified that she had paid off her student loans and produced documentary evidence to support her testimony. After considering Hann's evidence, the bankruptcy judge ruled that Hann owed ECMC nothing.

Hann probably thought her student debts were behind her, but she was wrong. After her bankruptcy case was concluded, ECMC renewed its efforts to collect on Hann's old student loans. In fact, it even garnished her Social Security.

Richard Gaudreau, Hann's lawyer, contacted ECMC and told the company that Hann's student-loan debt had been discharged in bankruptcy. Nevertheless, ECMC continued trying to collect the debt.

 Gaudreau then reopened Hann's bankruptcy case and asked a new bankruptcy judge to order ECMC to stop its collection efforts.   ECMC showed up for the hearing, where it, argued that the former bankruptcy judge, who had retired, had never adjudicated the amount of ECMC's claim and that student-loan debt is generally nondischargeable. ECMC, did not, however, quantify how much it claimed Hann still owed.

Again, a bankruptcy judge ruled in Hann's favor, and the judge awarded sanctions against ECMC.  ECMC appealed this order to the First Circuit's Bankruptcy Appellate Panel, and the Panel upheld the bankruptcy court.  The BAP specifically approved the sanctions against the debt collector, explaining that ECMC's continued collection activities in spite of the bankruptcy court's ruling, "constituted an abuse of the bankruptcy process and defiance of the court's authority."

Did ECMC get the message? Apparently not. ECMC then appealed the BAP's ruling to the First Circuit Court of Appeals,  On March 29, 2013, almost nine years after Hann filed for bankruptcy, the First Circuit ruled in Hann's favor yet again. Hann owed ECMC nothing, the appellate court ruled; and the bankruptcy court had appropriately sanctioned the debt collector for abusing the bankruptcy process.

Implications of the First Circuit's ruling in Hann v. ECMC

The Hann case is extraordinary for two reasons. First, ECMC defended its right to collect on Hann's student loans all the way to the First Circuit Court of Appeals, despite its "repeated inability to identify or quantify [Hann'] outstanding debt obligation" to the bankruptcy court.

Second, the sanctions that ECMC fought were not large: only about $9,000. Clearly, it made no economic sense for ECMC to fight a pitifully small sanction award at two appellate levels. Surely, ECMC's attorney fees were many times the amount of the sanctions award.

Taken together, the Bruner-Halteman decision and the Hann decision portray ECMC as  a pretty rough outfit. It has appeared in hundreds of court cases involving student-loan debtors, and surely it knows the Bankruptcy Code. Yet it was willing to garnish Bruner-Halteman's wages 37 times in defiance of settled law and to continue trying to collect on student loans that had been discharged in bankruptcy.

Who paid ECMC's attorney fees in these two wild-hare cases? It is not entirely clear, but the Century Foundation's report on ECMC and other student-loan guaranty agencies suggests that the federal government is paying ECMC's fees.

If that is true, then you, Mr. and Ms. Taxpayer, are paying ECMC's lawyers to hound distressed student-loan debtors through the federal courts. Don't you think we should find out? And wouldn't that be a good question for the U.S. Senate to explore through its hearing process?


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).

John Hechinger. Taxpayers Fund $454,000 Pay for Collector Chasing Student Loans., May 15, 2013. Accessible at:

Natalie Kitroeff. Loan Monitor is Accused of Ruthless Tactics on Student Debt. New York Times, January 1, 2014. Acccessible at

Robert Shireman and Tariq Habash. Have Student Loan Guaranty Agencies Lost Their Way? The Century Foundation, September 29, 2016. Accessible at

Tuesday, July 5, 2016

Davidson v. Sallie Mae: Another student-loan debtor sheds debt in bankruptcy because institution she attended was not on Department of Education's Approved School List

In my last post I reported on Decena v. Citizens Bank, in which a New York bankruptcy judge discharged Lorelei Decena's student-loan debt in bankruptcy because Decena had borrowed the money to attend an African medical school that was not on the Department of Education's Federal School Code List.

Normally, student-loan debt is not dischargeable in bankruptcy unless the borrower can show that repayment would create an "undue hardship," a very difficult standard to meet. But in Decena's case, the bankruptcy judge ruled  that St. Christopher's College of Medicine, the African medical school Decena attended, was not an "eligible educational institution" because the school was not on the Department of Education's list of approved schools Thus, Decena could discharge the loans she took out to attend St. Christopher's (more than $160,000) without having to show undue hardship.

Richard Gaudreau, writing for Huffington Post, recently reported on another case in which a student-loan debtor freed herself from student-loan debt  because the institution she attended was not listed in  DOE's Federal School Code List.

In Davidson v. Sallie Mae, Jennifer Lynn Davidson borrowed approximately $20,000 from Sallie Mae to attend a "Co-Active Coach Training Program" operated by an outfit  called CTI. As she explained in her Adversary Proceeding complaint, Davidson quickly became disenchanted with the program after her instructor swore at her during the first session and then announced that there would be a clothing-optional pool party at the end of the program day. She immediately notified CTI that she was withdrawing from the program.

Davidson sued Sallie Mae in an Oregon bankruptcy court to discharge her educational loans in bankruptcy, and  she eventually persuaded Sallie Mae to sign a Stipulated Judgment agreeing to allow her to discharge the debt.

Why did Sallie Mae throw in the towel and allow Davidson to free herself from her student loans? Because--as Gaudreau explained in his Huffington Post article--CTI was not on the Department of Education's Federal School Code List.

What are we to make of Davidson's victory?

First, Sallie Mae is apparently loaning money to people to enroll in all kinds of so-called educational programs without regard to program quality, secure in the belief that people who take out loans for these programs will find it  virtually impossible to discharge their debt in bankruptcy.  In Davidson's case, however, Sallie Mae slipped up and loaned Davidson money to attend CTI's "Co-Active Coach Training Program" without checking to see whether CTI was on the Department of Education's Federal School Code List.

Second, students who borrow money to enroll in programs at marginal institutions like CTI and St. Christopher's College of Medicine should definitely consult DOE's School Code List to determine if the institution they attended is on it. If the school is not on that list, a borrower has a reasonable shot at shedding the student-loan debt in bankruptcy without having to show that it would be an "undue hardship" to repay the loan.

As Gaudreau pointed out, bankruptcy courts are not in total agreement as to what constitutes an educational loan that is covered by the Bankruptcy Code's undue hardship rule. But Lorelei Decena convinced a bankruptcy judge that St. Christopher's College of Medicine was not an "eligible educational institution" for purposes of the undue hardship standard; and Jennifer Lynn Davidson apparently persuaded Sallie Mae that loans taken out to attend CTI were likewise not subject to the undue hardship rule.

Congratulations to Lorelei Decena and Jennifer Lynn Davidson for their victories in the bankruptcy courts. As for Sallie Mae and Citizens Bank, which collectively lost $180,000, they got the bankruptcy-court outcomes they so richly deserved.


Davidson v. Sallie Mae,  Case No. 12-33122-TMB-7, Adversary Proceeding Number 12-03171 (Bankr. D. Or. Aug. 15, 2012) (Stipulated Judgment to Discharge Educational Loan Debt and Dismiss Adversary Proceeding) (from an article appearing in Accessible at

Decena v. Citizens Bank, 549 B.R. 11 (Bankr. E.D.N.Y. 2016).

Richard Gaudreau. Some Private Loans Eligible for Automatic Discharge. Huffinton Post, June 21, 2016. Accessible at

U.S. Department of Education. Federal School Code List 2016-1017.