What Consequences? Judge Rules Student Loans Of Broke Lawyers Can Be Cancelled

Tyler Durden's picture

Following SCOTUS' decision not to hear a case making it easier to get rid of student debt, and The White House's push to ease student loan 'burdens', WSJ reports a federal judge ruled law-school graduates who file for bankruptcy protection can cancel the debt they racked up while studying for the bar exam.

In an opinion filed Thursday, Judge Carla Craig of the U.S. Bankruptcy Court in Brooklyn, N.Y., said bar-exam loan debt is “a product of an arm’s-length agreement on commercial terms” and doesn’t fall into the category of student loans that stick with a borrower who files for bankruptcy.


The decision, which is the most thorough recent ruling on the matter, contradicts the widely accepted notion that student loan-related debt can be canceled in bankruptcy only under rare cases of extreme financial hardship.


In her 20-page ruling, Judge Craig said bar-study loans were akin to commercial or consumer loans and weren’t an “educational benefit,” like a scholarship or stipend, and thus could be erased in a bankruptcy case.


The U.S. Supreme Court recently declined to hear a case that could have made it easier to get rid of student loan debt. The White House, however, said last year that it would examine whether it should be easier for student loans to be canceled by bankruptcy, opening the door for student debt made by private lenders to be treated on par with credit-card debt and mortgages.


“We’re starting to chip away at the absolute immunity of student loans from bankruptcy,” said Austin Smith, Ms. Campbell’s lawyer.


A Citibank lawyer declined to comment on the ruling or to say whether the bank plans to appeal.

Judge Craig’s ruling isn’t binding on other courts but may be helpful to other bankruptcy judges with similar disputes before them.

Judge Craig isn’t the first federal judge to take up the issue of whether bar-study loans can be wiped out in bankruptcy. Her ruling conflicts with an April 2010 decision from Alabama Bankruptcy Judge Jack Caddell, who said a University of Alabama School of Law graduate couldn’t cancel a $9,475 bar-study loan.


“We’ve come to a place where student loan debtors are very much backed into a corner,” said Greta LaMountain Biagi, a bankruptcy lawyer in Amherst, Mass. “This judge clearly to me understands that and is in touch with that.”

Perhaps it is time to reconsider the cost-effectiveness of college? Or of adding to the swirling shoal of sharks that are called 'lawyers'? But that would not do in this new age of higher education is "Free-for-all" - when "free" means becoming a debt serf for the rest of your working life unless you hit the lottery.

Once again - a poor outcome from a seemingly-easy decision (suggested by, and made easy by government) is made consequence-free by America's government (on behalf of US taxpayers). One wonders if the law graduates in question should receive "participation trophies" also as they enter the workforce (as Baristas).

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Tom Servo's picture

Get that young lady a nailgun!


SethDealer's picture

USA has way too many lawyers and not enough engineers. Hope the lawyers all go broke

CClarity's picture

Nice - so when you're 4 years smarter after getting your non-writeoffable through bankruptcy undergrad degree, you're now genius enough to go back for 3 more years of school and bar study - and you can write that off.

This is nuts.  Lawyers - we NEED them so bad!

Ghost of Porky's picture

Law degree - coming to a Costco near you.

CJgipper's picture

Welcome to Costco.  I love you.

CheapBastard's picture

" There's never been a better time then now to be an in-debted lawyer! "

johngaltfla's picture

So basically the 14th Amendment which these liberal cunts like her hold so near and dear does not apply to others but only to asswipes like lawyers? Good luck with that at a non-moronic full appeals court hearing:


Equal Protection: An Overview

The Equal Protection Clause of the 14th amendment of the U.S. Constitution prohibits states from denying any person within its jurisdiction the equal protection of the laws. See U.S. Const. amend. XIV. In other words, the laws of a state must treat an individual in the same manner as others in similar conditions and circumstances. A violation would occur, for example, if a state prohibited an individual from entering into an employment contract because he or she was a member of a particular race. The equal protection clause is not intended to provide "equality" among individuals or classes but only "equal application" of the laws. The result, therefore, of a law is not relevant so long as there is no discrimination in its application. By denying states the ability to discriminate, the equal protection clause of the Constitution is crucial to the protection of civil rights. See Civil Rights.

