Will Mark Tetzlaff Be Our Student Loan Hero?

Mark Tetzlaff is a law school student who might not have achieved his dream of being a licensed attorney but the guy surely deserves some props for championing the cause through the courts of being impossibly in debt with student loans and seeking a legal remedy.

My last story on Tetzlaff, here, talked about how his request failed to have his federal student loans discharged in bankruptcy. Educational Credit Management Corporation has been fighting hard to not let the court permit a discharge of Tetzlaff’s student loans or the loans of many others are well. Click here to see some of the crazy cases.

The whole situation has been a bit perplexing since the U.S. Department of Education came out with a policy which appears to encourage student loan debt discharge in bankruptcy. And these are federal student loans. Read that here.

According to Bloomberg Business, “Tezlaff also got a new attorney after representing himself for most of his case. The lawyer, Douglas Hallward-Driemeier, successfully argued part of the landmark June case that made same-sex marriage a legal right in all 50 states. Hallward-Driemeier and his team have asked the court to clarify 1970s-era rules that prevent borrowers from getting rid of education debt in bankruptcy, except in cases in which repaying it would constitute an “undue hardship.” Lawmakers never fully defined “undue hardship,” leaving it to the courts to define these special, and rare, circumstances in individual cases.” – Source

Tetzlaff certainly has a story that would lead any person outside of a court to say he has a reasonable request to have his student loans forgiven. According to court documents Tetzlaff owes more than $260,000 in federal student loans which he attempted to receive a discharge for in bankruptcy since the loans were an “undue hardship,” a standard for discharge recognized differently in different courts.

But here is how the United States Court of Appeals summarized his situation. They said, “Mark Tetzlaff is fifty-six years old and lives in Waukesha, Wisconsin with his eighty-five-year-old mother; they both subsist on the income from her Social Security payments. Tetzlaff is divorced, has no children, and is currently unemployed. From the mid-1990s until 2005, Tetzlaff pursued a Masters in Business Administration from Marquette University, as well as a law degree from Florida Coastal School of Law (“Florida Coastal”). Most relevant to this appeal, Tetzlaff took out various federally guaranteed student loans to finance his graduate education. In 2004, Tetzlaff consolidated his student loan debt, and Educational Credit Management Corporation (“Educational Credit”) is now the guarantor for the outstanding loan amount.

Tetzlaff has been unsuccessful at passing a state bar exam to date (although he has made two attempts). Prior to attending graduate school, Tetzlaff worked as a financial advisor, an employee-benefits consultant, an insurance salesman, and a stock broker. Over the years, Tetzlaff has struggled with depression and alcohol abuse; he has also been involved in domestic disputes. Tetzlaff has several misdemeanor convictions, including convictions for disorderly conduct and intimidating a victim. He claims that all of these factors combined make it very difficult for him to secure employment.

In February 2012, Tetzlaff filed for Chapter 7 bankruptcy in the United States Bankruptcy Court for the Eastern District of Wisconsin. At the time, Tetzlaff owed approximately $260,000 in student loan debt, which was guaranteed by Educational Credit. In July 2012, Tetzlaff filed an adversary complaint seeking to discharge his student loan debt; the complaint named two financial institutions (who are not parties to this appeal) as defendants. Educational Credit subsequently filed a motion to substitute itself as a real party of interest, and the bankruptcy court granted this motion.

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The bankruptcy court held a trial in May 2014 to determine whether Tetzlaff was eligible to discharge his student loans. The court determined that Tetzlaff failed to show that repaying his student loans would constitute an “undue hardship,” and thus found that Tetzlaff could not discharge them. The United States District Court for the Eastern District of Wisconsin affirmed. Tetzlaff appealed.”

The Freaking Crystal Ball

As it stands now, courts are faced with a ridiculous or impossible task of determining someone has the capacity to alter their life and get down to paying the loans. I’ve seen opinions that say the consumer can go out and get a better job and do more but what crystal ball are they looking at?

