Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Intel Empire Fights Back with Rocket and Alder Lake! - 24th Jan 21
4 Reasons for Coronavirus 2021 Hope - 24th Jan 21
Apple M1 Chip Another Nail in Intel's Coffin - Top AI Tech Stocks 2021 - 24th Jan 21
Stock Market: Why You Should Prepare for a Jump in Volatility - 24th Jan 21
What’s next for Bitcoin Price – $56k or $16k? - 24th Jan 21
How Does Credit Repair Work? - 24th Jan 21
Silver Price 2021 Roadmap - 22nd Jan 21
Why Biden Wants to Win the Fight for $15 Federal Minimum Wage - 22nd Jan 21
Here’s Why Gold Recently Moved Up - 22nd Jan 21
US Dollar Decline creates New Sector Opportunities to Trade - 22nd Jan 21
Sandisk Extreme Micro SDXC Memory Card Read Write Speed Test Actual vs Sales Pitch - 22nd Jan 21
NHS Recommends Oximeter Oxygen Sensor Monitors for Everyone 10 Months Late! - 22nd Jan 21
DoorDash Has All the Makings of the “Next Amazon” - 22nd Jan 21
How to Survive a Silver-Gold Sucker Punch - 22nd Jan 21
2021: The Year of the Gripping Hand - 22nd Jan 21
Technology Minerals appoints ex-BP Petrochemicals CEO as Advisor - 22nd Jan 21
Gold Price Drops Amid Stimulus and Poor Data - 21st Jan 21
Protecting the Vulnerable 2021 - 21st Jan 21
How To Play The Next Stage Of The Marijuana Boom - 21st Jan 21
UK Schools Lockdown 2021 Covid Education Crisis - Home Learning Routine - 21st Jan 21
General Artificial Intelligence Was BORN in 2020! GPT-3, Deep Mind - 20th Jan 21
Bitcoin Price Crash: FCA Warning Was a Slap in the Face. But Not the Cause - 20th Jan 21
US Coronavirus Pandemic 2021 - We’re Going to Need More Than a Vaccine - 20th Jan 21
The Biggest Biotech Story Of 2021? - 20th Jan 21
Biden Bailout, Democrat Takeover to Drive Americans into Gold - 20th Jan 21
Pandemic 2020 Is Gone! Will 2021 Be Better for Gold? - 20th Jan 21
Trump and Coronavirus Pandemic Final US Catastrophe 2021 - 19th Jan 21
How To Find Market Momentum Trades for Explosive Gains - 19th Jan 21
Cryptos: 5 Simple Strategies to Catch the Next Opportunity - 19th Jan 21
Who Will NEXT Be Removed from the Internet? - 19th Jan 21
This Small Company Could Revolutionize The Trillion-Dollar Drug Sector - 19th Jan 21
Gold/SPX Ratio and the Gold Stock Case - 18th Jan 21
More Stock Market Speculative Signs, Energy Rebound, Commodities Breakout - 18th Jan 21
Higher Yields Hit Gold Price, But for How Long? - 18th Jan 21
Some Basic Facts About Forex Trading - 18th Jan 21
Custom Build PC 2021 - Ryzen 5950x, RTX 3080, 64gb DDR4 Specs - Scan Computers 3SX Order Day 11 - 17th Jan 21
UK Car MOT Covid-19 Lockdown Extension 2021 - 17th Jan 21
Why Nvidia Is My “Slam Dunk” Stock Investment for the Decade - 16th Jan 21
Three Financial Markets Price Drivers in a Globalized World - 16th Jan 21
Sheffield Turns Coronavirus Tide, Covid-19 Infections Half Rest of England, implies Fast Pandemic Recovery - 16th Jan 21
Covid and Democrat Blue Wave Beats Gold - 15th Jan 21
On Regime Change, Reputations, the Markets, and Gold and Silver - 15th Jan 21
US Coronavirus Pandemic Final Catastrophe 2021 - 15th Jan 21
The World’s Next Great Onshore Oil Discovery Could Be Here - 15th Jan 21
UK Coronavirus Final Pandemic Catastrophe 2021 - 14th Jan 21
Here's Why Blind Contrarianism Investing Failed in 2020 - 14th Jan 21
US Yield Curve Relentlessly Steepens, Whilst Gold Price Builds a Handle - 14th Jan 21
NEW UK MOT Extensions or has my Car Plate Been Cloned? - 14th Jan 21
How to Save Money While Decorating Your First House - 14th Jan 21
Car Number Plate Cloned Detective Work - PY16 JXV - 14th Jan 21
Big Oil Missed This, Now It Could Be Worth Billions - 14th Jan 21
Are you a Forex trader who needs a bank account? We have the solution! - 14th Jan 21
Finetero Review – Accurate and Efficient Stock Trading Services? - 14th Jan 21

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

Exposing the Secret to Wiping Out Student Loan Debt in Bankruptcy

Personal_Finance / Student Finances Jun 06, 2013 - 11:45 AM GMT

By: Money_Morning


Tara Clarke writes: Accepted wisdom says that there are only two (rather sobering) ways to relieve the burden of student debt: either pay it off, or depart from this earthly world.