Generally, the question of whether the equal protection clause has been violated arises when a state grants a particular class of individuals the right to engage in an activity yet denies other individuals the same right. There is no clear rule for deciding when a classification is unconstitutional. The Supreme Court has dictated the application of different tests depending on the type of classification and its effect on fundamental rights. Traditionally, the Court finds a state classification constitutional if it has "a rational basis" to a "legitimate state purpose." The Supreme Court, however, has applied more stringent analysis in certain cases. It will "strictly scrutinize" a distinction when it embodies a "suspect classification." In order for a classification to be subject to strict scrutiny, it must be shown that the state law or its administration is meant to discriminate. Usually, if a purpose to discriminate is found the classification will be strictly scrutinized if it is based on race, national origin, or, in some situations, non U.S. citizenship (the suspect classes). In order for a classification to be found permissible under this test it must be proven, by the state, that there is a compelling interest to the law and that the classification is necessary to further that interest. The Court will also apply a strict scrutiny test if the classification interferes with fundamental rights such as first amendment rights, the right to privacy, or the right to travel. The Supreme Court also requires states to show more than a rational basis (though it does not apply the strictly scrutiny test) for classifications based on gender or a child's status as illegitimate.

The 14th amendment is not by its terms applicable to the federal government. Actions by the federal government, however, that classify individuals in a discriminatory manner will, under similar circumstances, violate the due process of the fifth amendment.




(except mine, I'll take care of him if he fucks me)


The Alarmist's picture

Bar study is not an educational pursuit.

Now that is a Clintonian answer of the William Jefferson variety.

CJgipper's picture

Read it again. This ONLY affects stipend loans made by private lenders to cover living expenses and bar review courses between May graduation an August bar exams.  Government backed loans for tuition are unaffected.

Ghost of Porky's picture

The judge is still a dumb broad.

CJgipper's picture

No, this is exactly what you want to see so that they'll stop doing the bar review loans.

The Alarmist's picture

No, but they will do them at credit card interest rates.

back to basics's picture

Oh ffs, you had to go and post that and spoil this ZH click-bait article.

Well, I suppose no harm done because they'll soon follow it up with either a Hilary is going to jail tomorrow story or the markets face imminent collapse from yuan depreciation or......(feel free to fill in the doom and gloom story of your choice)

pitz's picture

Actually 2/3rds of our STEM qualified people are underemployed/unemployed.  There's plenty of engineers.  So many in fact that most firms don't even bother with the basic professional  courtesies to job applicants.  The problem is, there's simply not enough jobs for them as they've either been de-emphasized as part of the workforce, or replaced with foreigners on the H-1B visa program.

Marge N Call's picture

That has NOT been my actual experience employing software engineers for 20+ years now. Even in this economy we have several open positions. On the latest job posting last week, we have over 10 people submit resumes in the first hour. Guess how many were born in the U.S.? ZERO. NADA. NONE.

THis is the NYC metro area, so starting salary is close to 100K/year for 1-3 years experience. The GOOD software engineers, as long as they are citizens or green card holders, can still pretty much have their pick of well-paying jobs. And by good, I mean they have spent a lot of time keeping their skills relevant and up-to-date.

CJgipper's picture

100k in NYC for an experienced software engineer?  

I found the problem. 

pitz's picture

Exactly.  Why should people with hard technical skills earn less than paper pushers and traders in the NYC financial sector? 

Freddie's picture

I have a friend their in Manhattan probably making $220K and wife make $80 to 90 K.  They were able to buy their place 7 years ago or so as they are savers.

He said many times he is athe token American.  The companies have ghettoes of Indian and other programmers where they block any Americans.  Many of the biggest compnaies load up with H 1B shit.  The guy is top notch but I have known more than a few very good American programmers.  

The H1Bs are usually total shit except Russians, Eastern Europeans and some Asians as in Chinese/Vietnamese.

