Cases for Zip , California Northern District Bankruptcy Court

Ninth Circuit Cases

• Craig v. Educational Credit Management Corp. (In the Matter of Craig)

9th Cir. - 579 F.3d 1040 - 2009-08-26 - 13 , Above

9TH CIRCUIT VACATES PERPLEXING STUDENT LOAN RULING

• In re Coleman

9th Cir - 560 F.3d 1000 - 2009-03-25 - 13 ,

Chapter 13 debtors do not need to wait till end of plan to seek discharge of student loans.

• In re Scott

Bankr.W.D.Washington - ___ - 2009-02-25 - 7 , NA

Chapter 7 case. Allowed discharge of $322,443 student loan debt given amount of debt and inability to generate income to pay debt. Court finds that Plaintiffs have met their burden of proving that they are entitled to a hardship discharge under 523(a)(8).

Other Circuits

• Bene v Educational Credit Management Corp (In re Bene)

Bankr.W.D.N.Y - 2012 WL 2412037 - 2012-06-26 - ,

The analysis above implies, if not demonstrates, that formulation of a three-prong test applicable to every student loan debtor who has ever sought relief in the bankruptcy courts of the Second Circuit since Brunner was not required under the facts of Ms. Brunner's case. Further, because there was no advocacy (by a lawyer or by any amicus) on behalf of student loan debtors in general, or Marie Brunner in particular, it is possible that countless such debtors whose budget was not "incredible" (as the district court found Ms. Brunner's budget to be), were done a disservice.[12]

To repeat the five questions to be answered in the present case, the case of Ms. Bene.

1. What at this time is a "minimal standard of living" under the first prong of Brunner?

2. What bearing does a long-past choice to forego education and the economic benefits it might provide toward the payment of outstanding student debt, have within the Brunner analysis?

3. What role does the availability of the current version of the William D. Ford Program play within the Brunner analysis as regards Ms. Bene?

4. How does the Brunner test apply to the fact that Ms. Bene, at age 64, faces imminent job loss?

5. Twenty-five years ago, the debtor's parents transferred $25,000 to her which she chose to devote to her parents' care. It was not in trust or as a gift, but rather it was to repay her for her past services to them. (A 1987 affidavit by her parents is in evidence as Defendant's Exhibit A.) She could have used it to pay off her student loans which already existed and by then totaled only approximately $14,500. Now that has grown to $56,300.00 because of accrued interest. How does that figure in to the Brunner analysis?

Answer
D. This Court predicts that when a debtor passes the Brunner Test but for the Ford options, the Second Circuit would adopt a "totality of circumstances" test.

E. This Debtor has passed the Brunner Test, and now must face the "totality" presented by the current version of the Ford Program.

F. The following facts satisfy the "totality test:"

1. She is 64 and facing job loss.
2. She never had a profession.[22]
3. She has no debt other than 24-year-old student loan debt.
4. She gave up educational opportunities in order to care for her ill parents two decades ago.
5. She lives an austere life.
6. She has worked on an assembly line for 12 years at less than $13.00/hr. leading up to trial.
7. She never completed her education, and so has no options for higher income now.
8. She paid little toward her student loans, but paid what she could.
9. The $25,000 payment from her parents in 1986 could have paid-off her student loans, but she used it to care for her parents. There is nothing culpable about that in the Bankruptcy Code.
10. Finally, Brunner involved a debtor starting out on her career. (So did DeRose, albeit at age 50.) This Debtor is at the end of her "rope" at age 64, facing job loss and no prospects other than Social Security.
The 1978 legislative history regarding efforts to discharge student loan debt concerned "abuses" of the "bargain." (See fn. 15 above)

There is no abuse here.

