The ruling in this particular case may be a few months old, but it was brought to light recently and I thought it was worth mentioning here.
A woman, Vicky Jo Metz, who took out $16,613 in student loans nearly three decades ago got a huge win from a bankruptcy court judge in late September when the judge allowed all but the original principal to be discharged. In the 27 years since she had taken out her last student loan, the individual had repaid $14,789, but because of accruing interest, she still owed $67,278.
At 59 and making about $40,000 a year, the judge deemed that there was no way the woman would ever be able to repay the amount she owed, either while working and especially after she retired, so he erased all of the interest on the debt and ordered her to repay just the principal.
The woman had filed for bankruptcy protection three times in the past 17 years and the judge acknowledged that she lived a “spartan” lifestyle in trying to repay her debts and live within her means.
The debtor suggested that the woman participate in an income-based repayment plan, but that would last for 25 years, until the woman was 84, the judge noted.
Metz “simply cannot maintain her minimal standard of living and pay the entirety of her student loan plus accrued interest,” the judge ordered in his ruling. “And if she paid the minimum due, she could theoretically pay as much as $60,900 over 25 years, almost as much as [she owes], and not only leave the principal untouched, but also be left owing $90,000 more than when she started. That’s not a fresh start.”
A copy of the judge’s ruling can be accessed by clicking here.
