Collector - May 2017 - 23
Institute's Graduating with Debt, and rulings
have been inconsistent.
"But I think attorneys are getting more
sophisticated in saying when something
doesn't look like a student loan," Hauser
In D'Youville Coll. v. Tucker, the U.S.
Bankruptcy Court for the Western District
of New York ruled that a financial agreement
between a student and an educational
institution for tuition and fees wasn't a
student loan but rather "a running account,"
in part because the agreement in question
lacked a stated amount due as well as a
promissory note. As a result, the borrower
was allowed to discharge the debt in her
And in Citizens Bank v. Decena, a
judge in the Eastern District of New
York allowed the consumer to erase the
student loan debt she took on to attend
a school that falsely represented that it
was accredited. (The case was eventually
sent back to bankruptcy court where it
was overturned because the defendant,
Citizens Bank, hadn't been properly
notified of the lawsuit.)
"I'd say [courts] are tinkering around
the margins in terms of giving relief, but
the vast majority of outstanding federal
student loans, either Direct or FFELP ... are
provided relief generally only through undue
hardship," said Timothy Fitzgibbon, senior
vice president of the National Council of
Higher Education Resources. "And I haven't
seen any significant change or ground made
by attorneys to really loosen the standards
for undue hardship."
"While different undue
hardship tests have
evolved over the years,
those tests still have to
be applied by a judge
and that means there's
involved. One judge's
undue hardship is
another judge's plainold hardship."
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