In Into the re Rosenberg, Judge Cecelia Morris of the United States Bankruptcy Court for the Southern District of New York permitted the debtor to discharge his student loan debt in a bankruptcy. The Rosenberg decision, which is on appeal, is noteworthy because under section 523(a)(8) of the Bankruptcy Code, student loan debt can only be discharged in cases of “undue hardship.” Rosenberg reinterprets – more leniently — the standard for discharging student loan debt established in Brunner v. N.Y. County Highest Educ. Servs. Corp. (In re Brunner), 831 F.2d 395, 396 (2d Cir. 1987). The Brunner test for student loan debt discharge is followed by every Court of Appeals except the First and Eight Circuits, which use a totality of the circumstances test. The Rosenberg court ruled that debtor, Kevin Jared Rosenberg (“Rosenberg”), satisfied the Brunner test and discharged more than $220,000 of his student loan debt.
When the Bankruptcy Code was enacted in 1978, borrowers could discharge student loan debt if they waited until five years after it first became payable. That period was extended to seven years in 1990, but a change in the law in 1998 made that period indefinite, making student loans dischargeable only when there was undue hardship. Under Brunner and similar cases in other circuits, debtors rarely even attempted a discharge action and very few succeeded.
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