To return to an earlier part of this Decision, Collier warned that changes in the Ford Program ought not to be viewed as an implied repeal of 11 U.S.C. § 523(a)(8). Rather, this Court must "decide how much personal sacrifice society expects from individuals who accepted the benefits of guaranteed student loans but who have not obtained the financial rewards they had hoped to receive as a result of their educational expenditures." (Collier on Bankruptcy, 15th Edition ¶ 523.14[2]. Ms. Bene has satisfied that standard.

This loan must be discharged.

• In re Crawley

Bankr. E.D. Pa - 460 B.R. 421 - 2011-10-24 - ,

Student loann hardship discharge allowed where debtor had paid for 24 years despite diffuculties. Failure to participate in Income Contingent Repayment Plan (ICRP) was not a deal killer. Brunner test is satisfied.

• In re Sederlund

8th Cir BAP - 440 B.R. 168 - 2010-11-01 - ,

Applying principles announced in the 2009 8th Cir case, Jesperson, 571 F.3d 775 (hardship cannot be claimed where lack of income is self-imposed) court found debtors tendency to quit repeated jobs after disputes with co-workers and supervisors made her hardship self-imposed.

• In re Bronsdon

BAP 1st - 435 B.R. 791 - 2010-09-21 - ,

1st Cir BAP declines to follow Brunner test.
65 year old debtor need not participate in ICRP student loan payment modifications to qualify for hardship discharge. Although good faith is required, ICRP participation is not, pre se, a requirement to show good faith, and was not required under the facts of this case.

• In re Walker

Bankr. 8th Cir. - 427 BR 471 - 2010-04-09 - 7 ,

Affirmation of bankruptcy court's ruling that the debtor's student loans were discharged.

"The Bankruptcy Code and Rules give student loans special treatment, including treating undue hardship as a fluid concept. Allowing debtors an opportunity to attempt to make student loan payments post-discharge after other debts are wiped away, without fear of losing the ability to bring dischargeability action until the debtor is eligible to file a new bankruptcy case, is a desired result."

"the Eighth Circuit Court of Appeals confirmed in Jesperson that the Income Contingent Repayment Program for student loans, which is available to Michele, is a factor to be considered in evaluating the totality of the debtor's circumstances:

[U]ndue hardship under § 523(a)(8) continues to require separate analysis under which, in this circuit, the ICRP is "a factor" to consider in evaluating the totality of the debtor's circumstances. However, a student loan should not be discharged when the debtor has "the ability to earn sufficient income to make student loan payments under the various special opportunities made available through the Student Loan Program."[49]
Although some question remains as to the weight to be given to the ability to make an ICRP payment following Jesperson,[50] 487*487 the Eighth Circuit made clear that the ability to do so is, at a minimum, an important factor in the analysis."

• In re Myers

Bankr.E.D.N.C. - No. 08-08353-8-RDD - 2010-04-01 - 7 ,

Debtors student loans were not discharged despite debtor's sleep disorder. The court felt that debtor's good work history was an indication that he had the ability to repay the loans.

• In re Larson

Bankr. N.D.Ill. - 426 BR 782 - 2010-03-25 - ,

Middle aged debtor incurred student loan debt between 1991 and 1993. By 1993, he was going blind, and was completely blind by 1998. By 2004, after major health issues (heart attack and failed kidneys), and inability to work more than 28 hours per week (on doctor's orders), debtor filed for relief, and the court permitted a hardship discharge for debtor's student loans.

Specifically, the court said, "Section 523(a)(8) was designed in part to prevent abuse of the bankruptcy system, by preventing recent student borrower graduates, who often have few assets and high dent, from exploiting that short-term insolvency to wipe away the cost of their education while reaping the benefits of the education during the rest of their lives. However, there is no evidence of such abuse by the debtors or evidence that it would be unjust to discharge the student loan. On the other hand, denying the debtors their discharge would deny them their 'fresh start.' Even if they were ultimately not required to make any payments on the student loan, the debt would still hang over their heads, affecting their credit, and causing a psychological and emotional toll."

