The New York Times greeted 2014 with an article detailing the allegedly “ruthless” tactics the Educational Credit Management Corporation (ECMC) uses when dealing with student loan debtors. Readers will recall ECMC as the creditor in recent student loan discharge cases that involve the issue of whether the debtor should be required to sign on to an income-sensitive repayment plan. In most cases, the courts held that debtors weren’t obligated to enroll in such plans and could obtain a discharge.
However, it’s no accident that ECMC appears in the case caption for those cases. It has an exclusive agreement with the Department of Education to handle every attempt by debtors to discharge their student loans via the “undue hardship” exception.
The Times article discusses some of ECMC’s alleged ruthlessness and abuses of student loan debtors. Here are some of the highlights:
- ECMC argued that one debtor should be denied a discharge because the possibility that her cancer would recur wasn’t a sufficient undue hardship.
- A debtor declared bankruptcy, and in a hearing that ECMC did not attend, she demonstrated that she had repaid her student loans. After her bankruptcy concluded, ECMC garnished her wages, a clear violation of the discharge order, even though her debts had been repaid. A federal appeals court sanctioned ECMC for “abusing the bankruptcy process.”
- When a debtor’s husband became chronically ill, she cut back the family’s expenses. ECMC objected anyway, claiming that a meal at McDonald’s was excessive spending on restaurant meals. In that case too, ECMC argued the debtor should have signed on to an income-sensitive repayment plan.
- ECMC successfully pushed the U.S. Circuit Court of Appeals for the Eighth Circuit to change its “undue hardship” standard in 2009 to require debtors to enroll in income-sensitive repayment plans so long as they can maintain a minimal standard of living (ECMC v. Jesperson, No. 07-3888, PDF). The debtor in that case owed more than $300,000 in federal student loans and nearly $60,000 in private student loans. He was making less than $20,000 annually as a lawyer from 2003 to 2006 (his petition was filed in 2005).
One thing the Times should have mentioned but didn’t is that until 1998 Congress allowed debtors to discharge their federal student loans like any other unsecured debt seven years after they entered repayment. After the 1998 law, the seven-year time limit was completely rescinded, leaving debtors such as those in the above circumstances no realistic choice but to fight their cases against ECMC through federal appeals courts, which sometimes sided against them.
The Times article can be found here.
If you owe federally guaranteed or direct student loans and ECMC is wrongly attempting to garnish your wages, or if you think it is abusing you in some other way, talking to an experienced New York bankruptcy lawyer can help you explore your options.
For answers to more questions about student loans, bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced bankruptcy lawyer Brooklyn NY Bruce Weiner for a free initial consultation.
