RULING ON LAW SCHOOL GRAD'S DEBT MAY SIGNAL 'SEISMIC' SHIFT IN LOAN PRACTICES

[Liberal_in_LA]

Source: Abc7

A judge's recent ruling that part of a law school graduate's loans can be canceled breaks new ground for other students who owe a mountain of debt.

Lesley Campbell applied for a loan while she was studying for the bar as a student at Pace University Law School in 2009. She received a "bar loan" of $15,000 from Citibank, a bankruptcy court document states, and she made payments on the loan until June 2012. But in November 2014, after having failed the bar exam, she filed for Chapter 7 bankruptcy protection.

With nearly $300,000 in student loan debt, Campbell, of Brooklyn, New York, found an administrative job with a hotel management company that paid about $50,000, according to a bankruptcy document.

U.S. bankruptcy code states that among the obligations that can't be canceled include funds received as an "educational benefit," scholarship or a stipend. Campbell wanted the loan to be canceled, or "discharged," when seeking bankruptcy relief, arguing that it wasn't an "educational benefit" under the U.S. bankruptcy code. Citibank moved to dismiss that claim, arguing that the loan was an "educational benefit" in the fact that the eligibility for the bar loan was dependent on the plaintiff being a law student.

http://abc7ny.com/news/ruling-on-law-school-grads-debt-may-signal-seismic-shift-in-loan-practices/1266566/

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