You never know what it’s like to walk in someone else’s shoes. If I asked your thoughts on a 56 year old healthy male, living in California, who has been an attorney admitted to practice law since 1993, what would they be? High net worth? Partner? 1%? What if I told you that this person is real and filed for chapter 7 bankruptcy because he is living in the red nearly $800 per month? What if I also shared with you that he managed to get almost a quarter of a million dollars worth of student loans discharged in his bankruptcy case?
The debtor in this case is a 56 year old attorney living in California. He started his legal career in 1993 but, due to firms dissolving, winding down, downsizing and so forth, his legal career has been a roller coaster. In that time, he has applied for firm positions, worked legal temp jobs, and tried to operate as a solo practitioner. In that time, he has traveled to multiple states, gaining admission in those states, and looking for legal work. Unfortunately, for this debtor, he just wasn’t able to find legal work that worked for him.
He filed for chapter 7 bankruptcy in August 2014, declaring monthly income of about $875 (which includes public assistance), and monthly expenses of just under $2,000.00. As the court suggested, the debtor leads a “spartan life,” driving the same car since 2003, hasn’t paid certain expenses like malpractice insurance or bar dues in other states, and has two roommates. Further, the debtor has no kinds of assets, like real property, to pay creditors, including student loans.
After his bankruptcy case closed, the debtor started this action to have his $264,056.41 in student loans determined to be discharged. The court applied the three-prong Brunner test, which asks (1) Barrett cannot maintain, based on current income and expenses, a “minimal” standard of living for himself if forced to repay the loans; (2) additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period of his student loans; and (3) Barrett has made good faith efforts to repay the loans.
With respect to the first prong, the court was satisfied with, and found credible, the testimony of the debtor. He is living as frugally and minimally is possible and, if forced to continue to pay student loans, he would struggle even more with the basics of living. With respect to the second prong (which has been the challenging prong for many debtors that have sought to discharge their student loans in bankruptcy), the court found that the debtor’s dismal circumstances will likely persist. The debtor plans to work for another 10 years. Any kind of student loan repayment plan, including those income-based repayment and Pay As You Earn plans, would extend to twenty years and beyond. The court found that the debtor has not been able to generate income for the last 20 years, and no circumstances exist that that is going to change for this debtor. Further, he has done everything that he can to find employment, but it just has not worked out. Thus, the court found this prong satisfied. Finally, with respect to acting in good faith, the debtor had made regular payments when he had steady income, and even made irregular payments with irregular income. Although he has not applied for one of the newer, alternative student loan repayment alternatives, the court found that this, alone, was not dispositive on the issue of whether a debtor is acting in good faith. Barrett vs. US DOE, 14-43516-CN (Bankr. N. D. Ca., Feb. 10, 2016).