• In re Bartel

Bankr. N.D.Ala. - No. 09-40154-JJR-7 - 2010-03-10 - 7 , Below

Vietnam vet with health problems and very low monthly income was nevertheless required to repay $847 in student loans. Partially, this finding was based on court's belief that the debtor did not make a good fairh attempt to repay the loan (noting that he borrowed $18,000 in the past 2 years to buy a new car). Also, the monthly payment was only $15, and the court found that the debtor failed to show that this small payment would impair his ability to maintain a minimal standard of living.

• In re Buckland

Bankr. D.Kan. - 424 B.R. 883 - 2010-02-12 - 7 ,

The debtor was unemployed and was having trouble finding work as a fire chief. In his current situation, the court said the debtor could not afford to repay his student loan and maintain a minimal standard of living, however the court would not discharge the loans since the debtor could get a lower level job and pay the loans without a problem.

• In re Bronsdon

D.Mass - 435 B.R. 791 - 2010-01-08 - ,

65 year old debtor need not participate in ICRP student loan payment modifications to qualify for hardship discharge. Although good faith is required, ICRP (Income Contingent Repayment Program) participation is not, pre se, a requirement to show good faith, and was not required under the facts of this case.

• In re Torres

Bankr.D.Mass - __ BR __ - 2009-12-01 - 7 ,

• In re Miller

Bankr.E.D.Pennsylvania - 409 B.R. 299 - 2009-07-22 - ,

disabled debtor can afford to pay $20K of Parent Plus loans for children's education and could not discharge debt. Debtor's expenses found excessive in light of IRS education expense standards, given that her only income was $846 in Social Security Debtor's home also found too luxurious in light of overall household income.

• In re Mosko

4th Cir - 515 F.3d 319 - 2008-02-12 - ,

Student loan not dischargeable because they did not attempt to maximize their income minimize their expenses, or consolidate their debt.

• Ekenasi v. Education Resources Institute (In re Ekenasi)

4th Cir. - 325 F.3d 541 - 2003-04-16 - ,

Case by case analysis is needed to make hardship determination because it will depend on facts at end of the plan.

• Bender v. Educational Credit Management Corp. (In re Bender)

8th Cir. 5/12/2004 - 368 F.3d 846 - - ,

Consideration of undue hardship issue not "ripe" until near time of discharge.

• Bene v Educational Credit Management Corp (In re Bene)

Bankr.W.D.N.Y - 2012 WL 2412037 - 2012-06-26 - ,

The analysis above implies, if not demonstrates, that formulation of a three-prong test applicable to every student loan debtor who has ever sought relief in the bankruptcy courts of the Second Circuit since Brunner was not required under the facts of Ms. Brunner's case. Further, because there was no advocacy (by a lawyer or by any amicus) on behalf of student loan debtors in general, or Marie Brunner in particular, it is possible that countless such debtors whose budget was not "incredible" (as the district court found Ms. Brunner's budget to be), were done a disservice.[12]

To repeat the five questions to be answered in the present case, the case of Ms. Bene.

1. What at this time is a "minimal standard of living" under the first prong of Brunner?

2. What bearing does a long-past choice to forego education and the economic benefits it might provide toward the payment of outstanding student debt, have within the Brunner analysis?

3. What role does the availability of the current version of the William D. Ford Program play within the Brunner analysis as regards Ms. Bene?

4. How does the Brunner test apply to the fact that Ms. Bene, at age 64, faces imminent job loss?

5. Twenty-five years ago, the debtor's parents transferred $25,000 to her which she chose to devote to her parents' care. It was not in trust or as a gift, but rather it was to repay her for her past services to them. (A 1987 affidavit by her parents is in evidence as Defendant's Exhibit A.) She could have used it to pay off her student loans which already existed and by then totaled only approximately $14,500. Now that has grown to $56,300.00 because of accrued interest. How does that figure in to the Brunner analysis?

Answer
D. This Court predicts that when a debtor passes the Brunner Test but for the Ford options, the Second Circuit would adopt a "totality of circumstances" test.

