Student Defense and Neu Law Bring Lawsuit Seeking a Bankruptcy Discharge on Behalf of Financially Distressed Student Borrower
FOR IMMEDIATE RELEASE:
October 18, 2022
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Student Defense and Neu Law Bring Lawsuit Seeking a Bankruptcy Discharge on Behalf of Financially Distressed Student Borrower
Borrower attended now-closed for-profit Griffin College over thirty years ago, Department of Education still seeking $78,715 in student debt repayment
Student Defense, along with Latife Neu of Neu Law, PLLC, yesterday filed a lawsuit against the U.S. Department of Education seeking a student loan discharge on behalf of Zena Dodson, a financially distressed public school employee in Washington State. The lawsuit calls on the Department of Education to discharge the borrower’s $78,715 of student loan debt, which originated from an $18,955 student loan the borrower took out in the late 1980’s. Dodson’s case is the most recent among a litany of cases that underscore the need to reform student debt bankruptcy policies.
“Zena’s case is a prime example of how borrowers can become buried under a mountain of debt for decades just to attend classes at shoddy for-profit schools,” said Student Defense President Aaron Ament. “What’s more, our client clearly meets the standards for a hardship discharge according to federal law. Everyone close to the process — including, ostensibly, the Department of Education itself — agrees that these bankruptcy policies are broken, and there is no reason for the Department to keep fighting people like Ms. Dodson.”
Ms. Dodson has made a good faith effort to pay back her loans since entering repayment in the early 1990s, and she was granted Chapter 7 bankruptcy protection in 2014. However, under federal bankruptcy law, discharging student loans requires a separate legal proceeding such as the adversary case filed yesterday. Dodson currently supports both of her adult daughters and a granddaughter and has no significant financial assets.
“Despite maximizing her income and minimizing her expenses, Ms. Dodson is currently unable to repay her student loans without undue hardship to herself and her dependents, given her income and family responsibilities,” the lawsuit states. “The Plaintiff has carried the debt taken to attend a failed school for over thirty years. It would be a grave injustice to require her to pay another $78,715, plus interest, on this debt.”
The Department has come under recent scrutiny over denying financial hardship discharges and opposing individual borrowers in bankruptcy court. Last October, Office of Federal Student Aid Chief Operating Officer Richard Cordray testified before congress that he believed the student debt bankruptcy process did not work well. “We think that [the bankruptcy process] needs to be reformed and reevaluated and [the Department is] committed to doing that,” Cordray said.
Following months of inaction, in February 2022, a group of consumer and student advocates called for the Department to issue a moratorium on further student loan discharge opposition and appeals. The request drew support from members of Congress, including Senate Judiciary Chairman Dick Durbin, Senate HELP Committee Chairwoman Patty Murray and Senate Majority Leader Chuck Schumer. The Department still has not issued updated guidance and continues to fight distressed borrowers in court.
For more information on Ms. Dodson’s case, click here.
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