A No-Contest Discharge for Uncollectable Student Loans

66 Pages Posted: 12 Apr 2019 Last revised: 13 Jun 2019

See all articles by Matthew A. Bruckner

Matthew A. Bruckner

Howard University School of Law

Brook Gotberg

University of Missouri School of Law

Dalié Jiménez

University of California, Irvine School of Law; Harvard Law School - Center on the Legal Profession

Chrystin D. Ondersma

Rutgers University School of Law

Date Written: April 5, 2019

Abstract

Over 44 million Americans owe more than 1.4 trillion dollars in student loan debt. This debt is uniquely difficult to shed in bankruptcy; even attempting to do so usually requires costly and contentious litigation with the Department of Education, and initial success may be followed by years of appeals by the Department of Education. As a result, very few student loan borrowers even attempt to discharge their student loan debt in bankruptcy.

In this Article, we call on the Department of Education to develop a set of nine easily calculable and verifiable circumstances in which it will not contest a debtor’s attempt to discharge her student loan debt. Nearly every category of “no-contest” discharge represents a circumstance where the debtor would clearly suffer an undue hardship if forced to continue to attempt repayment, such that the Department of Education should conserve taxpayer dollars by consenting to discharge. Specifically, we urge the Department of Education to allow a “no-contest” discharge when the debtor’s income is less than 150% of the federal poverty level and:
(1) household income has been at or below the federal poverty level for the last four years;
(2) the debtor receives disability benefits under the Social Security Act;
(3) the debtor receives disability benefits because of military service;
(4) the debtor’s income is derived solely from retirement benefits;
(5) the debtor is a caregiver of an adult or child as defined in the Lifetime Respite Care Act;
(6) the debtor is a family caregiver of an eligible veteran;
(7) the debtor did not receive a degree from the institution or the institution closed;
(8) the debtor owes less than $5,000; or
(9) the debtor has been repaying their student loans for more than 25 years.

Our proposal will not solve every problem, but it would go a long way towards resolving many of the grosser inequities currently associated with student loans and their treatment in bankruptcy.

Suggested Citation

Bruckner, Matthew A. and Gotberg, Brook and Jiménez, Dalié and Ondersma, Chrystin D., A No-Contest Discharge for Uncollectable Student Loans (April 5, 2019). University of Colorado Law Review (2020 Forthcoming); UC Irvine School of Law Research Paper No. 2019-33; Howard Law Research Paper. Available at SSRN: https://ssrn.com/abstract=3366707

Matthew A. Bruckner (Contact Author)

Howard University School of Law ( email )

2900 Van Ness Street, N.W.
Washington, DC 20008
United States

Brook Gotberg

University of Missouri School of Law ( email )

Missouri Avenue & Conley Avenue
Columbia, MO MO 65211
United States

Dalié Jiménez

University of California, Irvine School of Law ( email )

401 E. Peltason Dr.
Ste. 1000
Irvine, CA 92697-1000
United States

HOME PAGE: http://www.law.uci.edu/faculty/full-time/jimenez/

Harvard Law School - Center on the Legal Profession ( email )

1585 Massachusetts Avenue
Wasserstein Hall, Suite 5018
Cambridge, MA 02138
United States

Chrystin D. Ondersma

Rutgers University School of Law ( email )

180 University Avenue
Newark, NJ 07102
United States

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