Interesting times to be a student loan attorney. Just this week, a key decision was issued by the Fifth Circuit in In re: Crocker, No. 18-20254 which discharged private student loans. Why is this important? Well, it’s the first published Circuit level case on this issue. And the Court ruled against Navient!
Of course, you have to meet certain criteria to have a non-qualified student loan — the loans must have been outside or beyond the actual cost of education, or provided to an ineligible institution or ineligible student.
Which brings to mind, what is an ineligible institution? Simple, one that was not eligible for federal funding. Including a school which got federal aid under false pretenses. Perhaps federal loans were provided to a for-profit school BEFORE they were actually eligible. This opens a whole new batch of loans which may be discharged.
Sometimes, in a bankruptcy, we want to separately classify student loans, particularly federal student loans, where our client debtors can benefit from public service or income driven plans with debt forgiveness. It’s also helpful to separately classify private student loans if we’ve otherwise reached a settlement agreement with the creditor. The key is to avoid harm to the other unsecured creditors by doing so.
The Bankruptcy Court for the Middle District of Florida maintains its own newsletter called Court Connection which is distributed among court personnel and attorneys throughout the Middle District of Florida. This Court is the third most busy bankruptcy district in the country! One of the reasons it’s so active is that it covers several large metro areas including Tampa, St. Petersburg, Orlando, Daytona, Jacksonville, and Ocala. The Hon. Judge Jennemann wrote a short introductory article about how this new program got its start and the various participants along the way.
Our article “Why Do We Need the Student Loan Management Program?” was published and distributed today in the Court Connection. It discussed this brand new program which is the first in the nation developed to address student loan debt in bankruptcy. We hope that it helps to raise awareness of the need and application of a program such as this.
We are hopeful that the new Student Loan Management Program will be adopted throughout the country as a new way to combat student loan debt. The key goals are to enhance communication, increase awareness of various options regarding both private and federal loans, and take advantage of applicable programs and mediation while in bankruptcy, rather than just suffer through years of forbearance that only results in larger balances post bankruptcy with no forgiveness on the horizon.
As a student loan attorney, I find this appalling. What if someone hired me as their attorney and I failed to comply with the law 61% of the time? I bet I’d be hearing from the Florida Bar pretty quickly and I’d probably lose my license to practice law.
But what happens when the federal student loan servicers fail to comply with the law 61% of the time? Well the Department of Education doesn’t really seem to care.
Here are some key points raised in a 52 page an audit by the Office of Inspector General released recently (that we’ve been liberally sharing with our bankruptcy judges to show why the new Student Loan Management Program in bankruptcy court is needed):
We are speaking at a number of student loan related presentations over the next couple months. Please put any of interest on your calendar and send to other interested parties!
11/6/19 2:00 – 5:00 Bench Bar presentation on Student Loan Management Program (Tampa) (this is the day before the View From the Bench program – provided to our Judges etc. in advance)
11/7/19 2:00 – 3:00 p.m. NACA webinar (How and When to Discharge Student Loans in Bankruptcy) – focusing on private loan adversary cases.
There is a separate process from the Social Security Administration’s process that is available through NelNet to discharge federal student loans (no matter who the servicer is). It’s called a Total and Permanent Disability Application. The good news is that it has been taking our firm only about two months to obtain this 100% discharge of student loans. It’s also tax free for any applications approved prior to 2025. After that, it will depend upon whether the program’s tax forgiveness waiver is extended by Congress.
A couple critical issues arise when filing these applications. First, is the need to get it right the first time around — in other words don’t file a half-%$$ application and expect it to be approved by the Department of Education. Second, many jobs nowadays are performed remotely and at all hours of the day or night. So an employer’s inability to reasonably accommodate an employee under the Americans with Disabilities Act may need to be explored and included as a supplement to the TPD application. Third, you can work, although at a minimal level and earning no more than the poverty level for a family of two.
This begs the question: how much work can be performed, but yet qualify as being unable to engage in “substantial gainful activity”.
We often hear from clients who have tried to dispute, settle or otherwise get rid of student loan debt — with little results except for hours upon hours of telephone conversations with reps. Consider hiring a student loan attorney to help you. This review was posted by a happy client just yesterday! Three months and she’s now debt free!
Years of stress and debt dismissed
The TEPSLF was established for public service employees who had the correct loans, Direct loans, but were making a payment under a non-income driven plan – such as Extended, a 20-30 yr Standard, Graduated etc. They key is you have to apply for PSLF, be denied, and then submit a second request to the TEPSLF as follows:
TEPSLF forgives debt for borrowers who meet the following requirements:
- Have at least 10 years of full-time work experience for a qualifying non-profit or government employer
This is a pretty cool map that shows the southeastern U.S. as ground zero for the student loan crisis. Most all of Florida shows this to be a High, Very High or Extremely High debt level according to this map.
I’m glad our bankruptcy court for the Middle District of Florida is taking this very important step to implement a new Student Loan Management Program for all debtors in Tampa, Orlando, Jacksonville and Ocala – and surrounding areas in between. The program goes live on October 1 — and anyone who is a debtor in a pending case is eligible for this relief, as well as all future debtors!
Please reach out to us if you want to know more about the student loan program now being offered by our bankruptcy court. We are also available to co-counsel on any cases with bankruptcy counsel who may be unfamiliar with the options available under this program.