Until now.

On May 22 the Ninth Circuit Court of Appeals wiped out $58,000 in student loan debt for a former law student in bankruptcy proceedings, sending shockwaves through the formerly impervious facade of student loan debt performance.

Ten years in the making, the ruling could burst the trillion dollar student loan bubble.

This is the case of Michael Hedlund.

His tale seems unexceptional in today's economic hard times.

Hedlund went to the University of Oregon and earned a bachelor's degree in business administration. He then attended Willamette Law School where he earned his J.D.

Hedlund financed his education with Stafford loans, a commonplace higher education loan backed by the U.S. government.

After graduating, Hedlund took the Oregon bar exam and worked as an intern for the Klamath County District Attorney.

That's when things began to fall apart.

Hedlund failed the bar. He tried and failed again. The DA fired him for he was not able to practice law.

In an effort to turn things around, Hedlund got a full time job as a counselor with the Klamath County Juvenile Department. He signed up to take a third stab at the bar exam.

The day of the exam, he accidentally locked his keys in his car and missed the test.

At this point, Hedlund gave up on trying to practice law. He married in 2000, and became a father in 2001.

But just because Hedlund gave up on his legal training didn't mean the lenders who paid for it were going to let him off the hook.

Hedlund owed PHEAA (Pennsylvania Higher Education Assistance Agency) more than $85,000, which came out to monthly payments around $800. He didn't make nearly enough money in his counselor position to pay that amount, so he began searching for relief.

After exhausting all forbearance opportunities, Hedlund applied to consolidate his student loans in an attempt to lower his monthly payment.

The lender lost his application causing Michael to default on his loans. Once he defaulted, he was no longer eligible for consolidation or any other program relief. He tried different avenues to consolidate his loans but was rejected at every turn. He made every attempt to continue paying for his loans.

But the lenders filed action against Hedlund for defaulting. They began garnishing his wages in small increments, which he did not contest.

Then, one of the lenders garnished a larger chunk, way too much for Hedlund to handle, as he frantically tried to keep his family afloat.

In a final act of desperation, Hedlund filed for bankruptcy.

Until Hedlund's case, bankruptcy was thought to be a safety net only available to failed businesses and unlucky or mismanaged personal finances.

Debt wrought from educating yourself is considered a non-dischargeable offense, unless you can show "undue hardship" - up until now a nearly insurmountable standard to prove in court.

Proving undue hardship is a costly and highly intrusive prospect. The burden is on the debtor to prove it's impossible for him or her to pay the student loan. The process involves a public, intimate, and downright embarrassing examination of your finances.

On top of that, different courts use different indicators to determine undue hardship, making the likelihood of success extremely difficult to predict.

But here we have Michael Hedlund, a shining example of a man who acted in good faith to repay his debt.

The Ninth Circuit looked upon Hedlund with an appraising eye.

Here is a debtor who made every effort to obtain employment, to maximize his income, and to minimize his expenses. He tried everything he could think of to reduce the monthly payments to a manageable amount, including negotiating with lenders. He even endured wage garnishments without protest until an overwhelming amount was taken.

Hedlund was judged to have done his absolute best to pay his debts and so the court discharged all but $32,080 of his remaining debt.

It decided that paying the full amount would be too onerous on Hedlund and his family.

This ruling opens the flood gates to student debtors across the nation.

By defining guidelines for undue hardship in a detailed, published opinion, the Ninth Circuit has given courts more freedom to say, "You've done enough to try to repay. We'll discharge your student debts."

Borrowers who have truly made every effort to repay their loans now have an avenue for relief.

Derek Foran, whose firm represented Hedlund, commented, "The Ninth Circuit's decision is important for other student debtors, because it clarifies the correct standard of review governing undue hardship determinations under the bankruptcy code. It will mean significant relief for student debtors - who often are unrepresented - seeking relief in bankruptcy court."

Now, imagine what would happen if an abundance of student debtors across the nation have circumstances as compelling as Hedlund's?

The implications are vast, given the student loan bubble.

Klamath Community College President Dr. Roberto Gutierrez commented to his local NBC affiliate: "An extreme measure would be that the bubble will burst as far as loans - and a lot of students will refuse to pay the loans anymore. Then we've got a problem, because then we may have lenders that do not want to loan anymore."

If the student loan bubble bursts, we are talking earth-shaking stuff here - as major as the subprime mortgage crisis in 2008.

And, just like subprime, Hedlund's case reiterates the idea that lenders have a responsibility to issue loans they know can actually be repaid.

Hedlund's case is a game changer for student debtors, and if enough borrowers like him are out there, it's a game changer for us all.

Source :

Money Morning/The Money Map Report

©2013 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email:

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules