A Potential Shift On Education Debt Discharge Standards
Associate Amir Shachmurove and partners David Gettings, Stephen Piepgrass and Timothy St. George are published in Law360 for their byline, “A Potential Shift On Education Debt Discharge Standards.” They write, “To its detractors, bankruptcy law’s ‘Brunner test,’ which is used to establish the dischargeability (i.e., elimination) of student loan debts, stands out like a sore thumb. They claim it is a relic, yet it is controlling within the majority of federal circuits. ... Recently, the U.S. Department of Education (“DOE”) may have breathed new life into these critiques — signaling there may be a policy shift with respect to the Brunner test.” The article points to a recent memorandum, issued by the DOE, that solicits public input on what sorts of borrowers seek to eliminate their student loans in Chapter 7 proceedings as providing evidence that the DOE is considering changing the test. The authors write, “…no matter how the Brunner test is changed, lenders and debtors will be faced with uncertainty as they try to determine how a new test could be applied. Such unpredictability necessarily will lead to increased litigation for both debtors and creditors. Both the defense and plaintiffs bars will face the challenge of litigation across the nation’s 94 bankruptcy courts, guided by sparse jurisprudence.”