E. This Debtor has passed the Brunner Test, and now must face the "totality" presented by the current version of the Ford Program.

F. The following facts satisfy the "totality test:"

1. She is 64 and facing job loss.
2. She never had a profession.[22]
3. She has no debt other than 24-year-old student loan debt.
4. She gave up educational opportunities in order to care for her ill parents two decades ago.
5. She lives an austere life.
6. She has worked on an assembly line for 12 years at less than $13.00/hr. leading up to trial.
7. She never completed her education, and so has no options for higher income now.
8. She paid little toward her student loans, but paid what she could.
9. The $25,000 payment from her parents in 1986 could have paid-off her student loans, but she used it to care for her parents. There is nothing culpable about that in the Bankruptcy Code.
10. Finally, Brunner involved a debtor starting out on her career. (So did DeRose, albeit at age 50.) This Debtor is at the end of her "rope" at age 64, facing job loss and no prospects other than Social Security.
The 1978 legislative history regarding efforts to discharge student loan debt concerned "abuses" of the "bargain." (See fn. 15 above)

There is no abuse here.

To return to an earlier part of this Decision, Collier warned that changes in the Ford Program ought not to be viewed as an implied repeal of 11 U.S.C. § 523(a)(8). Rather, this Court must "decide how much personal sacrifice society expects from individuals who accepted the benefits of guaranteed student loans but who have not obtained the financial rewards they had hoped to receive as a result of their educational expenditures." (Collier on Bankruptcy, 15th Edition ¶ 523.14[2]. Ms. Bene has satisfied that standard.

This loan must be discharged.

• In re Crawley

Bankr. E.D. Pa - 460 B.R. 421 - 2011-10-24 - ,

Student loann hardship discharge allowed where debtor had paid for 24 years despite diffuculties. Failure to participate in Income Contingent Repayment Plan (ICRP) was not a deal killer. Brunner test is satisfied.

• In re Sederlund

8th Cir BAP - 440 B.R. 168 - 2010-11-01 - ,

Applying principles announced in the 2009 8th Cir case, Jesperson, 571 F.3d 775 (hardship cannot be claimed where lack of income is self-imposed) court found debtors tendency to quit repeated jobs after disputes with co-workers and supervisors made her hardship self-imposed.

• In re Bronsdon

BAP 1st - 435 B.R. 791 - 2010-09-21 - ,

1st Cir BAP declines to follow Brunner test.
65 year old debtor need not participate in ICRP student loan payment modifications to qualify for hardship discharge. Although good faith is required, ICRP participation is not, pre se, a requirement to show good faith, and was not required under the facts of this case.

• In re Walker

Bankr. 8th Cir. - 427 BR 471 - 2010-04-09 - 7 ,

Affirmation of bankruptcy court's ruling that the debtor's student loans were discharged.

"The Bankruptcy Code and Rules give student loans special treatment, including treating undue hardship as a fluid concept. Allowing debtors an opportunity to attempt to make student loan payments post-discharge after other debts are wiped away, without fear of losing the ability to bring dischargeability action until the debtor is eligible to file a new bankruptcy case, is a desired result."

"the Eighth Circuit Court of Appeals confirmed in Jesperson that the Income Contingent Repayment Program for student loans, which is available to Michele, is a factor to be considered in evaluating the totality of the debtor's circumstances:

[U]ndue hardship under § 523(a)(8) continues to require separate analysis under which, in this circuit, the ICRP is "a factor" to consider in evaluating the totality of the debtor's circumstances. However, a student loan should not be discharged when the debtor has "the ability to earn sufficient income to make student loan payments under the various special opportunities made available through the Student Loan Program."[49]
Although some question remains as to the weight to be given to the ability to make an ICRP payment following Jesperson,[50] 487*487 the Eighth Circuit made clear that the ability to do so is, at a minimum, an important factor in the analysis."

