A Dutchess County man does not have to pay a $221,385 student debt, under a bankruptcy court ruling that challenges the “certainty of hopelessness” created by a test of whether someone has proved undue hardship.
U.S. Bankruptcy Judge Cecelia G. Morris in Poughkeepsie granted summary judgment to Kevin J. Rosenberg of Beacon questioning the Brunner test, “a quasi-standard of mythic proportions” that most bankruptcy professionals believe is impossible to satisfy.
“This court will not participate in perpetuating these myths,” Morris stated in a Jan. 7 decision. “Rather, this court will apply the Brunner test as it was originally intended.”
Rosenberg borrowed money from 1993 to 1996 to pay for his education at the University of Arizona, where he received a bachelor of arts degree in history. He served in the U.S. Navy for five years. Then he took out more loans to attend Cardoza Law School at Yeshiva University from 2001 to 2004.
Rosenberg petitioned for Chapter 7 bankruptcy protection in 2018, owing $370,353 in student loans to various entities.
Bankruptcy rules do not allow education debts to be set aside, unless the individual can demonstrate undue hardship under the Brunner test.
Brunner has three prongs. The debtor cannot maintain a minimal standard of living if forced to repay the loans. This state of affairs must be likely to persist during the loan’s repayment period. And the debtor has made good faith efforts to repay the loans.
Rosenburg practiced law for two-and-a-half years but “realized that a legal career was not for him,” he states in a proceeding against New York State Higher Education Services Corp.
In 2008, he started Gear to Go Outfitters LLC and also worked as a mountain guide. His small Brooklyn store failed and he continued as an online company. In 2017, he injured his back and it took nine months to get treatment from the U.S. Department of Veterans Affairs and another year to recover.
Having not practiced law for many years, he stated in a motion for debt relief, “no law firm would hire him.” The collapse of his business and his health problems left him with a “bleak salary outlook” that is unlikely to change.
Rosenberg asked the court “to recognize his service to country through two periods of national emergency, as well as the harsh reality of his economic future, in deciding this case.”
A full discharge of his debt would give him a “chance to have a decent life where basic shelter, food, and the necessities of life can be provided for.”
The Educational Credit Management Corp., intervening on behalf of the state education services agency, questioned Rosenberg’s hardship. He is 45, healthy and has no dependents, ECMC stated in a filing, and his circumstances are of his own making.
He is licensed to practice law in New York and New Jersey, but he has not sought employment in the legal profession and “has no intention of ever doing so.”
He could find work as a legal assistant or paralegal for $42,000 to $120,000 annually, work as a retail store manger for $45,000 to $100,000, or take an entry level customer service or sales position for $36,000 to $50,000.
He could consolidate his loan into a new option where monthly payments would be based on his annual income.
Morris applied the Brunner test to a consolidated loan on which Rosenberg owed $221,385, plus interest, as of November.
For five years, Rosenberg has had an average monthly negative net income of $1,549.
“He has no money available to repay his student loan,” Morris stated, “and maintain a ‘minimal’ standard of living. This prong of the test is met.”
The repayment period ended when the loan defaulted, she said, and he became responsible for paying the full amount of $221,385. Thus, his circumstances had persisted during the repayment period, satisfying the second prong of Brunner.
Rosenberg missed only 16 payments in 13 years, she said, and he was current as of April 2015. He made several more payments, even when the loan was in forbearance and no money was due.
He “did not sit back for 20 years,” Morris stated, “but made a good faith effort to repay his student loan.”
“Petitioner has satisfied the Brunner test,” she stated. “It is hereby ordered that student loan imposes an undue hardship on the petitioner and is discharged.”