Bankruptcy Law

1st Circuit urges discharge of former executive's $246K in student loan debt

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After years of pro se legal battle and the pro bono help of a Brown Rudnick lawyer who took his case while it was pending before a federal appeals court, Robert Murphy may be on the verge of seeing more than $246,000 in student loan debt discharged in bankruptcy on undue hardship grounds.

Even though he lost his $165,000-a-year job as a manufacturing company executive in 2002, Murphy, now 65, took on Parent PLUS loans between 2001 and 2007 to help put his three children through college. He expected to find another high-paid position. But that never happened, thanks to his age, the economy and a lack of manufacturing jobs, reports the Boston Globe (sub. req.). Although Murphy has applied for lower-echelon jobs, he is deemed overqualified for those, he says.

With interest, the loan balance now tops $246,000, even though Murphy took $61,000 from his retirement savings to pay the balance down, the newspaper reports. He and his wife now live largely on her $13,200-a-year salary as a teacher’s aide and his social security payments and occasional jobs as a handyman. The couple is now facing a mortgage foreclosure.

At oral arguments four months ago, the 1st U.S. Circuit Court of Appeals urged the parties to settle. On Tuesday, avoiding a potential adverse precedent-setting ruling in the closely watched case, Educational Credit Management Corp. agreed to discharge the debt on undue hardship grounds, according to newspaper. It is now up to the bankruptcy court to decide whether to accept the settlement.

Murphy was represented on appeal by partner Steven Pohl of Brown Rudnick, who compared his client’s pro se ascent to the federal appeals court to the Biblical story of David battling Goliath.

Murphy told the Globe he would like to see a system established that creates a level playing field for all borrowers who find it impossible to repay their student loans. He called on Congress to define the “undue hardship” required under federal bankruptcy law to discharge student loan debt. And he suggested a Department of Education panel be created to make discharge recommendations before a case goes to court.

“I’m not proud of what happened to me, but I’m certainly not ashamed,” he told the newspaper. “It happens in life, and you move on.”

Related coverage:

Bloomberg: “This Court Case Could Unshackle Americans From Student Debt”

See also: “Would-be lawyer won’t have $260K in student loans erased; SCOTUS refuses to hear appeal”

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