A determination this month out from the Bankruptcy Court in Manhattan (SDNY) may have an impact that is significant the marketplace for education loan securitizations. Education loan asset-backed securities (SLABS) are unsecured, but market individuals typically assume that the student that is underlying aren’t dischargeable in bankruptcy. A ruling that is new the principle judge of this SDNY’s Bankruptcy Court challenges this presumption.
In Rosenberg v. N.Y. State Degree Services Corp. (Jan. 7, 2020), Chief Judge Cecelia Morris discharged the debtor’s student loans and vigorously forced right right right back regarding the “myth” that it’s “impossible to discharge student education loans. ”
The debtor is really a Navy veteran who graduated from legislation college in 2004, but worked as a lawyer briefly that is only. He missed reasonably few re payments over 10+ years before filing for bankruptcy, of which time he reported negative income that is monthly. Their education loan financial obligation surpassed $220,000.
Chief Judge Morris discovered that the debtor had shown the hardship that is“undue required by statute and came across the Second Circuit’s three-part test for discharge, which goes back to 1987. Continue reading