A determination this month from the Bankruptcy Court in Manhattan (SDNY) might have a significant effect on industry for education loan securitizations. Education loan asset-backed securities (SLABS) are unsecured, but market participants typically assume that the student that is underlying aren’t dischargeable in bankruptcy. A ruling that is new the principle judge of this SDNY’s Bankruptcy Court challenges this presumption.
In Rosenberg v. N.Y. State Degree Services Corp. (Jan. 7, 2020), Chief Judge Cecelia Morris discharged the student that is debtor’s and vigorously forced straight right right back from the “myth” that it’s “impossible to discharge student education loans. ”
The debtor is just a Navy veteran whom graduated from legislation college in 2004, but worked as legal counsel only briefly. He missed reasonably few re re payments over 10+ years before filing for bankruptcy, of which time he reported negative month-to-month earnings. Their education loan financial obligation surpassed $220,000.
Chief Judge Morris unearthed that the debtor had shown the hardship that is“undue required by statute and came across the Second Circuit’s three-part test for release, which goes back to 1987. The court composed: “For a variety of petitioners like Mr. Rosenberg, who’ve been away from college and suffering education loan financial obligation for several years, the test is quite straight-forward and simple. Continue reading Pupil Loan Discharged in Bankruptcy – only a Blip, or something like that larger?