In 2020, Debra Jean Marchus filed an adversary proceeding in a North Dakota bankruptcy court, seeking to discharge about $38,000 in student-loan debt. After a trial, Bankruptcy Judge Shon Hastings wiped out the debt.
As summarized in Judge Hastings’s decision, Ms. Marchus began her journey through higher education in 1975, forty-five years before she filed for bankruptcy. She first enrolled at North Dakota State University, then attended a couple of for-profit institutions, and finally obtained an associate degree in accounting from the University of Phoenix in 2013.
When Marchus appeared in Judge Hastings’s courtroom, she only made $11.00 an hour working as a North Dakota grocery store stocker. Moreover, Marchus had never made a lot of money. Her average annual income over the previous fifteen years was only $14,493.
As Judge Hastings noted, Marcus bought her clothing from second-hand stores, received health care from Medicaid, and supplemented her food budget with financial assistance from the federal government’s SNAP program. She drove a 17-year-old car and lived in a one-bedroom apartment.
Ms. Marchus also suffered from serious health problems, which Judge Hastings summarized in some detail:
“[Marchus’s] physical conditions include arthritis, water retention, relaspes of colitis, chronic sinusitis . . . , no upper arm strength, weight gain, lack of blood flow in her legs, thyroid disease, hiatal hernia and kidney disease.”
After sifting through all the evidence (including more than 500 pages of medical records), Judge Hastings concluded Ms. Marchus’s financial future did not look promising.
“[Marchus] is almost 64 years old. She holds no pension or investment accounts and saved no money for retirement. Her employment and income opportunities are limited, and the prospect of [Marchus] increasing her income either through new employment or a promotion at her current job appears bleak.”
Summarizing the evidence (which included more than 500 pages of medical records), Justice Hastings concluded that it was unlikely that Ms. Marchus would ever earn more than her current income. He discharged her debt to SLND in its entirety.
What are we to make of Marchus v. SLND?
First, Debra Machus is one among millions of Americans who took out student loans to attend for-profit colleges but did not benefit financially. For more than forty years, Marchus attempted to improve her lot in life by enrolling at for-profit schools, and yet she wound up working at a job that paid only $11 an hour.
Second, Marchus’s case shows how interest and penalties can cause a student-loan debt to balloon out of control. Debra Marchus borrowed $14,000 in 2007 to attend Aakers Business College, and she paid back more than half that amount with money she received from an inheritance. Nevertheless, by the time she filed for bankruptcy, her debt had grown to more than $38,000!
Finally, Marchus v. SLND is another win for student-loan debtors who reside in the Eighth Circuit Court of Appeals. Like Diane Ashline’s victory in Iowa and Michael Abney’s success in Missouri, Marchus’s victory in North Dakota is a sign that the bankruptcy judges in the Eighth Circuit are becoming more willing to grant student-loan debtors the relief to which they are clearly entitled.
Abney v. U.S. Department of Education, 540 B.R. 681 (Bankr. W.D. Mo. 2015).
Ashline v. U.S. Department of Education, Adversary No. 16-09028 (Bankr. N.D. Iowa, Sept. 28, 2021).
Marchus v. Student Loans of North Dakota, 630 B.R. 91 (Bankr. D.N.D. 2021).
Elizabeth Lally, N.D. of Iowa Judge Collins Leads the Way On Discharge of Student Debt in the Eighth Circuit, Goosmann Law Firm (July 28, 2018).