A good example of a company H-!Bs helped destroy was Motorola.  

QEpp's picture

There's a bigger benefit regarding why companies continue to hire H1B over domestic software engineers...indentured servitude.  It's not just the salary that the company controls...it's the family's ability to stay in the US (until they get citizenship which can take a decade).  That's a heck of a lot of leverage on an employee.  And why does experience matter?  It may take the unexperienced employee 2x as long as an experienced employee to get the job done, but these guys are salaried so why would the company care how much time it takes them.  They'll get the job done either way.  And sometimes quality problems don't show up until after the manager gets promoted.

deja's picture

I get calls from those dothead H1B agencies all the time.  They cold call people in the positions they are trying to get filled, offer some ridiculously low salary, and then go back to the corps that hired them saying they couldn't get any americans to fill the positions, then fill them from offshore at a fraction of the going rate.  I presume they then go off somewhere and have a good laugh at our expense.

Frankie Carbone's picture

That's about 25% down from the equivalent salary for a new grad. 

pitz's picture

Sounds like you need to advertise a bit more, and pay better.   Because any time the west coast firms advertise, they receive mountains of resumes from qualified software talent, US citizens.  "Close to 100k/year" isn't good enough.  Lots of good software engineers can't even get responses when they shoot their resumes in.

vq1's picture

Im a systems engineer in NYC.


I call bullshit. 10 people submitted resumes? where did you post it? Cheapinternatinals.net? My company got over 100 resumes for a job on DAY 1 of the posting (posted on indeed). How many were born in the US? 75% or more. 

Freddie's picture

The f***king evil HR department will play games to insure they only get H 1-Bs and make sure Americans resumes never get to anyone.  The HR dept gets a bonus cause they hired cheap and shitty H 1-bs.

Then some American manager (MBA) in the dept whines that no Americans apply.   HR makes sure no Americans get near a job.  I have seen it endless numbers of times. Sickening.

pitz's picture

Yup.  Like receiving, say, 10,000 resumes on say, the "citibank.com/Careers" website for a given job, but deciding to fill the position using "Patel's Staffing Solutions Ltd." instead (because "Patel" allows the execs to run up big tabs at the strippers).   Seen it many, many times myself as well.  Of course, Americans won't bother applyling to Patel's, so it gets filled with a H-1B by default.

pitz's picture

Another scam is asking for "salary aspirations".  Most Americans will put their bottom-line all-in compensation, fully undertanding that some of it could be in the form of a bonus.  They're arbitrarily excluded simply on that basis alone even if they would accept less of a base at a firm that pays reasonably lucrative bonuses. 

Frankie Carbone's picture

Let me give you a tip that will leave the interviewer all twisted up, and impressed: 

Interviewer: So, what are your salary expectations? 

Frankie: Given my qualifications, my strong educational background and "list achievements here", I would expect your most competitive offer reflective of the local cost of living. 

I used this approach over 20 years ago to land my present job. It usually ends there. In my case it didn't. The interviewer followed up:

Interviewer: So Frankie, what would you consider competitive? 

Frankie: Well, I really don't know what your company considers to be its most competitive offer. Perhaps you could tell me? 

Cha-ching! Hardest question of the interview, it always is, knocked out of the park. Next question....

Guys, the interviewer will LOVE you. You took a question that always makes people turn ashen and you turned it around on us. Touche. That shows the ability to think on your feet under duress. 

Even better, the burden is on US to make a very competitive offer if we are interested, because if we lowball you then we will know that we look cheap and will worry that we will lose you. 

Frankie Carbone's picture

NOT TRUE where I work. 

If I am looking for a seasoned engineer with 7+ years experience I hit the American pile. For new grads I want both American and H1B's because the latest American grads are complete shit and my first duty is to hire quality, which usually comes from the foreign students. HR constantly pressuring recruiters to avoid H1B's because of the legal cost. They initially cost a lot more to hire. A lot more. 

