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Topic #30:: Student Loans as "Special Circumstances" to overcome 707(b)(2) presumption of abuse.

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  • 12 Cases on This Topic
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Student Loans > As Special Circumstances in Chapter 7

Student Loans as "Special Circumstances" to overcome 707(b)(2) presumption of abuse.

12 Cases , IssueID 30

Ch 7 Means Test
Form 22A, Line 53
Ch 13 Means Test
Form 22C Line 57

Topic Description:

There is no mention of student loan debts in 11 U.S.C. §507(a) and therefore, there is no statutory basis for treating such debts as priority debts under the Bankruptcy Code. As a result, a monthly student loan payment is not an expense that may be deducted from income on the means test form 22A.

The key issue in these cases is whether the obligation to repay a nondischargeable student loan constitutes "special circumstances" under §707(b)(2)(B).

Cases tend to be fact based, and lead to different results, and also apply different standards in arriving at those results.

Lines of Cases:

A:

Student loan found as a special circumstance to overcome presumption of abuse

B::

Student loan does not qualify as special circumstance to overcome abuse presumption

Topic Background / Overview:

  • Type A = Student loan found as a special circumstance to overcome presumption of abuse
  • Type B = Student loan does not qualify as special circumstance to overcome abuse presumption
  • Type E = "Everything Else"
  • Cases for Zip
  • All Cases By Date
  • Cases A - Z

Cases for Zip , California Northern District Bankruptcy Court

Ninth Circuit Cases

� In re Martellaro

Bankr.D.Mont - 404 BR 548 - 2008-12-05 - 13 ,

Google ID#: 1945467518088873791
(Type B : Student loan does not qualify as special circumstance to overcome abuse presumption )

Other Circuits

� In re Harmon

Bankr.E.D.PA - Bky. No. 10-15329 ELF - 2011-02-16 - ,

Google ID#: 6891258598979471949
(Type B : Student loan does not qualify as special circumstance to overcome abuse presumption )

� In re Siler

Bankr. W.D.N.C. - 426 B.R. 167 - 2010-03-23 - 7 ,

Google ID#: 5336180722064125723
(Type B : Student loan does not qualify as special circumstance to overcome abuse presumption )

� In re Baker

Bankr.N.D.Ohio - 400 B.R. 594 - 2009-01-30 - 7 ,

Google ID#: 10297691131073738335
(Type B : Student loan does not qualify as special circumstance to overcome abuse presumption )

Debtor's student loan repayment may not be deducted from income, and deductions for daughters college and living expenses not allowed where unsecured creditors are receiving less than full payment. Case dismissed under "totality of circumstances"

� In re Fonash

M.D.Pennsylvania - 401 B.R. 143 - 2008-12-12 - 7 , Above

Google ID#: 7552361301759014734
(Type B : Student loan does not qualify as special circumstance to overcome abuse presumption )

� In re Champagne

Bankr.D.Kan. - 389 B.R. 191 - 2008-04-04 - ,

Google ID#: 850043663018975976
(Type B : Student loan does not qualify as special circumstance to overcome abuse presumption )

Student loans are not a special circumstance.

� In re Patterson

Bankr. S.D. Fla. - 392 B.R. 497 - 2008-03-07 - 7 ,

Google ID#: 9824233919018431846
(Type B : Student loan does not qualify as special circumstance to overcome abuse presumption )

