The National Trial Lawyers
  • Home
    • Meet Our Team
    • Contact Us
    • Mission & Goals
    • FAQ
  • Webinars
  • News
  • Membership Directory
    • Top 100 Map – Civil Plaintiff
    • Top 100 Map – Criminal Defense
    • Top 40 Under 40 Map – Civil Plaintiff
    • Top 40 Under 40 Map – Criminal Defense
  • Top 100
    • Civil Plaintiff Officers / Executive Committee
    • Criminal Defense Officers / Executive Committee
    • Benefits
    • About
    • Top 100 President’s Message
    • Diplomat
    • Membership Renewal
    • Member Profile Updates
    • Top 100 Badge
    • Media
  • Top 40
    • Civil Plaintiff Officers / Executive Committee
    • Criminal Defense Officers / Executive Committee
    • Top 40 Under 40 Trial Academy Bootcamp
    • Benefits
    • About
    • Top 40 President’s Message
    • Membership Renewal
    • Member Profile Updates
    • Top 40 Badge
    • Media
  • Specialty Assoc
    • About
    • Shop
    • Officers
    • Membership Renewal
    • Member Profile Updates
    • Media
  • Nominate
    • Top 100
    • Top 40
    • Specialty Association
    • Trial Lawyer Hall of Fame
    • Trial Lawyer of the Year
    • Trial Team of the Year
    • America’s Most Influential Trial Lawyer
    • America’s Most Influential Law Firm
    • Lifetime Achievement Award
  • Shop
  • Magazine
    • A-List
  • Education and Networking Agenda
    • Trial Lawyers Summit
      • Summit Sponsors
    • Top 40 Under 40 Trial Academy Boot Camp
    • Mass Torts Made Perfect
    • The Lanier Master Class 5.0 Trial Academy 2021
    • Webinars
  • Hall of Fame
    • Trial Lawyer Hall of Fame

Bankruptcy Court Allows Discharge of Law Student’s Bar Loan Debt

Posted on April 26, 2016 by Larry Bodine

bar loan 2A bankruptcy court for the Eastern District of New York has ruled that a former law student’s bar study loan can be discharged in bankruptcy because the loan is not an educational benefit.

The court did, however, dismiss the student’s claims that the lenders misrepresented the legal obligations of the lender and borrower in the loan by fraudulently misrepresenting the loan as a student loan, which cannot be discharged in a bankruptcy.

While a student at Pace University Law School, then-student Lesley Campbell applied for and received bar loan for $15,000 in April 2009.  Campbell, who did not pass the bar, had nearly $300,000 debt, according to the Wall Street Journal.

Student sought to discharge bar loan debt

After graduation, Campbell worked as a secretary earning $49,000 a year and made payments to the bar loan until June 2012.  She filed for Chapter 7 bankruptcy in November 2014.  Campbell received a discharge in March 2015, but the bar loan was not discharged.

Campbell asserted five claims against five lenders including Citibank, N.A. and The Student Loan Corporation.  Campbell sought a determination of the dischargeability and a declaratory judgement that the bar loan is dischargeable.

She also claimed the lenders violated the Truth in Lending Act by representing that the bar loan was a nondischargeable loan by its titling the promissory note “Master Student Loan Promissory Note.”  She further claimed that the lenders fraudulently misrepresented that the bar loan was a nondischargeable student loan.

Bar Loan not an educational benefit

The U.S. Bankruptcy Court thoroughly examined the United States Bankruptcy Code provision § 523(a)(8), which pertains to the discharge of educational benefits and does not discharge a debtor from debt incurred as an educational benefit.

The court discussed that other courts have interpreted “educational benefits” to encompass any loan which relates in some way to education, but wrote that if the term extended to all education-related loans, then it would “swallow” provisions in the statute that specifically identify the particular loans by particular lenders that are excepted from discharge.

The court wrote that the bar loan, unlike an educational loan, was a private consumer loan that required a consumer credit application evaluated through a credit-scoring model.  The lenders argued that the loan was an educational benefit because eligibility was dependent on Campbell being a law student.

The court found this argument, and the case law the lenders relied on unpersuasive, writing that the underwriting standards requiring an applicant to be a law student “does not turn an arm’s length consumer credit transaction into” an educational benefit within the meaning of the statute.

The court wrote further that loans provided tuition reimbursement on a condition of continued service to a company that are nondischargeable, do not apply to the bar study loan because it is not a conditional loan.  The court found that the bar loan was not an educational benefit under the bankruptcy code, and does not fall within its exceptions to discharge.

The court agreed with the lenders on their motion to dismiss Campbell’s claims for misrepresenting legal obligations and fraudulent misrepresentation, writing that she failed to plead any facts sufficient to establish that the lenders misrepresented any legal obligations of the parties.  The court further wrote that the lenders titling of the promissory note did not create a misrepresentation of any sort.

 

The case is Lesley Campbell v. Citibank, N.A., et. al., case no. 14-45990-CEC, in the United States Bankruptcy Court in the Eastern District of New York.

Posted in Blog, Consumer Protection

Comments are closed.

Recent Posts

What is Sexual Harassment?

What is Sexual Harassment?

March 1st, 2021

Sexual Harassment Defined: Legally, sexual harassment is a form of sex discrimination that violates Title VII of the [Read More...]
Facebook Pays $650M to Settle a Privacy Dispute

Facebook Pays $650M to Settle a Privacy Dispute

March 1st, 2021

WASHINGTON: A US federal judge has given final approval to Facebook's US$650 million payment to settle a privacy dispute betw[Read More...]
Pharmaceutical Giant Johnson & Johnson is Preparing $3.9B for Talc Settlements

Pharmaceutical Giant Johnson & Johnson is Preparing $3.9B for Talc Settlements

February 26th, 2021

Pharmaceutical giant Johnson & Johnson has set aside $3.9 billion for talc-related litigation, according to a regulatory [Read More...]
Alaska Airlines Will Pay $3.19M Following the Death of a Passenger

Alaska Airlines Will Pay $3.19M Following the Death of a Passenger

February 24th, 2021

Seattle-based Alaska Airlines has been ordered to pay more than $3 million to the family of a passenger of reduced mobility w[Read More...]
No thumbnail available

Keith Givens on the Trial Lawyers Summit and Lanier Trial Academy

February 23rd, 2021

https://vimeo.com/515910581 Michelle Swanner, Executive Director of The National Trial Lawyers, interviews Keith Givens[Read More...]

Contact Us | Terms of Use | Privacy Policy

Attorney information and content provided on this website is provided for the benefit of members of The National Trial Lawyers and as a public service by Legal Associations Management, Inc. The website and all data are the property of Legal Associations Management, Inc. Data, including without limitation attorney information and content, on the site may not be mined, sold, or used commercially for any purpose without the explicit written consent of Legal Associations Management, Inc. This site may not be accessed by any automated program for extracting data for any use. By accessing and using the site you agree that you will not develop, support or use software, devices, scripts, robots, or any other means or processes (including crawlers, browser plug-ins and add-ons, or any other technology) to scrape data or otherwise copy profiles and other data. Unauthorized use or attempted unauthorized use of this system may subject you to both civil and criminal penalties.