Bankruptcy Law

9th Circuit OKs discharge of $53K in student-loan debt for law grad working as a probation officer

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After a 10-year legal battle, a 1997 graduate of an Oregon law school has not only won a federal appeals court ruling that eliminates more than half of his student loan debt, but has established favorable precedent for other recent grads struggling with major debt and minimal job prospects.

Finding a bankruptcy judge had appropriately determined that Michael Eric Hedlund had made reasonable, good-faith efforts to minimize his expenses and repay his student loan debt–and reversing a federal district court that determined otherwise–the 9th U.S. Circuit Court of Appeals last week OK’d the bankruptcy judge’s discharge of $53,000 of the Willamette University law graduate’s $85,000 in student-loan debt.

In its May 22nd opinion (PDF), the 9th Circuit explained that it wouldn’t necessarily have made the same findings as the bankruptcy court, but said the bankruptcy court decision was not clearly erroneous since it relied on substantial evidence in the record and made permissible inferences.

“I owe a car instead of a house now. It’s huge for me,” a jubilant Hedlund told the Oregonian after learning of the May 22 decision by the 9th Circuit, adding that he is “happy that maybe this will help someone else in their dealings with the student loan people.”

Hedlund, who is married and has three daughters, earns about $40,000 a year as a juvenile probation officer in Klamath County, Ore. After failing the bar exam twice, he locked his keys inside his vehicle when he stopped for coffee en route for his third try and never took the exam that time around or subsequently. He had been working for the district attorney’s office in Klamath County, but lost that job after failing the bar.

See also: “Oregon Chief District Judge Blasts High Cost of Legal Ed”

Above the Law: “In Showing Undue Hardship, Court Is Not Allowed To Come Into Your House and Repurpose Your Wife “

MoneyWatch page (CBS News): “Court opens window of hope for student debtors”

Wall Street Journal Law Blog (sub. req.): “Luckless Law Grad Gets Loan Relief … 10 Years Later”

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