We ask contestants to compare, contrast and comment upon the various state approaches to the Homestead Exemption, which in their opinion are better, and why, and whether there should be different state by state approaches or one common federal approach in the entire country.

The United States Bankruptcy Code, as Federal Law, is operative in all fifty (50) States of the United States of America. However, the Bankruptcy Code, in deference to the rights of each state to be their own sovereigns, with the ability to enact laws for the Citizens of their respective State, contains certain provisions reflective of this principle. One of those sections is found in 11 U.S.C. Section 522(b), which allows the debtor to claim the Federal Bankruptcy Exemptions (found under Section 522(d)) or those exemptions found under Federal Non-Bankruptcy Law (such as Social Security benefits under 42 USC 407) and Local and State Law exemptions which are applicable as of the date of the filing of the Bankruptcy Petition.

  In 1978, Congress passed the Bankruptcy Reform Act, commonly referred to as the Bankruptcy Code, which has been periodically amended to further limit a debtor’s ability to discharge student loan debt.  The most recent changes to the code were passed in 2005 when Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act (“BAPCPA”).  Under BAPCPA, Congress excepted certain student loans from discharge, namely, (i) if they were made, insured or guaranteed by the government, (ii) made under any loan program funded in whole or in part by the government or nonprofit institution, or (iii) private loans which are considered “qualified education loans”.               

Currently, the majority of Bankruptcy Courts apply the three-pronged “Brunner Test”, established in Brunner v. New York State Higher Education Services Corp. (S.D.N.Y. Oct. 14, 1987) to discharge a student loan based upon an “undue hardship”.  To establish an undue hardship under Brunner, a debtor must show (1) based upon debtor’s current income and expenses, they cannot maintain a normal standard of living for themselves or their dependents if forced to repay the loans, (2) the state of affairs is likely to persists for a significant portion of the repayment period, and (3) the debtor has made good-faith efforts to repay the loans.  A minority of circuits apply the “totality of the circumstances test” which does not require the third-prong in Brunner.

According to the Education Data Initiative, approximately $43.2 million American student borrowers are in debt by an average of $39,351 each.^[1] Currently, student loan debt in the United States totals $1.75 trillion and grows six (6) times faster than the nation’s economy.  Id.               

Please Discuss:

(1) both the history and current bankruptcy court policies regarding the dischargeability of student loan debt;

(2) how this policy could be changed to balance the competing interests of alleviating the burden imposed on student borrowers versus preventing abuse by borrowers; and

(3) to what extent should bankruptcy law and the bankruptcy courts be used to resolve the student loan dilemma, and how can bankruptcy policy be part of larger national policy approach to remedy the crisis in funding higher education.               

The essay should not exceed 2,000 words and should use facts and references to support an argument for a position 

“During the last year, due to the Covid-19 pandemic and interruptions to our economy, many states and the federal government imposed foreclosure and eviction moratoriums that protected non-paying mortgage borrowers and tenants. While this protection in many cases was needed to protect persons in financial hardship stay in their homes during a pandemic, it at the same time caused hardship for mortgage holders and landlords who could not enforce payment obligations. Please discuss whether and under what circumstances such foreclosure and eviction moratoriums can and should be imposed by the federal and/or state/local governments and whether and under what circumstances such moratoriums should continue. Please cite specific laws and references in developing your arguments.”

The 2021 Spring Essay Contest dealt with the newly enacted Subchapter V to Chapter 11 of the Bankruptcy Code and how it may be helpful for small business debtors seeking to reorganize their finances in better way than the former provisions of Chapter 11 dealt with small business debtors. Subchapter V was passed by Congress in late 2019 but in March of 2020 it was expanded as part of the CARES Act legislation which broadly dealt with the Covid-19 pandemic. This was an exciting and timely topic that in part addressed reorganizations for some of the hardest hit businesses during the global pandemic, small businesses. We received many excellent essays. The three students winning first, second and third place for their essays are shown below with a link to their essays.