CHICAGO — A federal judge has affirmed a bankruptcy court judge was correct in finding a 63-year-old lawyer is still required to repay his student loan debt.
The appellant, Donald Rosen, had been practicing law, but had his license suspended by the Illinois Attorney Registration and Disciplinary Commission (ARDC). While those proceedings were underway, Rosen filed for bankruptcy, asking the court to discharge his student loan debt. He also asked the bankruptcy court to enter a declaratory judgment asserting the ARDC had violated his rights. The court denied both requests, and he appealed to the U.S. District Court for the Northern District of Illinois.
According to court documents, Rosen had accumulated almost $500,000 of student debt between 1980 and 2001, earning a bachelor’s degree, two master’s degrees and a law degree. His payments were deferred until 2007, and over the following four years he made approximately $11,000 in payments before purportedly defaulting in 2011.
Rosen had begun practicing law in 2008, and in 2012, the ARDC accused him of misappropriating approximately $85,000 in client funds and hindering the police and ARDC’s investigations into the matter by allegedly lying and providing fabricated bank records. After a hearing, the ARDC suspended Rosen’s law license for a period of three years and ordered him to pay approximately $57,000 in restitution to his wronged clients.
After the bankruptcy court denied Rosen’s claims, he brought his case to the district court, where Judge Rebecca R. Pallmeyer found the bankruptcy court was correct to dismiss Rosen’s claims against ARDC due to a lack of jurisdiction. Rosen argued the bankruptcy court was a proper venue for his claims because he felt he could show the ARDC had wrongly moved to suspend him and had violated his rights, which, he asserted, would show he faced sufficient hardship to repay his debt, allowing it to be discharged.
However, Pallmeyer pointed out that “there is no serious argument that this declaratory judgment ‘could arise only in the context of a bankruptcy case.’ ...Rosen cites no case law that challenges this conclusion. He merely repeats that vindication in his disciplinary proceeding will demonstrate that his hardship is not self-inflicted and therefore support his claim for a discharge.”
She therefore affirmed the bankruptcy court’s dismissal of this claim.
Next Pallmeyer applied the three-point Brunner test to Rosen’s request for discharge of his student loan debt.
Rosen argued the first element of the test - the debtor’s ability to maintain a minimal standard of living if forced to repay the loans - was improperly applied by the bankruptcy court. The bankruptcy court had determined Rosen could repay his loans in 30 years if Rosen supplemented his Social Security income by only $14,000. Rosen contended he had struggled to find a job, and even if he could, he would not repay the loans until he was more than 90 years old.
Pallmeyer, however, found “the possibility that the plaintiff will not live until the end of the repayment period is not a factor that the court must consider in applying the Brunner test.”
Furthermore, she did not believe Rosen had sufficiently shown paying back his loan would eliminate any chance of an acceptable standard of living.
The second element of the Brunner test calls for the plaintiff to show additional circumstances exist that will prevent the debtor from making payments.
“On this front, Rosen repeats his arguments that his health, age, poor credit, non-profit industry specialization and lack of work history since 2008 all serve as ‘impediments to employment,’” Pallmeyer said.
Pallmeyer dismissed all of these arguments, noting Rosen had not shown his health, credit history or lack of work since 2008 render him unemployable. His arguments “ignore the fact that he possesses valuable skills, apart from his law license,” Pallmeyer said. “This court is not persuaded that Rosen’s unemployment will continue indefinitely.”
The third element of the Brunner test the court applied to Rosen’s request to discharge his debt is “good faith efforts to repay.” On this count, Rosen claims that the duration of time between when he finished his schooling and when he applied to have his loans discharged “is an important signal of good faith.”
The court, however, found Rosen’s failure to prioritize payment of his student loans, even when making a salary of $80,000 per year along with his failure more recently to maximize his income, coupled with his 2011 default, “is not evidence of a good faith effort to pay.”
The court affirmed the bankruptcy court’s refusal to discharge the debts.
“This court declines to reward Rosen’s choices at the expense of American taxpayers,” Pallmeyer said.
The decision was filed Sept. 29.