So, at least where I work, that's a myth. 


pitz's picture

At most big companies, someone like you wouldn't even get to look at "the pile".  HR pre-selects people, and, at best, you get a small amount of input on who to hire.  Naturally HR has already selected those who are palatable to them, which usually means low salary, foreigner, etc.


H-1B's are generally lower cost than domestic employees on account of their lower salary expectations, "retainability" (ie: we'll send you back India if you dare quit or need a year off to shat out a baby), and even integrity. 

Most H-1B employers do enough of them every year that there's no extra 'cost' as the paperwork is already done -- just change the names, and send it in for approval.  Or they hire an staffing contractor which does the same and takes care of the messy details.

Sure your company might be different, but that's an exception, not the  rule these days.



pitz's picture

Also, why not hire with 0 experience, but merely a requisite degree?  Where are grads supposed to get that "1 year" of experience to get them into an organization like yours, if nobody  is willing to give them that 1 year?  Why is it always someone else's problem?

CJgipper's picture

Companies are free to do as they please.  But the required experience and background here doesn't match the salary.

JoeSoMD's picture

They get the first year of experience while interning during summer and winter breaks.  We get tons of kids that way - all are American and they are smart as hell.  I think it's a graduation requirement at many STEM schools that their students intern.  Yeah they don't make much, but I know we make a huge time investment in them.  They're a blast to work with.

pitz's picture

But lots of kids don't/can't do that.  So what are they supposed to do?  Die?  Sounds like  a cheap labour scam.

Frankie Carbone's picture

Sounds like a cheap labor scam. 

Don't let any kids you know with this attitude apply at my company. I won't hire them. THIS is what I am talking about when I speak of the attitude of the American kids. I am stunned that you said it, unless, that is, you are a recent college grad.  

Absolutely we are going to pay them shit. Some places might not pay them at all. Because they are a new graduate, and contrary to their inflated egos, they don't know shit and are therefore fucking worthless the first 6-12 months. 

Cheap labor scam? Listen, I've been doing this for 20+ years. They get to mentor under me, or more likely one of the senior engineers working for me who are also quite accomplished and learn how to use that set of tools that they hopefully acquired at university. 6 months with me or my crime partners and they will be WAY ahead of the game. Plus, if I am bringing in an intern, then I am looking to fill a void in the next 6 to 12 months. If I am not hiring then they have that on your resume and are not considered a "new grad". A recommendation from me means that he/she 'not worthless'. 

So yeah, they get paid shit because they are an unproven commodity and we are diverting resources to mentor and polish them, with an eye on potentially hiring. If not then I am giving them a massive competitive advantage. 

BTW, This kind of statement is the typical mentality of millennials. They want big bucks right out of the gate because they have "book knowledge" and an overinflated sense of their self worth. Don't bring that attitude to my interview. He/She shows a single instance of arrogance or overly inflated self-esteem/self-worth and I will perform an ego intervention and absolutely fucking destroy them in the interview. I will melt that little snowflake right then and there. THEN they will know what we mean when ALL OF US HERE tell them that their teachers did not prepare them for the real world with this 'you are such a special snowflake' shit. The real world is cruel. We all did our right of passage. What make you so special? 


modest_proposal's picture

I think the original comment referred to "no-pay internships". There's a difference between crap pay that barely covers room and board, and being expected to be grateful to work like a dog for free 'because the experience is so great'. Right now there are a LOT of areas (entertainment, politics, most non-profit) that fully expect long-term (6-12 mos.) interns to work for free. If you're not a trust fund kiddie, this means you're locked out of great-experience internships because you can't afford rent without some income. So please consider that sometimes millenials are whining, but sometimes they're genuinely being exploited.

Freddie's picture

Where are grads supposed to get that "1 year" of experience to get them into an organization like yours, if nobody  is willing to give them that 1 year? 

Where?  Bangalore.

I had American programmer friends who had junior Indian, Pakistani and other H-1bs at work ask them for copies of software code for their school work because they had no clue.


pitz's picture

Meanwhile tons of American grads can't even get those firms to even pick up the phone and acknowledge their job applications.   Firms want the foreigners because the minute they start agitating for higher pay or promotions, they can be deported.

