Bankruptcy Law

Some bankruptcy judges look for 'wiggle room' in student debt cases; law clerks prove instructive

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Some bankruptcy judges are showing more flexibility when borrowers seek to cancel student debt.

Though few judges are canceling the debt outright, some are encouraging lawyers to offer pro bono help and others are trying to ease repayment amounts, the Wall Street Journal reports. Its story is based on interviews with more than 50 current and former bankruptcy judges.

As judges grow more sympathetic, more lenders are willing to reach settlements with borrowers, some lawyers report.

Some judges are influenced by the situations of their own children who are saddled with education debt. Some are learning about heavy debt loads from their law clerks. The Wall Street Journal cites a figure from Law School Transparency: The typical law student has $119,000 in loans.

Vanderbilt law professor Terry Maroney, who studies judicial decision-making, told the Journal that frustrated judges are more likely to “look for wiggle room and try to find solutions that will allow them to sleep at night.”

One solution embraced in December 2016 by U.S. Bankruptcy Judge Dale Somers of Topeka, Kansas, was to cancel more than $230,000 in interest on a couple’s student loans. Absent the interest, they owed only $78,000.

The prior year, U.S. Bankruptcy Judge William Sawyer of Montgomery, Alabama, canceled $112,000 in student debt for a high school teacher. The case was appealed and returned to Sawyer.

Last year, another bankruptcy judge, Eric Frank of Philadelphia, canceled $30,000 in student loans owed by a single mother. The ruling was overturned on appeal, however.

More recently, U.S. Bankruptcy Judge Frank Bailey of Boston canceled $50,000 in student loan debt because a man was unable to work due to his health problems.

Still, few people seek to cancel their student debt, given the difficult standard that requires them to show an “undue hardship.” One study using the Westlaw database found that judges issued rulings on student loan debt only 16 times last year. Judges canceled the debt in only three cases and gave partial relief in another.

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