The proceeds of two of these loans were used to fund Angelia Patterson's undergraduate and graduate education. The proceeds of the third loan has been used to fund the education of the Debtors' adult daughter. While it may be laudable for the Debtors to support their adult daughter's education, "it cannot be justified in the bankruptcy context. It forces the debtors' creditors to support the debtors' adult children." In re Siemen, 294 B.R. 276, 279 (Bankr.E.D.Mich.2003). "[C]ourts generally agree that educational expenses for adult children are discretionary; and are not expenses that should be foisted upon a debtor's pre-petition creditors." In re Staub, 256 B.R. 567, 571 (Bankr.M.D.Pa. 2000). See also United States Trustee v. Harrelson, 323 B.R. 176 (W.D.Va.2005) (finding debtors have no duty to pay for adult child's college expenses); In re Richmond, 144 B.R. 539, 542 (Bankr.W.D.Okla. 1992) ("debtors' unsecured creditors should [not] be required to contribute to the voluntary support of family members who are not dependents of the debtors"). This consensus is unchanged under BAPCPA. In re Pfahler, 2007 WL 2156401 (Bankr.N.D.Ohio July 26, 2007); In re Mattingly, 2007 WL 1830805 (Bankr. S.D.Iowa June 22, 2007). An adult child attending college is not a special circumstance that is out of the ordinary for an average family which leaves the Debtors no reasonable alternative but to incur the expense. Absent evidence that the Debtors' adult daughter is chronically ill or disabled as contemplated by the allowance for continued contributions for the care of family members on Official Form 22 A at Line 35, the Court must disallow the listed expense of $400.00 per month for Debtors' adult daughter's living expenses and must also disallow the expense of $287.94 per month for servicing the student loan that funds their adult daughter's education.

The Court notes however that there is a developing body of case law regarding this issue with the decisions going both ways. See e.g. In re Delbecq, 368 B.R. 754 (Bankr.S.D.Ind.2007)(finding that debtor's student loan was a special circumstance sufficient to rebut the presumption of abuse); In re Templeton, 365 B.R. 213 (Bankr.W.D.Okla.2007)(determining that debtor's student loans constitute special circumstance for which the debtor had no reasonable alternative because they were non-dischargeable, and could not be consolidated or deferred); In re Robinette, 2007 WL 2955960 (Bankr.D.N.M.2007) (finding student loan expense a special circumstance because there is no reasonable alternative). But cf. In re Vaccariello, 375 B.R. 809, 816 (Bankr.N.D.Ohio 2007) ("It cannot be argued that having a student loan is rare or unusual; therefore, debtors' obligation to repay their student loans, standing alone, cannot constitute special circumstances."); In re Lightsey, 374 B.R. 377, 382 (Bankr.S.D.Ga.2007)(Section 707's special circumstances may apply if repayment of student loans becomes onerous due to catastrophic illness, military deployment or similar post-contractual misfortunes but not because a student loan is a non-dischargeable debt); In re Pageau, 383 B.R. 221 (Bankr.D.N.H.2008)(determining that debtor's student loan should not be included as an additional expense on the means test. It is not the obligation to repay a loan that qualifies such an expense as a special circumstance but rather it is the circumstances that led to incurring the loan that must be special and justify inclusion on the means test. Educational loans incurred in pursuit of education or training that is necessitated by permanent injury, disability or an employer closing might constitute special circumstances because such events are outside the control of the debtor as are the two examples in the statute).

� In re Pageau

Bankr.D.N.H. - 383 B.R. 221 - 2008-02-21 - 7 , N/A

Google ID#: 14861364185625888784
(Type B : Student loan does not qualify as special circumstance to overcome abuse presumption )

Cannot claim Student Loan as a special circumstance

� In re Robinette

Bankr.D.N.M. - 2007 WL 2955960 - 2007-10-02 - 7 , N/A

Google ID#: 12775064358120116332
(Type A : Student loan found as a special circumstance to overcome presumption of abuse )

� In re Lightsey

Bankr.S.D.Ga. - 374 B.R. 377 - 2007-07-26 - 7 , Above

Google ID#: 5418864583280234931
(Type : )

[Fn3. ] Section 707's special circumstances may apply if repayment of student loans becomes onerous due to catastrophic illness, military deployment or similar post-contractual misfortunes but not because a student loan is a non-dischargeable debt

� In re Wisher

Bankr. D.Colo. - 222 B.R. 634 - 1998-05-07 - ,

Google ID#: 14288321152191666644
(Type E : )

there was no testimony regarding how the student loan was used, so the Court held it was consumer debt, inferring that some student loan debt might be non-consumer debt

� In re Vianese

Bankr. N.D.N.Y. - 192 B.R. 61 - 1996-01-19 - ,

Google ID#: 10456529840531429286
(Type E : )

