Fonash 2008 WL 5248175 (Bankr.M.D.Pa.), Bankr. L. Rep. P 81,380

Chapter 7 debtor failed to sufficiently document student loan expenses raised as "special circumstance."

Regardless of whether a Chapter 7 debtor's student loan expenses might constitute a "special circumstance," of a kind sufficient to rebut the "means test" presumption of abuse and to prevent the case from being dismissed, a debtor who failed to provide any documentation of these expenses, with the exception of the "means test" form itself, did not satisfy the procedural burden of the "special circumstances" provision. A debtor seeking to show "special circumstances," of a kind sufficient to rebut the "means test" presumption that his Chapter 7 filing is an abuse of the provisions of that chapter, bears both a procedural and substantive burden.

Cooper v. ECMC Case No. 02-21129

Court finds student loan debt non-dischargeable pursuant to § 523(a)(8) where Debtor has maintained the same employment for 13 years, experienced regular pay increases and has a gross monthly income that exceeds her monthly expenses such that making a student loan debt payment is feasible under the ICRP. Debtor testified as to having medical problems and house repair issues but the Court was not convinced her issues limited her ability to generate income sufficient to repay her student loans.

Date of opinion: 12/12/08

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Marie v. Citibank, Case No. 07-6032

The Debtor incurred over $210,000 in student loans seeking a doctoral degree in psychology. When she failed to obtain her degree, she filed for Chapter 11 and sought to have her loans discharged under §523(a)(8). At the time of her trial, approximately $180,000 of her student loans were held by ECMC and $30,000 were held by Sallie Mae; while the ECMC loans were subject to an Income Contingent Repayment Plan (ICRP), the Sallie Mae loans were not. The Debtor, relying upon In re Reynolds, 425 F.3d 526 (8th Cir. 2005), claimed that she suffered from depression that affected her ability to work and that was exacerbated by the existence of her loans. The court found that the Debtor suffered only from temporary depression that did not prevent her from being capable of obtaining employment in her field and earning an annual salary of about $40,000. However, using the totality of the circumstances approach followed by the 8th Circuit, set forth in In re Long, 322 F.3d 549 (8th Cir. 2003), the court found that requiring her to repay the Sallie Mae loans and a portion of the ECMC loans would pose an undue hardship on her, and were therefore dischargeable. The court examined the ICRP option available to the Debtor for the ECMC loans and found that, even if she was earning an annual salary of $40,000, her monthly payments calculated under the plan would pose an undue hardship when considered with her reasonable monthly expenditures.

Date of the decision: 11/20/08

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In re Mabry, (Bkrtcy.E.D.Mo.)

December 16, 2008: Discharge - Unemployed Chapter 7 debtor was entitled to "undue hardship" discharge of student loans.

A 49-year-old Chapter 7 debtor who, despite graduating more than 26 earlier from a prestigious Ivy League school, had been unemployed or underemployed for many years since he graduated for various circumstances not entirely within his control, including the failure of a promising business that he had started when a major customer decided to change its method of operation and no longer needed the debtor's product, was entitled to an "undue hardship" discharge of his more than $80,000 in student loan debt. The debtor was currently unemployed, penniless, homeless and receiving food stamps. Moreover, the debtor, since the failure of his business, had been employed principally as a waiter and/or bartender, and despite having sent out employment applications to more than 40 restaurants, had been unable to obtain work in the food and beverage industry. Even if the debtor could obtain such employment, his earnings therefrom would be insufficient to permit payment on the student loans while still allowing for a minimal standard of living.

2003 Student Loan Case Law Update

Student Loan Update from 2003.

Neeson v. Sallie Mae, Inc., et al.

Description: Court sustains Debtor ′ s request to discharge student loan indebtedness as undue hardship pursuant to 11 U.S.C. section 523(a)(8). Debtor s current income barely sufficient to meet extremely modest expenses, which are likely understated given demonstrated need to resort to credit card debt to pay expenses and identified unmet needs. Employment history and Debtor ′ s diagnosed personality disorder and limited intelligence indicate that situation not likely to change in foreseeable future.

Date of decision: 2/12/08

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In re Dewey, (Bkrtcy.W.D.Tenn.)

Discharge - Unemployed Chapter 7 debtor suffering from bipolar disorder was not entitled to undue hardship discharge of student loans.

An unemployed Chapter 7 debtor whose bipolar disorder allegedly prevented from working in his former occupation as psychiatrist, and whose monthly income, consisting entirely of contributions from relatives, was nearly $1,000 less than his scheduled monthly expenses, failed to satisfy even the first prong of the Brunner "undue hardship" test for the dischargeability of his student loan debt. There was a complete lack of evidence either that the debtor had minimized his expenses, given that he had continued to pay to maintain his psychiatric license despite his alleged inability to practice psychiatry, and that his bipolar disorder, from which the debtor had suffered since high school, and which had not prevented him from graduating from an Ivy league school, completing his medical studies or fulfilling his psychiatric residency, was such as to prevent him from obtaining any employment that would permit him to make payments on his student loans.

In re Vaccariello 375 BR 809

Non-dischargeable student loan debt payments may not be used to reduce the income under the means-test to determine abuse


Date of the decision: 8/22/07

Educational Credit Management Group vs. Mason D-04-1075-BMaP 04-1077

Educational Credit Management Corporation (“ECMC”) appeals from the decision of the Bankruptcy Appellate Panel (“BAP”), which affirmed the bankruptcy court’s partial dis-
charge of government-insured student loans held by Debtor-Appellee Keith Mason (“Mason”). See Educ. Credit Mgmt. Corp. v. Mason (In re Mason), 315 B.R. 554 (B.A.P. 9th Cir. 2004). The bankruptcy court held that full repayment of the
loans would cause Mason an undue hardship within the meaning of 11 U.S.C. § 523(a)(8). It therefore discharged all amounts that Mason owed to ECMC in excess of $32,400.1
The bankruptcy court had jurisdiction under 28 U.S.C. § 157(b). The BAP had jurisdiction under § 158(c). We have jurisdiction under § 158(d), and we reverse.

