Today we heard that we were able to help a client to get rid of about $250,000.00 in student loans with a bankruptcy discharge. In Hunter v. NJHESSA, the debtor had borrowed a lot of NJCLASS loans, and after graduation, found she could not pay them and continue to pay her rent, eat, and all those other things people do. Our lawyers were able to show a bankruptcy judge that paying the loans would be such a hardship on the debtor that she should not have to pay all of them. The court agreed and ordered that the debtor not pay back about $250,000 in student loans.
The debtor had a master’s degree, and years of employment experience, and a fully employed (working two jobs) spouse. But she also had one child, another on the way and over a quarter of a million dollars in student loan debt. She wasn’t even 30 years old, and the rest of her life looked like a long haul of paying student loans. She had made some payments, and tried to get payment plans to get her loans in good standing, but simply wasn’t able to because the lender required a history of full, on time payments before it would even consider taking the loans out of default. Our lawyers were able to show the court that no household budget the debtor could come up with left money over for making a regular full payment on the loans. There was a trial, where the court heard from the debtor, and the court decided that it would be too difficult for the debtor to pay back the full amount due, and the lender did not offer any alternative payment plans or loan settlement programs, so the court made its own payment plan. The court discharged, or legally erased, about $250,000.00 of the loans. This changed the required loan payment, under the original terms, from $2600 per month to $400 per month, which the evidence showed was an amount the debtor could reasonably repay in the remaining loan term. This case seems like a good example of a lender being unreasonable (trying to get blood from a stone) and being forced by a court to be fair to a borrower by accepting what a borrower can reasonably repay. Its debt, not slavery.