Frankie Carbone's picture

That's a myth. It's just not true. In general, foreign grads are far better educated and better disciplined than American grads, which is why so many of them get jobs.  If you're an extremely well educated American grad, who really knows what he learned at university, and knows it well and has great discipline (almost always due to either gratitude or  a good upbringing, or both) then we will find that out in the interview and trip over each other to recruit you because you are not common. 

Now if you're the run of the mill new grad then you spent 4-5 years grade chasing instead of learning the material, and you listened to your slacker friends that told you that "those theories don't matter. Just learn how to get the right answer! You'll learn all you need to know on the job" then, during the technical interview I, or someone else, will chew you up and spit out the wishbone.

Or, if you show up unprepared (you'd be stunned) and not looking your best (no suit needed, not judging you on your budget nor fashion, but be clean, pressed, and wear something decent!) then I will know who you are. Are your shoes polished? Foul! Some cry. What the fuck do polished shoes have to do with ability? Easy, you want a $65-75K a year starting job. I expect you to do everything in your power to show me that you will cross every t, and dot every i. If you can't even take the time to take a rag and some spit to your shoes, even old shoes, then what makes me think that you will not carry over that attitude into your work? These are actual traits that I see in a lot of American grads. I do not see them in the foreign grads. They know theory, they shine their shoes. They ask thoughtful questions, some of them even ask about the company's outlook. They have spent months preparing for the interview process and bring their A-game. 

Is your resume from a template? I have seen them all. Completely unoriginal and tells me that you did not take the time for something of such critical importance. Your resume had better be absolutely flawless. It is the only thing that we have that gives us information about you. Grammar, spelling, format. All perfect. Flow is important too. If you did it right then you probably spent 15 hours polishing it over and over again. You're committed to attention to detail and your perfect resume shows it. 

I have been trained by people who know how to find BS in a resume. If you lie or embellish then I will know. 

If you want to get hired then you had better bring your A-game too. That simple. American grad vs Foreign grad. If both are equally qualified and both equally industrious and disciplined then the American grad gets the job EVERY SINGLE TIME. 

Why? First, I love my country and want my people to do well first. Sorry, that's the way it is. Second, you have no complicated immigration issues nor legal costs to deal with. Third, I can crawl under your skin talking shit about your favorite college football team that I probably despise, and that's a lot of fun. Ask a foreign grad about football and they think you're talking about Manchester United. In other words, common culture matters to me in a tiebreaker. I have to work with you afterall. 

So no, no one singles out H1Bs because they are cheaper. They are not. That's a myth. 

Best technical interview tip that you will ever receive: A good technical interviewer will take you to your breaking point (we have to, if everyone ace'd it then how do we differentiate?). So, don't freak if you can't answer a question or two. It WILL happen with a good interviewer. When it happens, here is the answer that gets you hired: "You know, I just don't know. But here is what I would do to find out so that I could solve this... *then walk the interviewer through the steps that you would take to aquire the information needed to solve the problem*. My best engineer answered a question this way 10 years ago, and it impressed me so much that I hired him, and have never regretted it. By the way, he went to a 2nd tier rinky dink state school. Most of the best ones do not come from the brand names believe it or not. Why? Take a stab at the answer. I think it's pretty obvious. 

pitz's picture

Domestic grads want to be treated like professionals.  Foreign grads are not better educated.  Not by a long shot.  And the way you treat them, thinking that they're useless unless they've been given all that additional training, is a big part of the problem with lack of professionalism. 

Sure, additional training is part of the role of any engineer, but to call someone useless unless they've had additional training is right over the top.  We don't see newly called lawyers being called useless by senior lawyers.  We don't see newly minted doctors being called useless.  So why is it acceptable in engineering land?  Its not.  It speaks to arrogance on the part of those who would make such claim.  Everyone has to start somewhere, and even experienced engineers entering a new environment or working with new sets of technologies will need some period of training. 