• In re Myers

Bankr.E.D.N.C. - No. 08-08353-8-RDD - 2010-04-01 - 7 ,

Debtors student loans were not discharged despite debtor's sleep disorder. The court felt that debtor's good work history was an indication that he had the ability to repay the loans.

• In re Larson

Bankr. N.D.Ill. - 426 BR 782 - 2010-03-25 - ,

Middle aged debtor incurred student loan debt between 1991 and 1993. By 1993, he was going blind, and was completely blind by 1998. By 2004, after major health issues (heart attack and failed kidneys), and inability to work more than 28 hours per week (on doctor's orders), debtor filed for relief, and the court permitted a hardship discharge for debtor's student loans.

Specifically, the court said, "Section 523(a)(8) was designed in part to prevent abuse of the bankruptcy system, by preventing recent student borrower graduates, who often have few assets and high dent, from exploiting that short-term insolvency to wipe away the cost of their education while reaping the benefits of the education during the rest of their lives. However, there is no evidence of such abuse by the debtors or evidence that it would be unjust to discharge the student loan. On the other hand, denying the debtors their discharge would deny them their 'fresh start.' Even if they were ultimately not required to make any payments on the student loan, the debt would still hang over their heads, affecting their credit, and causing a psychological and emotional toll."

• In re Bartel

Bankr. N.D.Ala. - No. 09-40154-JJR-7 - 2010-03-10 - 7 , Below

Vietnam vet with health problems and very low monthly income was nevertheless required to repay $847 in student loans. Partially, this finding was based on court's belief that the debtor did not make a good fairh attempt to repay the loan (noting that he borrowed $18,000 in the past 2 years to buy a new car). Also, the monthly payment was only $15, and the court found that the debtor failed to show that this small payment would impair his ability to maintain a minimal standard of living.

• In re Buckland

Bankr. D.Kan. - 424 B.R. 883 - 2010-02-12 - 7 ,

The debtor was unemployed and was having trouble finding work as a fire chief. In his current situation, the court said the debtor could not afford to repay his student loan and maintain a minimal standard of living, however the court would not discharge the loans since the debtor could get a lower level job and pay the loans without a problem.

• In re Bronsdon

D.Mass - 435 B.R. 791 - 2010-01-08 - ,

65 year old debtor need not participate in ICRP student loan payment modifications to qualify for hardship discharge. Although good faith is required, ICRP (Income Contingent Repayment Program) participation is not, pre se, a requirement to show good faith, and was not required under the facts of this case.

• In re Torres

Bankr.D.Mass - __ BR __ - 2009-12-01 - 7 ,

• Craig v. Educational Credit Management Corp. (In the Matter of Craig)

9th Cir. - 579 F.3d 1040 - 2009-08-26 - 13 , Above

9TH CIRCUIT VACATES PERPLEXING STUDENT LOAN RULING

• In re Miller

Bankr.E.D.Pennsylvania - 409 B.R. 299 - 2009-07-22 - ,

disabled debtor can afford to pay $20K of Parent Plus loans for children's education and could not discharge debt. Debtor's expenses found excessive in light of IRS education expense standards, given that her only income was $846 in Social Security Debtor's home also found too luxurious in light of overall household income.

• In re Coleman

9th Cir - 560 F.3d 1000 - 2009-03-25 - 13 ,

Chapter 13 debtors do not need to wait till end of plan to seek discharge of student loans.

• In re Scott

Bankr.W.D.Washington - ___ - 2009-02-25 - 7 , NA

Chapter 7 case. Allowed discharge of $322,443 student loan debt given amount of debt and inability to generate income to pay debt. Court finds that Plaintiffs have met their burden of proving that they are entitled to a hardship discharge under 523(a)(8).

• In re Mosko

4th Cir - 515 F.3d 319 - 2008-02-12 - ,

Student loan not dischargeable because they did not attempt to maximize their income minimize their expenses, or consolidate their debt.

