Retiree Can’t Wipe Out Loans for Son’s College in Bankruptcy

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By Diane Davis

A retiree can’t use bankruptcy to wipe out $128,000 in federal student loans he took out to finance his son’s college education, a New York bankruptcy court held ( Gleason v. Dep’t of Educ. (In re Gleason) , 2017 BL 360506, Bankr. N.D.N.Y., No. 16-50007, 10/6/17 ).

Joseph W. Gleason failed to prove that repayment of the debt would impose an undue financial hardship, Judge Margaret Cangilos-Ruiz of the U.S. Bankruptcy Court for the Northern District of New York wrote Oct. 6.

Gleason failed to meet the three-prong Brunner v. N.Y. State Higher Educ. Servs. Corp.test in the Second Circuit, which is the high hurdle that debtors must meet before they can discharge student loan debt under Bankruptcy Code Section 523(a)(8), the court said.

Gleason didn’t make any loan payments and failed to show that he had made a good faith effort to repay his student loans, the court said.

Although Gleason said he expected his son to repay the loans, he signed the documents and committed to their repayment, the court said. Gleason’s understanding with his son is irrelevant, the court said.

Gleason claimed a 2005 Cherokee 28 travel trailer, a 2001 Dodge Dakota, a 2008 Jeep Cherokee, a 2009 EZ-Go golf cart, and a 1991 Glastron 16' motor boat as exempt property in his Chapter 7 filing. He didn’t claim more than $209,000 in investment accounts as exempt.

Ninety percent of Gleason’s $141,614 of unsecured debt is attributable to the student loans. He declined to reduce his monthly loan payments through an income contingent repayment plan. He had a $500 monthly shortfall in his budget, which he resolved by withdrawing money from his investment accounts.

Gleason met the first prong of Brunner because he can’t maintain, based on his current income and expenses, a “minimal” standard of living for himself, and his dependents, the court said.

Gleason’s failure to make any payments on the loan and his refusal to take advantage of the contingent repayment plan, however, show a lack of good faith, the court said.

Thomas F. Turturo, Auburn, N.Y., represented Gleason; William F. Larkin, Assistant U.S. Attorney, Syracuse, N.Y., represented U.S. Department of Education; William S. Nolan, Whiteman Osterman & Hanna LLP, Albany, N.Y., represented Educational Credit Management Corporation.

To contact the reporter on this story: Diane Davis in Washington at

To contact the editor responsible for this story: Jay Horowitz at

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