As far as the hazing ritual you're basically describing in a "technical" interview, completely unnacceptable and unprofessional.  Shame on you.   There are lots of ways to differentiate people that doesn't involve such unprofessional behaviour, but quite frankly, a big part of the problem is there's way too many engineers running around on account of the H-1B having displaced large numbers of them.  Particularly younger ones. 


Frankie Carbone's picture

Yep, I believe it. While a lot of kids are out on the weekends at the frat house chasing skirts, these foreign kids realize that they have just one shot at escaping the shitty mud road village back home. They are fanatical about mastering the material. American kids, in general, are not. BUT, when an American kid takes the same attitude he usually blows them away, primarily because of language advantages. 

Frankie Carbone's picture

It used to be that companies would be able to forecast their attrition, primarily through retirements, and then bring new graduates on board for a few years grooming ahead of the forecasts. That resulted in our being very slightly overstaffed most of the time, but the transition for the new engineers was smoother and the company benefited enormously from such as overlap. The extra labor costs were negligible comparatively and when these new grads were finally turned loose they would hit the gate cooking with gas

Not anymore. Older engineers are NOT retiring and tech companies are in "just enough staff" mode, - which really means short 2 engineers for every 5 in the group so it's burnout time! - so when someone does actually leave, we bring in a seasoned engineer first - now at lower salaries because of the competition - and the new grad gets the shaft. When we do bring in a new grad there is very little grooming period possible and the results are often unfairly hellish for both the "mentors" and the poor freshout graduate who is in way over his head. The results? Companies are spending more on schedule delays than they were on the overlapped staffing. But hey, the later can't improve next quarters financials so fuck it. Beancounters know jack shit about how technology development works and to them, cellphones? twinkies? What's the difference? "Just design x different products per year with y staff. I mean, how hard can it be?, they say" Both are commodities in their eyes. 

Fucking retards. Engineers really do absolutely fucking hate beancounters.  These people are stupid, but arrogant, and they "lead" people with IQ's 20, 30 points higher than theirs. The disgust is palpable and it probably why Dilbert's cariacuture of the feud is still very popular. 

vq1's picture

we have plenty of engineers. Most are un or under-employed. 


hint: the employed ones- born in america, they were not. 

Kirk2NCC1701's picture

Rx = simple = Have US universities postpone study for Final Exam by 6-12 months, and move bulk of tuition costs into this "Exam Study" phase.

Said Exam Study Phase (ESP) can then be written off in a bankruptcy, if they Pass the Exam.

With legal Precedent set with law students, Tuition Fees will no longer be an issue.


p.s. Are Sarc tags required?

deja's picture

Can't we somehow just get them into an infinite loop of circle-jerk scew... er, I mean suing each other?

rubiconsolutions's picture

What is black and brown and looks good on a lawyer? Answer: a Doberman

How do you get a lawyer out of a tree? Answer: cut the rope

pitz's picture

What next?  "Internship loans"?  I bet those fuckers would try to rope the population into that sort of bullshit.  Loaning people money for the "privilege" of working for free (or at a drastically reduced salary compared to normal people).

Gold Pedant's picture

I logged in so that I could upvote you and provide the following two-word response to your comment:



NoDebt's picture

Some of you guys are probably too young to remember the days when student loan debt WAS discharable in bankruptcy.  It was common practice for graduating doctors and lawyers to immediately declare bankruptcy after graduation before they had any income or assets.  That became so commonplace that bankruptcy laws were changed to what they are today (or WERE before this decision) making them non-dischargable.

One big circle jerk.  Round and round.  Nobody ever learns.

Miffed Microbiologist's picture

Interesting to note there is quite a shortage of Drs today whereas this doesn't seem to be the case with lawyers. Considering the percentages of lawyers in government, it would seems their scarcity would be a good thing in the long term.


NoDebt's picture

GPs there's a tremendous shortage, I agree.  Nobody wants to be a GP any more.  Not enough money in it (it's all being done by Nurse Practitioners, home health, the janitor who took a night course at the local college, etc.).  The BS level dealing with insurance companies, HIPAA and Obamacare is through the roof.  And you might as well be walking around with a sign around your neck that says "Sue me, I'm easy!"