� In re Harmon

Bankr.E.D.PA - Bky. No. 10-15329 ELF - 2011-02-16 - ,

Google ID#: 6891258598979471949
(Type B : Student loan does not qualify as special circumstance to overcome abuse presumption )

� In re Siler

Bankr. W.D.N.C. - 426 B.R. 167 - 2010-03-23 - 7 ,

Google ID#: 5336180722064125723
(Type B : Student loan does not qualify as special circumstance to overcome abuse presumption )

� In re Baker

Bankr.N.D.Ohio - 400 B.R. 594 - 2009-01-30 - 7 ,

Google ID#: 10297691131073738335
(Type B : Student loan does not qualify as special circumstance to overcome abuse presumption )

Debtor's student loan repayment may not be deducted from income, and deductions for daughters college and living expenses not allowed where unsecured creditors are receiving less than full payment. Case dismissed under "totality of circumstances"

� In re Fonash

M.D.Pennsylvania - 401 B.R. 143 - 2008-12-12 - 7 , Above

Google ID#: 7552361301759014734
(Type B : Student loan does not qualify as special circumstance to overcome abuse presumption )

� In re Martellaro

Bankr.D.Mont - 404 BR 548 - 2008-12-05 - 13 ,

Google ID#: 1945467518088873791
(Type B : Student loan does not qualify as special circumstance to overcome abuse presumption )

� In re Champagne

Bankr.D.Kan. - 389 B.R. 191 - 2008-04-04 - ,

Google ID#: 850043663018975976
(Type B : Student loan does not qualify as special circumstance to overcome abuse presumption )

Student loans are not a special circumstance.

� In re Patterson

Bankr. S.D. Fla. - 392 B.R. 497 - 2008-03-07 - 7 ,

Google ID#: 9824233919018431846
(Type B : Student loan does not qualify as special circumstance to overcome abuse presumption )

The proceeds of two of these loans were used to fund Angelia Patterson's undergraduate and graduate education. The proceeds of the third loan has been used to fund the education of the Debtors' adult daughter. While it may be laudable for the Debtors to support their adult daughter's education, "it cannot be justified in the bankruptcy context. It forces the debtors' creditors to support the debtors' adult children." In re Siemen, 294 B.R. 276, 279 (Bankr.E.D.Mich.2003). "[C]ourts generally agree that educational expenses for adult children are discretionary; and are not expenses that should be foisted upon a debtor's pre-petition creditors." In re Staub, 256 B.R. 567, 571 (Bankr.M.D.Pa. 2000). See also United States Trustee v. Harrelson, 323 B.R. 176 (W.D.Va.2005) (finding debtors have no duty to pay for adult child's college expenses); In re Richmond, 144 B.R. 539, 542 (Bankr.W.D.Okla. 1992) ("debtors' unsecured creditors should [not] be required to contribute to the voluntary support of family members who are not dependents of the debtors"). This consensus is unchanged under BAPCPA. In re Pfahler, 2007 WL 2156401 (Bankr.N.D.Ohio July 26, 2007); In re Mattingly, 2007 WL 1830805 (Bankr. S.D.Iowa June 22, 2007). An adult child attending college is not a special circumstance that is out of the ordinary for an average family which leaves the Debtors no reasonable alternative but to incur the expense. Absent evidence that the Debtors' adult daughter is chronically ill or disabled as contemplated by the allowance for continued contributions for the care of family members on Official Form 22 A at Line 35, the Court must disallow the listed expense of $400.00 per month for Debtors' adult daughter's living expenses and must also disallow the expense of $287.94 per month for servicing the student loan that funds their adult daughter's education.

