Discharging Student Loans — Self-Represented Effectiveness

The NY Times has an interesting article on how few student loans are discharged in bankruptcy — actually an additional procedure with different standards is needed.  There’s a debate about whether the problem is lack of attempts, or the admittedly difficult standard that a debtor has to meet.  The article includes an interesting titbit about self-representation.

Jason Iuliano, a Harvard Law School graduate who is now in a Ph.D. program in politics at Princeton, examined 207 proceedings that unfolded across the country. He found that 39 percent received full or partial discharges.

His assessment of E.C.M.C.’s view of the rarity of success? “I think that’s wrong,” he said. While his sample size was small and he agrees that it’s not easy to prove undue hardship and personal hopelessness, his assessment of bankruptcy data suggests that as many as 69,000 more people each year ought to try to make a case. And they don’t necessarily need to pay lawyers to argue for them, as he found no statistical difference between the outcomes of people who hired lawyers and those who represented themselves. (Bold added.)

In the actual paperIuliano writes:

The second misconception is that lawyers are necessary. Surprisingly, they are not. In fact, in my sample, pro se debtors were actually more likely to receive discharges than their counterparts who were represented by counsel (43% vs. 38%).

The writer adds:

A second reason that people may choose not to pursue discharges is that they do not have money to pay an attorney. Because the adversary proceeding is essentially a trial, debtors may believe that they need an attorney in order to win. Quite reasonably, they do not think they will be able to represent themselves against a large company such as Sallie Mae or Wells Fargo. My study, however, shows that a debtor can be successful without an attorney. In fact, after controlling for other factors, I found that there was no statistical difference in outcome between pro se debtors and debtors represented by an attorney.

Obviously one can no more jump to the conclusion from this study that lawyers make no difference, than one could from a non-randomized study showing the opposite — as so many do.  It may be that those who represent themselves are a unique population — or indeed that those who find lawyers are an even more unique population.

Or it could indeed be that when the standard to be met is so very high, the ones that get relief have such strong cases that they speak for themselves.  Or, it could be that when someone has a lawyer it is hard to think of them as as badly off as the requires the debtor to be.

Iuliano thinks more people should file for discharge.  If there were any systematic effort to encourage this, it would be good to combine it with some randomized research.


About richardzorza

I am deeply involved in access to justice and the patient voice movement.
This entry was posted in Consumer Rights, Research and Evalation. Bookmark the permalink.