- In March, a judge agreed to postpone Heather Smart’s student loan bankruptcy hearing due to medical treatment.
- But he has just decided that she must continue with her lawsuit unless she can prove that she is medically incapable.
- Biden has promised to reform the bankruptcy process, but it continues to be a burden on borrowers.
Three months ago, a federal judge ruled that Heather Smart could postpone her hearing to get rid of her student debt through bankruptcy while she undergoes cancer treatment. Now that same judge says it’s time for Smart to go to court.
Smart filed for bankruptcy on his student debt of $95,181.92 in December due to unemployment caused by “receiving extensive medical care and treatment for a myriad of problems related to several forms of aggressive and invasive cancer, as well as ‘to a blood disorder,’ according to a court filing. She said her situation prevented her from earning enough income to repay her loans.
The Department of Education wrote at the time that Smart was ineligible for the bankruptcy discharge because when “her health improves, she has college degrees and is able to maintain full-time employment. and can maintain an adequate standard of living while repaying its loans”. But a US bankruptcy judge in the Southern District of Texas allowed her to postpone her hearing while she was undergoing treatment.
Last week, Smart requested a further postponement of her hearings because she “is currently in the long process of diagnosing, planning and executing a treatment plan for a myriad of medical issues,” including the cancer and a blood disorder, according to the court filing. She is waiting to find out if her disability is permanent, which could have a significant impact on the outcome of her student loan repayment.
The judge denied Smart’s request.
“The trial in this case has been set and then reset numerous times,” Judge Jeffrey Norman wrote. “This deal needs to be done. An indefinite suspension does not do justice.”
He added that the court would only consider an extension of the trial date if Smart “is medically unable to participate virtually”, and that she must prove this incapacity with “reliable evidence and give an estimate of when she will be able to participate.” appear at trial.”
Since Smart could not provide proof of her medical condition at the time due to the unavailability of her doctors, she asked for time to refile claims, and the judge granted that request.
The Education Department also gave Smart a cancer treatment deferral on her loans, which means she isn’t required to pay off her debt until October 2023 and interest won’t accrue. — but even being on a long-term reprieve, the judge still asks him to proceed with the trial.
Proving bankruptcy on student loans in court is no small feat. The borrower must prove an “undue hardship” standard, which requires him to show that he cannot maintain a minimum standard of living, that his situation is unlikely to improve, and that he has made an effort to good faith to repay its debt. But successfully meeting that standard is rare, and many borrowers have been stranded because of it, which is why the Biden administration has promised to reform the bankruptcy process.
“The process is not working well. It needs to be reformed … and we are committed to reforming it,” federal student aid chief Richard Cordray told a House education subcommittee l last fall. “There have already been discussions with the Ministry of Justice. They too are ready to have us revise our approach.”
Since then, however, the Ministry of Education has continued to oppose borrowers’ demands for release in court. Education Undersecretary James Kvaal said during a virtual discussion on student debt on Monday that “Secretary Cardona said we want to review this policy, and that’s something that’s ongoing right now. There’s an interagency process for that, it’s not just within the department at the discretion of the department, and we’re working very hard on that. In fact.”
But advocates say the process needs to be accelerated. Dan Zibel, vice president and chief counsel of Student Defense – an organization that defends the rights of borrowers – said in a statement that “time and again we continue to see the government erecting barriers that make it harder for borrowers bankrupts who request a discharge from their student loans. »
“Although the Ministry of Education has publicly acknowledged the problems, to date we have seen little concrete policy change, and borrowers facing extreme hardship are paying the price,” Zibel said. “Enough is enough.”