Federal Judge Rules Bankrupt Woman Will Not Have Student Loans Discharged
A woman’s bid to have $333,423 in student loan debt forgiven due to bankruptcy was denied by a federal judge on July 27th.
Patricia Gail McDade, a 46-year-old West Virginia woman, filed for bankruptcy in January of 2015. In court filings, she stated that her student loan debts and the monthly interest they were accruing had produced “a feeling of hopelessness.” Additionally, McDade cited several health conditions, such as diabetes and chronic pain, that caused her to miss work at West Virginia University’s dentistry school, where she currently makes an annual salary of $63,000.
According to McDade, these problems, combined with her student loan payments, would keep her from maintaining a minimal standard of living.
Judge Patrick Flatley, a federal judge in the U.S. Bankruptcy Court in Clarksburg, West Virginia, denied McDade’s request to have her student loans forgiven. Judge Flatley disagreed with McDade’s contention that her inability to buy a home or save money are signs that her standard of living is below minimal.
In his ruling, Flatley stated the following: “Her argument misses the mark; while it may be a worthy goal to build wealth, it is not necessary or required to do so in order to maintain a minimal standard of living.”
The federal judge also went on to cite McDade’s continued ability to make car payments on a 2014 Jeep and her monthly charitable donations in the amount of $525 as further proof that the plaintiff can maintain a minimal standard of living.
Not only did Patricia McDade use student loans to attain her degrees, but she is also on the hook for educational loans taken out for her children. According to the bankruptcy court, McDade is now responsible for $333,423 in outstanding principal and interest. McDade holds an undergraduate and master’s degree in public administration from West Virginia University.
For the U.S. Department of Education, Judge Flatley’s ruling regarding McDade’s student loans is a total win. The Department of Education’s lawyers represented the collection side of McDade’s federal loans. The lawyers from the Education Department argued that McDade’s financial woes would not continue because she has a job and she could easily find another job if she lost her position at the dentistry school.
Not to mention, the collection lawyers also made note of the fact that McDade received a salary bump during bankruptcy that brought her monthly income from $2,900 to $4,000.
The ruling in Patricia McDade’s case is further proof that while getting student loans forgiven is a rarity, getting them discharged through bankruptcy is next to impossible. Student loan debt cannot be forgiven through bankruptcy unless there is proof that the debt is causing the borrower “undue hardship.” The term “undue hardship” has yet to be given a more succinct definition from lawmakers.
Additionally, going to bankruptcy court can be an extremely expensive venture for student loan borrowers, who are already hampered by their education debt. Bankruptcy lawyers can end up costing more than $10,000 for a single case.
In January 2017, the United States Supreme Court Court refused to hear the case of one student loan borrower who was attempting to have his loans discharged through bankruptcy. That borrower, Mark Tetzlaff, did not believe he could repay $260,000 worth of student loans and was seeking clarification to the definition of “undue hardships.” The Supreme Court turned down his case, dashing the hopes of millions of student loan borrowers in the U.S. hoping to have their loans forgiven.
Tetzlaff was recently in the news again after he sued the Illinois Board of Admissions to the Bar after they denied him an open-book test and extra time. Claiming a violation of the Americans with Disabilities Act, Tetzlaff’s lawsuit is still up in the air.