In a move that could have repercussions for the thousands of Oregon residents suffering from severe student loan debt, the Ninth Circuit Court of Appeals recently ruled in favor of an Oregon old man who was forced to declare bankruptcy due to student loans that he could not repay. The man's attorney said he was pleased with the result and noted that the appeals court's decision clarifies the way courts should determine whether bankruptcy filers qualify for relief due to undue financial hardship.
The man filed for bankruptcy several years after earning an undergraduate degree from the University of Oregon and a law degree from another institution. He failed to pass the Oregon State Bar exam two times and was unable to take the test on a third occasion when he locked his keys in his car. Deciding not to take the exam a fourth time, he took a job as a counselor and started a family with his wife. He was 33 when he filed for bankruptcy protection.
The bankruptcy court hearing his case initially determined that the man had made an acceptable effort to repay his student loans before declaring bankruptcy and relieved him from some of his debts. However, a federal district court launched an appeal, reversing the lower court's ruling after finding that he had not in fact done everything within his power to handle his debt. The court contended that the man had failed to aggressively pursue a repayment plan for his student loans and chose to live an unaffordable lifestyle with his wife and children.
The recent appeals court decision overturned that decision, agreeing with the bankruptcy court and asserted that the man had indeed done his best to pay off his liabilities. The court then granted the Oregon grad a partial discharge of his law school loans, explaining that forcing him to repay them in full would likely cause undue hardship for him and his family.
Appeals such as this often result in complex litigation that can be confusing for those without deep legal knowledge. This makes it important for individuals involved in such cases to seek help from a qualified attorney.
Source: CBS Money Watch, "Court opens window of hope for student debtors" Charles Wilbanks, May. 27, 2013