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Nielsen v. ACS., Inc: Don’t Count on Discharging Student Loans

Blogs from August, 2012


It’s not the first time we’ve addressed the issue of student loan debts on our Woodland Hills Bankruptcy Blog‚ but it bears repeating for two reasons:

  1. It’s a question that arises repeatedly;
  2. The student loan crisis has reached a breaking point‚ with many students overwhelmed with debt.

Unfortunately‚ you aren’t likely to erase those debts. That’s not to say it’s impossible‚ but as Nielson v. ACS proves‚ the bar for qualification is set quite high.

We’ll address the case in a moment‚ but first‚ it’s worth noting that just because you’re student loan debts aren’t erased in bankruptcy doesn’t mean you can’t greatly benefit from filing. Doing so can free you of the burden of your credit card bills‚ your past-due medical tabs and other expenses that you may find impossible to cover when coupled with your student loan repayments.

There are a select few cases in which the court will grant relief from student loans‚ but only if you can prove undue hardship based on a strict set of criteria. It’s a basic‚ three-point test: Are you able to maintain a minimal standard of living if you were forced to repay these loans? Are there any factors that show that the circumstances preventing you from paying now are going to persist long-term and for a significant portion of the repayment period? And finally‚ have you up until now made a good faith effort to pay?

Those might not seem so strict on the surface‚ but courts tend to have a tight interpretation of who qualifies.

In Nielson v. ACS.‚ U.S. Bankruptcy Appellate Panel for the Eighth Circuit‚ the court ruled that the appellant failed to meet the burden of proof‚ partly because he filed his case and his appeal without the help of an attorney‚ and partly because he did not make an adequate case that his situation rose to the level required to obtain relief.

The plaintiff‚ “Nielson‚” spelled out the following case:

He had obtained an associate’s degree and subsequently pursued a bachelor’s at a university in South Dakota‚ though he did not complete his degree. He took out nearly $50‚000 in student loans‚ which were consolidated in 2005. Nielson and his wife had four children‚ and she was not employed outside of their home.

Nielson subsequently suffered from work-related wrist injuries‚ which ultimately forced him to leave his job and take another outside of his field‚ which meant accepting an annual $30‚000 reduction in pay. This is huge for any family‚ and theirs was no exception. In fact‚ they were receiving government assistance to cover grocery expenses.

He filed an adversary proceeding during the course of his bankruptcy to have his student loans forgiven‚ but that was denied – again‚ likely in large part to the fact that he was representing himself.

In his appeal of that decision‚ the court noted that his paperwork “failed to comply with the rules governing appeals.” The panel goes on to describe his narrative as disjointed‚ with a noted failure to produce documents to bolster his case. Additionally‚ the appellate court noted that there were a number of matters that he raised upon appeal that would be relevant‚ however they were never presented to the lower court prior to its determination.

If you are considering filing for Chapter 7 bankruptcy in Woodland Hills‚ contact Cal West Law to schedule your free consultation. Call (800) 568-0707.

Additional Resources:
Nielsen v. ACS.‚ Inc‚ U.S. Bankruptcy Appellate Panel‚ Eight Circuit‚ Justia

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