A determination this month out from the Bankruptcy Court in Manhattan (SDNY) may have a significant affect the marketplace for education loan securitizations. Education loan asset-backed securities (SLABS) are unsecured, but market individuals typically assume that the student that is underlying aren’t dischargeable in bankruptcy. A brand new ruling by the main judge of this SDNY’s Bankruptcy Court challenges this presumption.
In Rosenberg v. N.Y. State Degree Services Corp. (Jan. 7, 2020), Chief Judge Cecelia Morris discharged the debtor’s student loans and vigorously pressed straight straight straight right back from the “myth” that it’s “impossible to discharge student education loans. ”
The debtor is really a Navy veteran whom graduated from legislation college in 2004, but worked as a legal professional only briefly. He missed reasonably few re payments over 10+ years before filing for bankruptcy, from which time he reported negative income that is monthly. Their education loan financial obligation surpassed $220,000.
Chief Judge Morris discovered that the debtor had shown the hardship that is“undue required by statute and came across the Second Circuit’s three-part test for release, which goes back to 1987. The court penned: “For a variety of petitioners like Mr. Rosenberg, who’ve been away from college and suffering education loan financial obligation for quite some time, the test is quite straight-forward and simple. ” Chief Judge Morris declined to check out cases that are subsequent greater burdens: “This Court will likely not be involved in perpetuating these fables. ” Chief Judge Morris expressly rejected the positioning “that filing a bankruptcy petition so that you can rid yourself of a crushing $300,000+ of education loan financial obligation could ever be viewed ‘bad faith. [Read more…] about Pupil Loan Discharged in Bankruptcy – only a Blip, or something like that larger?