How many people do you personally know struggling with student loan debt? Burdened by what feels like a mortgage payment. Unable to find work that can cover the costs of the education intended to put them in a better financial position. Some, in a hopeless and dire situation, with compounding interest making it worse with each month that goes by. Nowhere to turn, and unable to discharge the student loan debt under previously interpreted bankruptcy rules.
Smith was the first attorney to prove in multiple cases that certain student loan debt could be discharged in bankruptcy. Section 523(a)(8) of the Bankruptcy Code protects certain student debts from discharge in bankruptcy, including federal student loans and some private student loans, unless the debtor can prove that repayment of the loans would constitute an “undue hardship.”
But, this protection was only extended to “qualified education loans” (aka “real” student loans), which requires the student be attending at least half time, at an accredited school, and only borrowing for tuition, room, board, and books.. If the loan is not a “real” student loan, it can be discharged automatically. If it is a “real” student loan, your client will need to prove an “undue hardship.”
The problem is that private lenders started abusing the lending process and extending loans of hundreds of thousands of dollars to individuals for “unqualified expenses.”. The result being students who are burdened with loan amounts of $500,000 to $1,000,000 that aren’t “real” student loans to begin with.
As time passed, and the student financing universe evolved, courts created what has become known as the “Brunner Test” to determine whether a debtor meets the standard for “undue hardship.” The Brunner Test requires proof that you’re living in poverty (and likely to stay there) before the court will discharge your student loans. Austin then saw an opportunity to work with Best Case, to develop a better evaluation method for the growing population of student loan debt cases, and determine which loans do not the definition of a student loan, and which loans that do meet the definition of a student loan but can be discharged because of “undue hardship.”
Together, Smith and the Best Case team created a tool called the Best Case Student Loan Analyzer. A first of its kind calculator that walks an attorney through the process of evaluating a potential client’s student loan debt.
One of the most impressive features is access to important resources for evaluating the debt. For example, the Institutional Lookup: A search tool that saves you and your staff hours of time looking up a school’s Cost of Attendance (COA) and accreditation status that will help you determine if your client has a “real” student loan. Plus, a Jurisdictional Scorecard™ which explores statistics for dischargeability based on jurisdiction, circuit and by judge. This is typically an “aha” moment” for attorneys that feel that their Court/Judge would never discharge/partial discharge student debt.
Years of practice, hard-fought case wins and rigorous software development have been poured into this incredibly powerful tool. The analyzer is more than just a calculator; it is substantive law coach. As each step of the analysis is completed, the user is prompted with ‘What’s Next’ checklist, and step by step guides.
To take things a step further, they have even included a library of corresponding retainer agreements, letters, complaints, and motions specific to student loan discharge cases—complete with case law citations, and ready for use.
“We know this is a new frontier for many of the law firms using the analyzer and are committed to giving them the resources they need to know exactly where they are in the process, and what to do next,” explains Smith.
Bethany Lape, Chief Product Officer for Best Case, shares their plans for an entire educational component around this growing niche of bankruptcy filings. For starters, you can check out their Student Loan NACBA Presentation for a primer on the basics of this new case type. She and Austin continue to work closely together to develop and promote training courses, for both the lawyers using the product, and a consumer facing website.
You can find their recent articles here, which include:
- How to Charge Your Client
- Potential Tax Consequences in Student Loan Litigation
- Private Student Loans with Non-Profit Guarantees
- Seven Little Steps to Freedom: The Trial
And without a doubt, education must be the driver for lawyers to take on new cases with confidence. For attorneys familiar with FDCPA casework, you can identify with the nuances and special processes to execute those cases.
For example, some of the questions the Best Case team is focused on answering are:
- How do we bill for these types of cases?
- What does the student loan debt discharge timeline look like compared to a traditional Chapter 7 or 13 case filing?
- How can I help a past client who should have had their student loan debt discharged?
- Are there other options for my client, if they do not qualify for a complete discharge of the loans?
All of which can be answered thoroughly, with real world examples and suggested best practices. Only further highlighting the level of detail and research that has gone into creating this product.
Consider the Best Case Student Loan Analyzer to be more than just a product, and more like a business coach. There by your side, every step of the way training you on what to do next, or pointing out a case that could be very lucrative for you, and life-changing for your client.
The opportunity to serve:
Think back on how many clients that weren’t a good fit for bankruptcy due to the myth about student loans, that now deserve a second review. Also, how many new clients that would retain you if you could help them sort through a massive issue in their lives.
Bankruptcy is a life-altering practice area. One that comes with a great deal of responsibility, as you determine what is dischargeable, and what must be re-paid. Not all results from the Student Loan Analyzer come back with good news. Outcomes vary based on how the debt is structured, private, government, consolidation loans, etc. However, it’s not a straight win or lose situation. Interest rate reduction, settlement, and restructuring are all options that can be negotiated on your client’s behalf. Even if you aren’t able to completely wipe out their student loan debt, you can still advocate for their well-being and financial solvency. Resources are listed for referring the client to the government’s Income Based Repayment plan for Federal Student Loan debt.
No matter what, you are still in the best professional position to help your clients. If student loan payments make up a large percentage of their income, any improvement to the structure of the debt will go a long way.
Learn more about the Best Case Student Loan Analyzer and this growing area of opportunity for Bankruptcy law firms at: https://www.bestcase.com/studentloans.