Last week, the Wall Street Journal featured the story of Kevin Rosenberg (also covered here), a former attorney who did what every student loan debt slave thought was almost impossible — he convinced the bankruptcy court to discharge his student loans in full.
What’s amazing about Rosenberg’s story is that he did this on his own without the assistance of an attorney. I reached out to him, and he was kind enough to grant an interview where he explains what led to his decision to file bankruptcy and how he handled the adversary process on his own.
Please tell me about yourself and what you did after graduation.
While I was serving in the naval officer’s program, I was told that those who were leaving were expected to go to graduate school. Based on my interests and background, I thought that going to law school and being a lawyer would be the right fit for me. As an officer, I was used to preparing and processing paperwork. I also wanted to help people and make good money.
It turns out that after my first year of law school, I found out that as a lawyer, I will either help people or make good money. I also realized that I was not going to enjoy doing legal work so I considered doing something else. I applied for jobs in the business sector, but I was mostly ignored. And the few employers who contacted me said that they were surprised that I did not want to be a lawyer since they thought lawyers made large salaries. It was then I realized that my law school (and others) were not truthful about nonlegal employment opportunities for those with law degrees.
So after graduation, I pursued a number of business ventures. I was a street vendor in Brooklyn, was a real estate broker, and ran an outdoor-gear rental business.
In 2016, with the help of angel investors, I opened a retail shop. Initially, the business was profitable. But business slowed as more people were turning online to shop instead of going to brick-and-mortar stores. Due to continuing losses, I had to shut down the business in 2017.
To make things worse that year, I underwent back surgery and was in rehab for one year. During that time, I could not move or lift heavy objects. As a result I was unable to devote myself to my business, which was a contributing factor to the closure.
Sounds like you had ups and downs over the years. How did you handle your student loan payments during those times?
I was unable to pay the monthly payments under the standard monthly plan so I contacted the lenders to try to work out a payment plan that I can afford based on the circumstances. The various student loan servicers who handled my account pushed me to be on forbearance which meant I didn’t have to pay temporarily but the interest grew in the meantime. Later, they switched me to an income-based repayment plan.
The private lenders set up a payment plan where I started with a low amount per month which increased after every year. However, there were times I was unable to pay because I did not have the money and so I defaulted. The lenders then sued and got a judgment against me which later showed up on my credit report.
Basically, I paid what I could based on how much I made at the time. At one time, I was making good money and used a large portion of it to try to pay down the loans. But most of the time, I could only pay what I can afford after basic living expenses.
What made you consider bankruptcy?
Based on everything that has happened and thinking about the future, I concluded that there was no realistic way I could pay off my student loans in full. Also, since the judgment from the private loan lenders affected my credit, it would be near impossible to obtain a loan from a bank. This made it impossible to expand my business or refinance my existing loans.
What was your total student loan debt at the time of your bankruptcy?
In total about $400,000. $220,000 were federal loans and $180,000 were private loans.
Were you aware that the law makes it more difficult to discharge student loans compared to other debts?
I read that it was not easy to show undue hardship in order to discharge student loans in bankruptcy. Not only that, you have to start an adversary proceeding in the bankruptcy court which is similar to filing a lawsuit. This made my case more complicated than a typical bankruptcy filing.
Did you try to retain a bankruptcy attorney to represent you?
Yes, but the attorneys I talked to said that costs would be between $25,000 to $40,000, and I could not afford that.
Did the loan companies offer to settle?
I was able to settle my private student debts in full. However, Navient, the loan servicer for my federal loans, was not willing to budge. They would only suggest that I enter into an income-based repayment plan.
What made you decide to go to the bankruptcy court on your own?
I researched the Brunner test which sets out the elements that needs to be met to show undue hardship which will discharge the student loans in full. After researching, including reading the case law, I believed that I met the standard. Finally, I had nothing to lose at this point.
So tell me about the filing the petition and starting the adversary process.
I filed the Chapter 7 bankruptcy petition on March of 2018 and then started the adversary proceeding in June 2018. I was required to undergo the credit counseling seminar and then my case was assigned to a bankruptcy trustee.
I started the adversary proceeding by filing a complaint with the court using templates I found online. ECMC filed an answer and then discovery proceedings began.
Note: Some bankruptcy court websites have templates for filing an adversary complaint. For example, this is a template that can be used in the Middle District of Florida.
So what happened during the discovery process?
For nonlawyers, discovery is the process where each party gathers information from the other. I asked ECMC to provide me with copies of my entire payment history, all internal communications concerning my file, and copies of loan documents.
ECMC asked for copies of my tax returns, my financial information, and my employment history. I provided copies of all of them.
They also deposed me and I spoke with one of their employment experts.
The employment expert concluded that I could have taken a paralegal job, with some being paid over $100,000 per year. The problem was that those high-paying paralegal jobs required many years of experience and was in specialized fields such as mergers and acquisitions. There was no way I could have qualified for those jobs.
Has ECMC (or anyone else) done anything to make the adversary process difficult for you? ECMC never turned over the documents/info I requested even after the judge ordered them to do so. They kept saying that those documents were from a prior party in interest, and I argued that if they now own the loan they need to be able to produce the documents. They gave me a data dump of around 150 pages that was basically in their company code and was practically undecipherable. From the beginning I tried to settle for an amount that I knew I could pay off in 10 years and they refused to budge.
So what led to the judge’s decision?
Over a year later, and a few months before the judge’s decision, she cancelled discovery. Both ECMC and I filed our summary judgment motions as there were no factual disputes. So I wrote the summary judgment motion arguing why I met the Brunner test: I cannot maintain a minimal standard of living based on current income and expenses, why my current financial condition is likely to persist for a significant portion of the repayment period, and that I made good faith efforts to repay.
So you must be happy with the judge’s decision?
I would say I feel more relieved than happy.
Are you ready in case ECMC appeals the decision?
I have not heard from ECMC about whether they will appeal. But since the decision was made public, I have been offered free representation by attorneys and advocacy groups in case they do. My research shows that the chances of reversal on appeal are very low, and I’m sure ECMC is aware that an affirmance from an appeals court will set future precedent.
In your opinion, do you think that most people can handle the adversary process on their own without an attorney? Yes, thanks to templates available online. It basically comes down to telling and proving your story and why you meet the requirements of the Brunner test. My pleadings are public but to make it easier for debtors representing themselves I’m happy to send them to a debtor’s advocacy group helping people like myself. That being said, I don’t consider myself a lawyer and my pleadings are far from perfect. I focused on telling my story in plain language and used case law that I found via Google, not Westlaw or Lexis, which I didn’t have access to. I’m sure my citation format was not up to law firm standards but it got the point across.
Student loan forgiveness is a sensitive and divisive topic. Is there anything you would like to say to those who think you should pay your debt in full?
I believe the judge made the fair and right decision based on my life struggles. I lived minimally. I rarely ate out, never traveled except for work and was living paycheck to paycheck. I was constantly behind on rent. I’m 46 and because of these loans, I am unlikely to have a long-term relationship. I am not asking for a handout, but instead a second chance. I don’t see why student loans have to be treated so harshly compared to other debts.
I chose bankruptcy because I had no other choice. I tried to work with the lenders but they gave me no other options. I am hoping that this ruling will force them to work with debtors instead of intimidating them.
I want to thank Kevin Rosenberg for sharing his story and I wish him well.
Steven Chung is a tax attorney in Los Angeles, California. He helps people with basic tax planning and resolve tax disputes. He is also sympathetic to people with large student loans. He can be reached via email at email@example.com. Or you can connect with him on Twitter (@stevenchung) and connect with him on LinkedIn.