Date of opinion: 9/28/06

Full opinion click here.

Educational Credit Management Group vs. Mason D-04-1075-BMaP

Keith Mason, an intelligent, determined chapter 7 (1) debtor, substantially overcame a learning disability and obtained a law degree, but finds that his disability impedes his admission to the bar, and adversely affects his access to the job market and professional employment.

He sought discharge of his student loans under § 523(a)(8). After trial, the bankruptcy court concluded that, although repayment of the full amount of the loan would impose an undue hardship on him, repayment of some lesser amount would not. Based on § 105(a) and In re Saxman, 325 F.3d 1168 (9th Cir. 2003), the bankruptcy court granted partial discharge. In re Mason, 303 B.R. 459 (Bankr. D. Idaho 2004). We AFFIRM.


Date of decision: 10/28/04

Full opinion click here.

In re Mason, Mason vs. Educational Credit Mgt. Group 03-6122

Discussion about the application of the Third Prong of the Brunner test after being directed by the Court of Appeals.

Date of the opinion: 9/9/2006

Full opinion click here.

Petrini vs. State of Alaska, Alaska Post Secondary Education Case No: 89-00042

Mr. Petrini filed this adversary proceeding to establish that he was entitled to a hardship discharge of his student loan under 11 USC § 523(a)(8).

The student loan first became due on November 1, 1984, within five years of the date of the petition. Mr. Petrini has a wife and three children, ages 8 years, 4 years, and 10 months. He alleges his wife suffers from arthritis. He is living on welfare and AFDC payments.

The student loan was incurred to provide training as a welder to Petrini. He has a varied work history. He had a military occupation as a jet mechanic. He has some experience in the construction trades, such as carpentry. He has experience in food serviced. Petrini says he is caught in a no-win situation. Jobs are not plentiful, and accepting one will detract from his monthly public benefits. That is, he will not make enough to even compensate for the loss of benefits. He has worked very little in the last three years. Nonetheless, he is only 37 years old and his health is excellent.

The State indicates his student loan payments are now $56.86 per month, and it is willing to restructure them if called for. The State cites a history of Petrini failing to keep it advised of his whereabouts and a spotty repayment history despite generous extensions and grace periods. As of January 22, 1991, the amount owed on the loan was a principal balance of $3,477.38 plus interest at 5% per year. Affidavit of Patty Fouse (Docket No. 15 filed January 27, 1992).

Date of Decision: 2/24/92

Full opinion click here.

Brunner vs. NY State Higher Education Services Case No: 87-5013

3 part test in order to discharge student loans:

(1) that the debtor cannot maintain, based on current income and expenses, a 'minimal' standard of living for herself and her dependents if forced to repay the loans; (2) that additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period of the student loans; and (3) that the debtor has made good faith efforts to repay the loans.

Date of decision: 10/14/87

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Francisco Armando Sherman, Debtor, Francisco Armando Sherman, Plaintiff v. Mohela, et al., Defendants.

Student loans imposed undue hardship and were therefore dischargeable under section 523(a)(8) where Debtor suffered a severe brain injury which left him unable to earn a salary sufficient to repay the loans. Decision based in part on lenders' failure to offer any affirmative evidence that Debtor could obtain more lucrative employment.

Date of decision: 8/15/07

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In re Douglas Adversary Case No: 05-07021 and 05-07022

The discharge of student loans is reserved for those most extreme instances of financial destitution. It is the Court’s finding that this debtor finds herself in such a situation. The Court holds that Debtor has carried her burden of proving, under the standard set forth in In re Brunner and adopted by the Eleventh Circuit Court of Appeals in In re Cox, that excepting Debtor’s student loan debt from discharge would impose an undue hardship on Debtor and her dependent son. As such, the student loan debt at issue, representing loans made by ECMC and the DOE, is held to be dischargeable.

Date of decision: 3/14/07

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In re Wynn

Discharge - Court had to consider income of debtor's spouse in conducting student loan dischargeability analysis.

A Chapter 7 debtor could not satisfy the first, or "minimal standard of living," prong of the Brunner test, and was not entitled to an "undue hardship" discharge of his more than $103,000 in student loan debt. The combined net monthly income of debtor and his wife, in the amount of $6,000, exceeded their monthly expenses of $3,846.99 by more than $2,000. In assessing whether the debtor had ability, based on his current circumstances, to repay his student loan debt while still maintaining a minimal standard of living for himself and his dependents, as required by the first prong of Brunner, the court had to consider the income both of the debtor and his nondebtor-wife and had to compare their joint income to their total household expenses.

In re Brown, Case No. 07-2010

Description: Court evaluated Debtor's past, present and reasonably reliable future financial resources; Debtor's reasonable and necessary living expenses; and other relevant factors and unique circumstances, including Debtor's failure to participate in the Income Contingent Repayment Program and found that repayment of Debtor's student loan indebtedness to Creditor would impose an undue hardship on her pursuant to 11 U.S.C. section 523(a)(8) and it was therefore dischargeable.

Date of decision: 11/13/07

Full opinion click here.