The Court notes however that there is a developing body of case law regarding this issue with the decisions going both ways. See e.g. In re Delbecq, 368 B.R. 754 (Bankr.S.D.Ind.2007)(finding that debtor's student loan was a special circumstance sufficient to rebut the presumption of abuse); In re Templeton, 365 B.R. 213 (Bankr.W.D.Okla.2007)(determining that debtor's student loans constitute special circumstance for which the debtor had no reasonable alternative because they were non-dischargeable, and could not be consolidated or deferred); In re Robinette, 2007 WL 2955960 (Bankr.D.N.M.2007) (finding student loan expense a special circumstance because there is no reasonable alternative). But cf. In re Vaccariello, 375 B.R. 809, 816 (Bankr.N.D.Ohio 2007) ("It cannot be argued that having a student loan is rare or unusual; therefore, debtors' obligation to repay their student loans, standing alone, cannot constitute special circumstances."); In re Lightsey, 374 B.R. 377, 382 (Bankr.S.D.Ga.2007)(Section 707's special circumstances may apply if repayment of student loans becomes onerous due to catastrophic illness, military deployment or similar post-contractual misfortunes but not because a student loan is a non-dischargeable debt); In re Pageau, 383 B.R. 221 (Bankr.D.N.H.2008)(determining that debtor's student loan should not be included as an additional expense on the means test. It is not the obligation to repay a loan that qualifies such an expense as a special circumstance but rather it is the circumstances that led to incurring the loan that must be special and justify inclusion on the means test. Educational loans incurred in pursuit of education or training that is necessitated by permanent injury, disability or an employer closing might constitute special circumstances because such events are outside the control of the debtor as are the two examples in the statute).

� In re Pageau

Bankr.D.N.H. - 383 B.R. 221 - 2008-02-21 - 7 , N/A

Google ID#: 14861364185625888784
(Type B : Student loan does not qualify as special circumstance to overcome abuse presumption )

Cannot claim Student Loan as a special circumstance

� In re Robinette

Bankr.D.N.M. - 2007 WL 2955960 - 2007-10-02 - 7 , N/A

Google ID#: 12775064358120116332
(Type A : Student loan found as a special circumstance to overcome presumption of abuse )

� In re Lightsey

Bankr.S.D.Ga. - 374 B.R. 377 - 2007-07-26 - 7 , Above

Google ID#: 5418864583280234931
(Type : )

[Fn3. ] Section 707's special circumstances may apply if repayment of student loans becomes onerous due to catastrophic illness, military deployment or similar post-contractual misfortunes but not because a student loan is a non-dischargeable debt

� In re Wisher

Bankr. D.Colo. - 222 B.R. 634 - 1998-05-07 - ,

Google ID#: 14288321152191666644
(Type E : )

there was no testimony regarding how the student loan was used, so the Court held it was consumer debt, inferring that some student loan debt might be non-consumer debt

� In re Vianese

Bankr. N.D.N.Y. - 192 B.R. 61 - 1996-01-19 - ,

Google ID#: 10456529840531429286
(Type E : )

All Cases A to Z

  • In re Baker, 400 B.R. 594 , (Bankr.N.D.Ohio ) 2009-01-30, #10297691131073738335
  • In re Champagne, 389 B.R. 191 , (Bankr.D.Kan. ) 2008-04-04, #850043663018975976
  • In re Fonash, 401 B.R. 143 , (M.D.Pennsylvania ) 2008-12-12, #7552361301759014734
  • In re Harmon, Bky. No. 10-15329 ELF , (Bankr.E.D.PA ) 2011-02-16, #6891258598979471949
  • In re Lightsey, 374 B.R. 377 , (Bankr.S.D.Ga. ) 2007-07-26, #5418864583280234931
  • In re Martellaro, 404 BR 548 , (Bankr.D.Mont ) 2008-12-05, #1945467518088873791
  • In re Pageau, 383 B.R. 221 , (Bankr.D.N.H. ) 2008-02-21, #14861364185625888784
  • In re Patterson, 392 B.R. 497 , (Bankr. S.D. Fla. ) 2008-03-07, #9824233919018431846
  • In re Robinette, 2007 WL 2955960 , (Bankr.D.N.M. ) 2007-10-02, #12775064358120116332
  • In re Siler, 426 B.R. 167 , (Bankr. W.D.N.C. ) 2010-03-23, #5336180722064125723
  • In re Vianese, 192 B.R. 61 , (Bankr. N.D.N.Y. ) 1996-01-19, #10456529840531429286
  • In re Wisher, 222 B.R. 634 , (Bankr. D.Colo. ) 1998-05-07, #14288321152191666644

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