Federal judge rejects decision to write off law graduate student debt, says issues should be decided at trial

Bankruptcy law

Federal judge rejects decision to write off law graduate student debt, says issues should be decided at trial

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New York federal judge overturns law graduate’s decision to discharge student debt, citing “constellation of evidence” debtor “placed himself in this situation” after giving up legal career .

U.S. District Judge Philip M. Halpern of the Southern District of New York said a bankruptcy judge should not have granted summary judgment to Kevin Jared Rosenberg because he has yet to provide sufficient evidence that the repayment of the loan would constitute undue hardship.

Halpern said in his Sept. 29 decision that he expressed no opinion on whether the student loan at issue – which amounted to a debt of over $ 220,000 – could be discharged in the event of bankruptcy.

“Either party can prevail in a factual trial; but it’s a problem for the bankruptcy court, ”said Halpern.

A bankruptcy judge ruled in January 2020 that Rosenberg could pay off his law student debt in what at the time was considered an “amazing” decision. Student debt cannot be discharged in the absence of undue hardship as defined by a three-part test that is difficult to satisfy.

Halpern said Rosenberg did not submit enough evidence to pass the three-part test, known as the Brunner test due to a 1987 appeal decision that established it.

Brunner’s test examines whether the debtor can maintain a minimum standard of living if forced to repay loans, whether an inability to maintain the minimum level is likely to persist for a significant portion of the repayment period, and whether the debtor made a good faith effort to repay the loans.

Halpern noted allegations that Rosenberg’s inability to repay his student loan was “a monster of its own making,” as claimed by Educational Credit Management Corp., which owns the interest on the debt.

Rosenberg served in the Navy for approximately five years and graduated from the Benjamin N. Cardozo Law School of Yeshiva University in 2004. After graduating from the bar, he worked for less than three months as an associate in a New Jersey law firm making an annual salary between $ 55,000 and $ 60,000.

Rosenberg testified that he was miserable at his job and was fired after a partner found out he intended to leave. He has done contractual legal work sporadically, but now his law degree is “retired”.

When contract legal work dried up during the 2008 financial crisis, according to the ruling, Rosenberg started an outdoor recreation business, sold it, and then started a similar business. The new company, International Adventure Guides, offers guided outdoor tours.

Before setting up the new business, Rosenberg left his studio in Brooklyn, New York, and rented a house in Beacon, New York. Beacon’s lease was $ 2,150 per month, an increase of $ 700 from his rent in Brooklyn.

Rosenberg defaulted on student debt after periods of deferral or withholding. He had paid less than $ 3,000 in debt.

In support of his summary judgment motion, Rosenberg submitted a professional appraisal report indicating that he could work as a legal assistant or paralegal, with an annual salary of $ 42,000 to $ 120,000; as a retail store manager, with an annual salary of $ 45,000 to $ 100,000; and in other customer service or sales roles with an annual salary of $ 36,000 to $ 50,000.

There is also evidence that Rosenberg sustained injuries and underwent surgery “which may or may not have impacted his ability to work,” said Halpern.

Halpern said Rosenberg had not presented any admissible evidence establishing the severity of his injuries and the impact on his ability to work.

Halpern also noted that Rosenberg was earning about $ 1,500 less than needed to meet his current expenses of about $ 4,000 per month, which include rent of $ 2,150 per month.

Rosenberg “offers no substantial explanation as to why its expenses are necessary to maintain a minimum standard of living, and does not point to any admissible evidence to support its conclusive argument that it is, indeed, necessary,” said Halpern.

It’s also not clear whether Rosenberg made a good faith effort to repay the loan, Halpern said.

He “probably made enough money to move out of New York City and rent a two-bedroom house – and ultimately made less than $ 3,000 in payments on a debt that went from an initial balance of $ 116,465 to over $ 220,000, ”Halpern said.

“These considerations are compounded by the plaintiff’s apparent decision to abandon his legal career (ie the area for which he assumed the debt in the first place), his admission that he filed the proceedings from chapter 7 for the purpose of releasing the presumed unreliable student, and his declaration that he has no interest in rehabilitating the debt through a repayment program.… This constellation of evidence certainly suggests a lack of good faith and this plaintiff has, indeed, placed himself in this predicament, ”said Halpern.

Rosenberg did not immediately respond to a request for comment sent to an email address from his company.

Hats off to Bloomberg law.

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