Summary: The U.S. Supreme Court refused to hear an appeal of a would-be lawyer’s attempt to escape $260,000 in student-loan debt.
This Monday, the U.S. Supreme Court refused to hear an appeal by a J.D. who hoped to declare bankruptcy to absolve himself of more than $260,000 in debt for business and law school, The Wall Street Journal reported. With student loans more than doubling since 2007 to a whopping $1.3 trillion, any attempt to get the Supreme Court in on easing the situation would be highly visible.
This case concerns Mark Tetzlaff, 57, who failed the bar exam twice. His dreams of being a lawyer haven’t panned out, and furthermore, he said in court papers that alcoholism, depression and a criminal record have prevented him from repaying his debt.
He filed for Chapter 7 in 2012 in an attempt to get his debt forgiven, but the courts failed to accept this.
Student loans are bound to be upheld unless the debtor can prove “undue hardship,” an ambiguous provision that’s been in the law books for decades. The judges who looked at Tetzlaff’s case used a three-part test, asking if he could maintain a minimal standard of living if he had to repay the debt and whether his current financial hardships were expected to persist. Various courts claimed Tetzlaff was capable of earning a living and pointed out he never made a single payment on his debt.
As it is, he lives with his mother who supports them with her Social Security payments.
As one in four borrowers out of school are 90 days behind on a payment, according to the Federal Reserve Bank of New York, student loans have become a crisis for this nation and a matter of debate.
Tetzlaff faced the nonprofit Educational Credit Management Corp., which collects debt on behalf of the U.S. Education Department. They asked the high court to reject the case saying Tetzlaff wasn’t entitled to lose his student debt even if a less stringent legal standard was used.
As different federal courts use different tests to determine “undue hardship,” Tetzlaff had hoped to make a case that the more lenient standards should be universalized, or at least applied to his case. The intended Supreme Court hearing would clear up inconsistencies in how “undue hardship” was determined.
The refusal of the Supreme Court to hear this case leaves extant the disparity between measures in federal courts appeals concerning the requisites for “undue hardship.”
Source: The Wall Street Journal
Photo credit: Jason Morrison/FreeImages