The case proves it's possible to discharge student loans in bankruptcy.
His journey with student debt began in 1993, according to the, when he took out student loans for his undergraduate degree. He kept up healthy financial habits, repaying his loans faithfully, until he served in the United States Navy on active duty for five years. After completing his tour of duty, he started law school at Cardozo in New York, for which he took out additional student loans.
“All along, having this debt, it would ruin relationships for me. ... it just affects everything in your life,” he said. “It always pissed me off that people at corporations who just negligently screw up, they just take chances they shouldn't... They get out of bankruptcy, no problem, and the executives get golden parachutes.”
Rosenberg filed for bankruptcy under chapter 7 in 2018. He also filed an adversary proceeding, which is essentially a civil lawsuit, against the New York State Higher Education Services Corporation. He said he was called to court five or six times for hearings on top of a deposition and an expert witness interview. Documents were produced and read. And both sides filed a summary judgement.
Because at the end of the day, the student loan system was “usury — plain and simple,” he stated. “These are not good actors here. They're not acting in good faith... It really is predatory lending in its classic sense.”Judge Morris, who applied the Brunner test to determine if student loans have caused the borrower to suffer undue hardship, which then decides if their debt will be discharged in bankruptcy, noted that the test was “fairly straight-forward and simple” for Rosenberg.
“Over the past 32 years, many cases have pinned on Brunner punitive standards,” Morris wrote, adding that judges sometimes required proof of “hopelessness” — a far more onerous standard than proving hardship. These interpretations were “applied and reapplied so frequently” and have “become a quasi-standard of mythic proportions soo much so that most people… believe it impossible to discharge student loans,” the judge stated.
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