65-Year-Old Man Fights Education Department for Undue Hardship Discharge

Posted on October 26, 2015 at 12:00pm by
Avoiding student loan defaults after job loss.

A 65-year-old man is taking on the Department of Education in a court battle to discharge $246,000 in student loans. If the man wins, it could secure another legal victory for former students and graduates who are looking to discharge excessive student loans and move on with their lives.

Attorneys representing the Department of Education have asked the court not to discharge the student loans of borrowers, claiming it would risk the financial stability of federal and private loan programs.

To discharge student loans, a borrower must prove his or her loans have created “undue hardship”. Depending on where borrowers live, the test to meet the criteria for undue hardship varies. Although a universal definition does not yet exist for “undue hardship”, the term implies a borrower cannot make payments on student loans while maintaining a minimal standard of living.

This case is interesting because the 65-year-old man has been unemployed since 2002 and is very unlikely to make enough money to pay down his loans in the foreseeable future. According to the man, he could make $50,000 for the next 12 years and still see his student loans debt balloon to $500,000. Department of Education attorneys have argued the man could still pay off the debts, but might have to retire beyond the age of 65 years old.

Is It Impossible to Receive an Undue Hardship Discharge?

We stated earlier that tests for undue hardship vary based on where debtors file for bankruptcy. If the First Court of Appeals rules in favor of the borrower and grants undue hardship under revised testing, it could be another win for student loan debtors.

While it is difficult in most places to prove undue hardship, it is not impossible. In Missouri for example, courts use the “totality of circumstances” test to assess undue hardship.

The Sader Law FirmKansas City Bankruptcy Attorneys