• Ekenasi v. Education Resources Institute (In re Ekenasi)

4th Cir. - 325 F.3d 541 - 2003-04-16 - ,

Case by case analysis is needed to make hardship determination because it will depend on facts at end of the plan.

• In re Rhodes

2009 - Bankr.D.Connecticut - - Below ,

below poverty debtor can't discharge 31K in student loans where debtor's "future is bright and hindered only by his propensity for indolence and his free choice to completely ignore his taxpayer financed college education." " The Debtor's employment record reveals a complete failure to pursue a career commensurate with his college education and a striking indifference toward maintaining steady employment. He has made no effort to find additional employment to supplement his current income.[11] He works only on weekends and he has not requested additional hours from his present employer in the past year. Meanwhile, he has nothing to do throughout most of the week and even complains of boredom.[12] It is not an undue hardship require an able debtor to work a full time job."

• Cassim v. Educ. Credit Mgmt. (In re Cassim)

BAP 6th Cir. - 395 B.R. 907 - - ,

Undue hardship determination need not await confirmation of chapter 13 plan.

• Bender v. Educational Credit Management Corp. (In re Bender)

8th Cir. 5/12/2004 - 368 F.3d 846 - - ,

Consideration of undue hardship issue not "ripe" until near time of discharge.

All Cases A to Z

• Bender v. Educational Credit Management Corp. (In re Bender), 368 F.3d 846 , (8th Cir. 5/12/2004 ) , #4821333643884536339
• Bene v Educational Credit Management Corp (In re Bene), 2012 WL 2412037 , (Bankr.W.D.N.Y ) 2012-06-26, #6311728698752180533
• Cassim v. Educ. Credit Mgmt. (In re Cassim), 395 B.R. 907 , (BAP 6th Cir. ) , #13343429754355416910
• Craig v. Educational Credit Management Corp. (In the Matter of Craig), 579 F.3d 1040 , (9th Cir. ) 2009-08-26, #15559990834128511299
• Ekenasi v. Education Resources Institute (In re Ekenasi), 325 F.3d 541 , (4th Cir. ) 2003-04-16, #18041889090887020182
• In re Bartel, No. 09-40154-JJR-7 , (Bankr. N.D.Ala. ) 2010-03-10, #12658032393975798680
• In re Bronsdon, 435 B.R. 791 , (D.Mass ) 2010-01-08, #14715509405075894100
• In re Bronsdon, 435 B.R. 791 , (BAP 1st ) 2010-09-21, #14715509405075894100
• In re Buckland, 424 B.R. 883 , (Bankr. D.Kan. ) 2010-02-12, #15329445015782270055
• In re Coleman, 560 F.3d 1000 , (9th Cir ) 2009-03-25, #15235306040222987981
• In re Crawley, 460 B.R. 421 , (Bankr. E.D. Pa ) 2011-10-24, #17995719087550404219
• In re Larson, 426 BR 782 , (Bankr. N.D.Ill. ) 2010-03-25, #136319119943765701
• In re Miller, 409 B.R. 299 , (Bankr.E.D.Pennsylvania ) 2009-07-22, #1805935947078914037
• In re Mosko, 515 F.3d 319 , (4th Cir ) 2008-02-12, #10769579074659981874
• In re Myers, No. 08-08353-8-RDD , (Bankr.E.D.N.C. ) 2010-04-01, #14944805286399318228
• In re Rhodes, Bankr.D.Connecticut , (2009 ) , #15295453305883786803
• In re Scott, ___ , (Bankr.W.D.Washington ) 2009-02-25, #1278114555514592532
• In re Sederlund, 440 B.R. 168 , (8th Cir BAP ) 2010-11-01, #2065666454188991508
• In re Torres, __ BR __ , (Bankr.D.Mass ) 2009-12-01, #6893029319787775304
• In re Walker, 427 BR 471 , (Bankr. 8th Cir. ) 2010-04-09, #7172645280981013398