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Seven Little Steps To Freedom: Settlement discussion and hearings

About a month after you provide discovery responses, you’ll be getting a letter from opposing counsel explaining why your client is a deadbeat, and not entitled to an “undue hardship” discharge.  They will point out the time your client went out to dinner at a fancy restaurant, and say they are saving too much for retirement, or saying they don’t work enough hours at their job.  But, in order to avoid further litigation, they are prepared to accept a reduction and put your client on a reasonable monthly payment plan.

Remember what’s going on here.  This is litigation.  Understand your adversary’s position, but don’t accept their conclusions and observations.  The fact that they are willing to settle is a good sign.  After discussing the settlement offer with your client, respond with a counter-offer. Trying cases is expensive, and risky, and it’s very likely your opposing counsel has never actually tried an “undue hardship” action.  If they offered 70 cents on the dollar, respond with a settlement of 30 cents on the dollar, and see if you can meet in the middle at 50 cents on the dollar.  Also be sure to extend payments out 30 years, with no further or at least minimal interest, and a reasonable monthly payment (no more than a couple hundred dollars a month).

Once opposing counsel has had an opportunity to respond to your motion for summary judgment, the court will set a hearing date for oral arguments.  Make sure you understand the substance of the briefs and your opposing counsel’s arguments.

Watch out for opposing counsel seeking to introduce the “Purpose Test” to rebut your claim that the creditor will also likely waive promissory notes in your face that show your client certified that the loans were qualified education loans.  Remind the creditor that this is a legal conclusion, and cannot be “certified” or stipulated to by a party.  Whether or not your clients’ loans are qualified education loans is a determination that only the judge can make.


At this hearing, the judge will ask whether the parties can settle, and if not, he or she will set a trial date.  He or she will then tell you to file your proposed findings of law and conclusions of law and a joint pre-trial stipulation.

Now you need to prepare and file your proposed findings of fact and conclusions of law, and a joint pre-trial stipulation.  BestCase has provided a template for this.  Work with opposing counsel to prepare a joint stipulation of facts that are not in dispute.   It is likely opposing counsel will stipulate to all your exhibits and thus save you the trouble of having to refresh yourself on the rules of evidence (unless you start objecting to their exhibits).

On the strength of these filings, you may also be able to secure a better settlement.  The closer you get to trial and the more you can show your adversary that you will go all the way to trial, the more nervous your adversary will get.  This is in some ways a game of chicken.  Don’t blink first (unless blinking is in your client’s best interests, in which case, blink!).


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Austin Smith, JDAustin Smith is a litigator who focuses on discharging private student loans in bankruptcy. Smith’s article, The Misinterpretation of 11 USC 523(a)(8), was foundational in articulating the proper scope and application of the student loan non-dischargeability provision of the Bankruptcy Code, and its arguments and reasoning have been adopted by bankruptcy courts. Smith’s work has been profiled by the Wall Street Journal, the American Bankruptcy Institute and more.