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| vol 16, num 2 | September 2019 |
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| Letter from the Newsletter Editor |
| The collective amount of student loan debt in the U.S. has surpassed the amount of credit card debt, yet bankruptcy rarely offers any relief. We decided to look deeper into this issue to determine how student loans became virtually nondischargeable, and how we as an organization of bankruptcy professionals can offer solutions.
Did you know that under the current Brunner test adopted by the Second Circuit in 1987, "undue hardship" has become an insurmountable hurdle to discharging student loans? I urge you to take a look at the explanation on how it became so in the article written by Stacey W. Salters entitled, “Brunner: A Faulty Foundation."
Would you like to see what the ABI Commission on Consumer Bankruptcy recommended to Congress, and what Congress is thus far doing with those recommendations? A great synopsis has been written by Elizabeth E. Stephens and is included in this newsletter.
We will continue to monitor any progress from Congress and the courts on this issue. Will courts move away from the Brunner test and adopt a more totality-of-the-circumstances approach? Will Congress take action to change the nondischargeability of student loans before they lead to a major crisis similar to the subprime mortgage crisis? Only time will tell, and the ABI Legislation Committee aims to bring you these updates in the future. |
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| Brunner: A Faulty Foundation |
| Many struggling to pay off student loans today may be surprised to find out that student loans were once freely dischargeable in bankruptcy. But due to abuse, it has become increasingly difficult to discharge student loan debt. It is currently one of the most difficult classes of debt to discharge. For example, “Section 523(a)(8) renders student loan debt presumptively nondischargeable ‘unless’ a determination of undue hardship is made [by the court].” The phrase “undue hardship” is not defined by the Code; this determination has been left to the courts. Two tests have emerged to help courts make this determination: the
Brunnertest and the totality-of-the-circumstances test. Although the Brunnertest has been adopted by an overwhelming majority of the circuits, a brief inspection of its foundation may reveal a fatal flaw. |
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| Student Loans and Bankruptcy: Congressional Action and Consumer Commission Recommendations |
| At last count, there were almost 100 pieces of legislation introduced into the 116th Congress relating to student loans, education financing and debt. As might be expected, a number of bills are related to the treatment of student loan debt in bankruptcy. In the midst of this flurry of legislative activity, the ABI Commission on Consumer Bankruptcy (“the Commission”) released its Final Report.The Commission studied the matter of student loan debt in bankruptcy in some depth and offered its recommendations.
The charge to the Commission was to recommend improvements that could be implemented within the consumer bankruptcy system’s existing structure. The Commission did not avoid recommending statutory amendments, however, and made several such recommendations regarding the issue of student loan debt.
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| Experts Discuss New Bankruptcy Laws to Help Distressed Small Businesses, Disabled Veterans and Family Farmers |
| On August 23, 2019, President Donald J. Trump signed the “Small Business Reorganization Act of 2019” (H.R. 3311), “HAVEN Act” (H.R. 2938) and “Family Farmer Relief Act of 2019” (H.R. 2336) into law. The bipartisan bills, which ABI testified in support of in June, passed the House in late July and the Senate on August 1.
Robert J. Keach of Bernstein, Shur, Sawyer & Nelson (Portland, Maine), Kristina Stanger of Nyemaster Goode, P.C. (Des Moines, Iowa), Jessica Hopton Youngberg of the Veterans Legal Services Clinic at the New England Center & Home for Veterans in Boston, Joseph A. Peiffer of Ag & Business Legal Solutions (Cedar Rapids, Iowa) and Donald L. Swanson of Koley Jessen (Omaha, Neb.) joined moderator and ABI Executive Director Samuel J. Gerdano on August 28 for an ABI media webinar that provided an overview of the new laws and how they will help financially distressed small businesses, disabled veterans and family farmers going forward.
To view the recording, please click here. |
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| Winter Leadership Conference Open Now! |
| Join the Legislation Committee at ABI's Winter Leadership Conference. The Terranea Resort in Rancho Palos Verdes California is the setting for this year's annual program, which features topics designed for consumer and business practitioners, as well as financial advisors. As always, the conference provides numerous social and fun events to network and renew friendships with your colleagues from around the nation and overseas. We look forward to
seeing you in December!
This year, the Committee will be hosting a session titled, Bankruptcy Legislation in 2019 and 2020.
Speakers for this session include:
- Elizabeth E. Stephens, Moderator
Sullivan Hill Rez & Engel; Las Vegas
- Hon. Michael A. Ferguson
Baker & Hostetler LLP; Washington, D.C.
- Hon. Michelle M. Harner
U.S. Bankruptcy Court (D. Md.); Baltimore
- Prof. Dalié Jiménez
University of California, Irvine School of Law; Irvine, Calif.
- Robert J. Keach
Bernstein Shur; Portland, Maine
- Donald L. Swanson
Koley Jessen; Omaha, Neb.
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| Legislation Committee Leadership for 2019 |
| For your reference, below is a full roster of the Legislation Committee leadership. Please consider them a resource for getting more involved in ABI volunteer activities.
You can also visit the committee's homepage for more newsletter articles, relevant recordings and other committee information.
The committee is always eager to welcome new volunteers. Please contact any member of our leadership team to find out how you can get involved.
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