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My Theory of Why My $130K of Federal Student Loans Was Discharged in Bankruptcy

By on June 14, 2016

THE DISCHARGE OF $130,000 WAS SETTLED WITHOUT A TRIAL! HERE IS MY THEORY OF WHY!

AT A MOTION HEARING, THE DEPT. OF ED. MOVED TO STRIKE MY COMPLAINT.

BY COUNTERING THAT MOTION, THE DEPT. OF ED. SAW I WAS NOT GOING TO FOLD!

THE JUDGE GAVE THE DEPT. OF ED. JUST THREE DAYS TO ANSWER MY COMPLAINT. WHAT THE DEPT. OF ED. DID NEXT LEFT ME THINKING WHY DIDN’T THEY WANT A TRIAL?

I HAVE A THEORY!

Ever since I won a full discharge of my student loan debt in February of this year, I have had this recurrent thought “why did the Department of Education (D.O.E.) agree to discharge my $130,000 loan debt without going to trial?” Why was it that the D.O.E. could possibly be so eager to end my Adversary Proceeding here at the Bankruptcy Court in Alexandria Virginia?

Let me begin by sharing a brief overview of my situation. At 67, retired, disabled unemployed, living on social security and a small federal pension, (both of which were being “garnished” by the D.O.E.), I was living with my youngest child and her husband on just $1,200.00 a month. My income was being offset by the U.S. Treasury in an attempt to pay the interest on my consolidated and defaulted 27-year old student loan. A debt which originally was $55,000.00 borrowed when I returned to earn a bachelors degree when I was 40 years old.

Of that debt, I had paid back nearly $14,000.00 in spite of the fact that from 2002 until I turned full retirement age, the Social Security Administration was deferring my loan due to my being awarded SSDI (Social Security Disability Insurance/Income). Once I reached what was described as “full-retirement status” my SSDI was changed over to “a straight social security annuity”. Then I was notified that my student loan was now due in full and had grown to nearly $130,000.00. And then I was notified that my monthly annuities were going to be garnished. The reality is that the 15% they are allowed to garnish was not enough to cover the interest, that keep growing adding to the principal each and every day!

IN ANSWERING THAT QUESTION —- I PROPOSED MY THEORY

Sometimes when we have an idea or in this case a theory, it helps to share those thoughts with a friend and get an opinion. So I wrote my friend W. Richard Fossey an email and proposed my theory to him as follows:

“Richard,

Something that has come into my thoughts on more than one occasion is the fact that the DOE moved so quickly in my particular case to settle without a protracted trial. I have a theory, perhaps you can consider this idea that I keep having and provide your thoughts?

OK… As you know, my preparation made a huge difference. And the fact that I had all of my documents and exhibits ahead of the discovery phase and filed the AP in a very timely and methodical way, also made a huge difference (in my opinion).

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But what has peaked my curiosity as I think back on this, is why did Coulter and the DOE move to settle without seeking a “trial judgement” or “decision” from Judge Mayer? Here is my theory….

Consider this — Had the DOE persisted on going to trial, and with the fact that I was challenging the DOE with their own July 7th policy directive, is it possible that the DOE and Coulter were reluctant to go to trial BECAUSE they were afraid that Judge Mayer would rule in my favor and write a decision brief that would be the key to opening a Pandora’s Box for other courts to rule with?

By NOT writing an official public trial decision, there is not that much publicity or factual case information that gets posted to the legal networks. Therefore the DOE continued to cover over the results of my case, and in the process continued to avoid a landslide from taking place?

My case is not out there like (a mutual debtor who won his case – and wants to remain anonymous) or any of the others who’s student loan cases went to trial and were decided upon, is there something to my theory?

What are your thoughts?” Richard P.

My friend’s reply….

Hi, Richard.

I think you are exactly right. Your thorough preparation was definitely a factor, and when DOE received that opposition to their motion to strike, Coulter knew you were ready to fight for as long as it would take.

But your other hypothesis is a big part of it as well. I agree that Coulter was afraid of a written decision that could be published in the Bankruptcy Reporter that would alert everyone in a similar position that the July 7th letter could be a huge asset. DOE couldn’t risk it. So your victory doesn’t go down in the records like (our mutual friend’s) did.

(Our mutual friend) thinks that the combination of the Roth decision and your victory means that anyone whose Social Security checks are being garnished can win an adversary proceeding. In other words, your victory could apply to about 155,000 people! In other words, all these people would have to do is to follow the template you laid out and they would almost certainly win.

That’s why I would like to see your victory publicized as widely as possible and why I think your blog is so important.

And although I am not certain, I also think your case might have been a factor in DOE’s decision to forgive student loans for everyone who is categorized as disabled. They too would fit under the July 7 letter.

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I’m thinking someone considered your case and could see that disabled people could do just what you did. To avoid the publicity and the court precedent that would surely come, DOE got pro-active and signaled it would forgive loans by all disabled people. As I recall, that is almost 380,000 people–people who may have gotten relief because of what you did with that letter.

You are kind of the Rosa Parks for the student-debtor class!”

In her autobiography, My Story (Rosa Parks) said:

People always say that I didn’t give up my seat because I was tired, but that isn’t true. I was not tired physically, or no more tired than I usually was at the end of a working day. I was not old, although some people have an image of me as being old then. I was forty-two. No, the only tired I was, was tired of giving in! (emphasis added)
Me…. the Rosa Parks for the student-debtor class!

Well I have actually been in the bus that Rosa Parks made famous, it was in the Henry Ford Museum in Dearborn, Michigan, and I can tell you that it was a somber experience.

For my friend to compare me to Rosa Parks is a great compliment. It would be a great honor to know that others find hope and answers to their personal student loan “crisis” by something I have shared! If you are struggling with a student loan that will never be paid off in your lifetime, there is a glimmer of hope. When I nearly despaired and was ready to quit, I was encouraged by my friends to press on. I decided I was not going to “move to the back of the bus” and I was not going to be intimidated by the unfair laws that were against me.

There is a change coming! I pray I have become one of the agents of change? But there are thousands of people in crisis just like I was who need a “fresh start”, please help me and others like me, get the word out that the current laws that prevent bankruptcy or forgiveness of inflated and corrupted student loan debt need to be changed. Feel free to pass my writings along.

Thank you! Sincerely, Richard Allan Precht

This article by Richard Allan Precht first appeared on Undue Hardship-Poverty Required and was distributed by the Personal Finance Syndication Network.


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One Comment

  1. Anon Person

    June 15, 2016 at 3:42 pm

    Thank you Steve for publishing my writings! Bless you and America!
    Richard Precht

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