Discharge in Bankruptcy. Jon Goulet attended the University of ...

[jerry coleman]

Discharge in Bankruptcy. Jon Goulet attended the University of Wisconsin in Eau Claire and Regis University in Denver, Colorado, from which he earned a bachelor's degree in history in 1972. Over the next ten years, he worked as a bartender and restaurant manager. In 1984, he became a life insurance agent and his income ranged from 20,000 to 30,000. In 1989, however, his agent's license was revoked for insurance fraud, and he was arrested for cocaine possession. From 1991 to 1995, Goulet was again at the University of Wisconsin, working toward, but failing to obtain, a master's degree in psychology. To pay for his studies, he took out student loans totaling 76,000. Goulet then returned to bartending and restaurant management and tried real estate sales. His income for the year 2000 was 1,490, and his expenses, excluding a child-support obligation, were 5,904. When the student loans came due, Goulet filed a petition for bankruptcy. On what ground might the loans be dischargeable? Should the court grant a discharge on this ground? Why or why not?

Question 2

Agency relationships used to be common in decades past, but in recent years they have fallen out of favor.
 a. True
  b. False
  Indicate whether the statement is true or false

[gabrielle_lawrence]

Answer to Question 1

Discharge in bankruptcy
The bankruptcy court concluded that repaying the loans would impose an undue hardship on Goulet and discharged the loans. The creditor appealed to a federal district court, which reversed this decision. Goulet appealed to the U.S. Court of Appeals for the Seventh Circuit, which affirmed the decision of the district court that the loans were not dischargeable. The appellate court acknowledged that student loans are dischargeable if they constitute an undue hardship on the debtor. The debtor must demonstrate (1) that he cannot maintain, based on current income and expenses, a minimal standard of living for himself and his dependents if forced to repay the loans; (2) that additional circumstances exist indicating that the state of affairs is likely to persist for a significant portion of the repayment period of the student loans; and (3) that the debtor has made good faith efforts to repay the loans. In this case, Goulet clearly established the first prong of the . . . test. As for the second prong, the court emphasized that Goulet's circumstances predated his loans and there was not any evidence his problems are insurmountable, or that they impair his ability to work. On the contrary, the record showed that Goulet can apply himself when he desires to do so. As for the third prong, the court said that we need not resolve this question, given our conclusion that Goulet has not established that his financial condition is likely to persist. The court added, f the leveraged investment of an education does not generate the return the borrower anticipated, the student, not the taxpayers, must accept the consequences of the decision to borrow.

Answer to Question 2

FALSE

[jerry coleman]

Thanks for the timely response, appreciate it

[scottmt]

Excellent