After exhausting her 36 months of student loan deferments for unemployment, the Debtor sought to discharge her student loans in bankruptcy. The Department of Education offered her an Income Contingent Repayment plan (“ICRP”), with monthly payments set, at least initially, in the amount of $0.00 a month.
Even though the Debtor had a very low standard of living, the bankruptcy court held that under ICRP she would have payments of $0.00 a month, her student loans would not cause a minimal standard of living. Further, despite being 61 years old, the court held that “age alone is not an “additional circumstance” determining the second prong. In re Spence, 541 F.3d (4th Cir. 2008). Lastly, the Debtor’s payments of other student loans, but only those that were co-signed, her retention of proceeds from the sale of her home and her decision not to enroll ICRP were all indicative of bad faith.
The existence of the ICRP is not meant to preclude bankruptcy discharge of student loans, but is an alternative. The Debtor here will be under an ICRP until she is 86 years old and has been consigned to a situation where any increase in the income she receives during the remainder of her life, will raise the amount of her ICRP and go to the Department of Education. As such, she has no incentive to work and is done as a productive member of society.
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