It happens all the time but how can you make an educated legal decision based on the likelihood of someone accomplishing something they’ve been unable to accomplish. In this case Tetzlaff would not need a hand-up to assist him to get to a position where he could repay his loans. He would need a helicopter, jet, and guide to the top of some mountain.

So logically there is no reasonable expectation that Tetzlaff would be able to repay his loans and he sure appears to have a valid position that faced with chronic unemployment, inability to utilize his education, and his underlying mental issues that it would be impossible to repay his loans.

You might have an impression right about now that Tetzlaff is trying to get away with something. You’d be right. He’s trying to get away with his right to move forward from an impossible situation. A right that is afforded to him under the United States Constitution. Without the legal right of debt discharge, people would be trapped for life in impossible debt, not by want, but mostly by circumstances they had no control over. Seriously, who wakes up and says, please fire me, please divorce me, please make me a drink, please give me cancer, or please maim me in a car accident so I can’t work?

According to the United States Courts, “A fundamental goal of the federal bankruptcy laws enacted by Congress is to give debtors a financial “fresh start” from burdensome debts. The Supreme Court made this point about the purpose of the bankruptcy law in a 1934 decision:

[I]t gives to the honest but unfortunate debtor…a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of preexisting debt.

This case is not one of some guy running up a bunch of debt to get away with something. If that’s the case then he took on substance abuse, mental illness, domestic problems, legal troubles, and living poor with his parents as a master reuse. Seriously, who believes that?

Instead, Tetzlaff, and other student loan debtors are shackled with the slavery of impossible debt and the pursuit of federal student loan guarantors simply because of a technicality. In this case that technicality is the assertion by ECMC that Tetzlaff is not eligible for a discharge because he did not make a “good faith” effort to repay his student loans. They say he paid some towards other student loans but not towards theirs.

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But just to show you how obscene this case was, you’ve got to understand the lengths ECMC and the courts have gone to not allow Tetzlaff to get relief from his loans.

“Here, the bankruptcy court found that Tetzlaff’s financial situation has the ability to improve given that “he has an MBA, is a good writer, is intelligent, and family issues are largely over.” The court also concluded that “Tetzlaff is not mentally ill and is able to earn a living.” On the topic of Tetzlaff’s mental health, the court mentioned the testimony of Dr. Marc Ackerman—a forensic psychologist hired by Educational Credit—and Dr. Amy Gurka—Tetzlaff’s treating psychologist. The bankruptcy court noted that Dr. Gurka diagnosed Tetzlaff with Narcissistic Personality disorder, but that Tetzlaff’s “anxiety and depression do not reach clinical levels.” The court also noted that tests performed by Dr. Ackerman indicated that Tetzlaff “scored very high on several malingering scales,” indicating that Tetzlaff was perhaps feigning his psychological symptoms.”

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The court went on and noted, “On appeal, Tetzlaff notes that the bankruptcy court did not permit him to present the testimony of two experts that would have helped his case, particularly on the topic of his future ability to secure employment and earn a living. Prior to trial, the bankruptcy court excluded the proposed testimony of: (1) a forensic psychologist who would have testified that Tetzlaff had memory problems that would likely prohibit him from ever passing a bar exam; and (2) a vocational counselor who would have testified that Tetzlaff was unlikely to find employment paying more than $31,000 to $37,000 per year.”

This really isn’t a case about is Tetzlaff faking his ongoing life issues or not. For me, it’s more about does this guy have a snowballs chance in hell of repaying $260,000+ in loans given his long-term demonstrated life situation. I don’t think so and attempting to do so would certainly be an undue hardship.

And before people start complaining that Tetzlaff borrowed the money so he has to repay it no matter what, you need to keep in mind there were two parties to this transaction. You also need to consider the responsibility of the lender to pass out huge sums of money to students who have no demonstrable evidence to support they will be able to earn enough in the future to repay it.

As life stands right now, we lure students in with easy money to go way in debt for degrees that most will never achieve and then play them like suckers when life doesn’t turn out like the lenders want. But that’s not how life works, is it?

Go Mark Go!

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