The Undue Hardship Thicket: On Access to Justice, Procedural Noncompliance, and Pollutive Litigation in Bankruptcy

Abstract

This Article offers new insights into understanding the complexities and costs of the litigation burden that Congress has imposed on debtors who seek a fresh start in bankruptcy. In order to explore the problems inherent in a system that necessitates litigation as the path for obtaining certain types of bankruptcy relief, this Article focuses on the particular example of debtors who seek to discharge their student loans in bankruptcy. Such debt may be discharged only if the debtor can establish through a full-blown lawsuit that repaying the loans would impose an undue hardship. The procedure and burdens of proof governing undue hardship adversary proceedings have created access-to-justice barriers that ratchet up the difficulty faced by student-loan debtors in establishing the merits of their claims for relief. Moreover, the complexity of the litigation framework has created opportunities for creditors to engage in unchecked careless practices that, to the detriment of debtors, prejudicially distort the form in which courts consider undue hardship claims. To demonstrate this phenomenon, the Article examines how some of the litigation conduct by Educational Credit Management Corporation — a legal entity that routinely litigates against debtors in undue hardship adversary proceedings — can be characterized as a pattern of procedural noncompliance and pollutive litigation that has exacerbated the access-to-justice barriers confronted by student-loan debtors. Absent congressional intervention, the solution to this problem will require bankruptcy courts to engage in more robust monitoring. Consequently, this Article illustrates the need to pay careful attention to procedural realities when assessing whether debtors in bankruptcy will be able to vindicate their legal entitlements.

Keywords: bankruptcy discharge, student loans, educational debt, discharge litigation, higher education