Court: United States Bankruptcy Court, E.D. Virginia; December 19, 2006; Us Bankruptcy; United States Bankruptcy Court
The Court, led by Chief Judge Douglas O. Tice Jr., held a trial on November 16, 2006, regarding Barbara Triplett’s request to discharge her student loans due to undue hardship. The plaintiff was represented by Owaiian M. Jones, while Educational Credit Management Corporation (ECMC) was defended by Rand L. Gelber, and the United States Department of Education was represented by Assistant U.S. Attorney Robert P. McIntosh.
The Court found that Triplett, a 46-year-old female with no dependents and a GED, failed to demonstrate undue hardship under 11 U.S.C. 523(a)(8). She incurred student loan debts totaling $24,283.26 owed to the Department of Education and $9,135.35 owed to ECMC. Triplett has held various jobs, including roles as a cashier, waitress, truck driver, and manager, and was last self-employed in home cleaning until January 2005. She claims to suffer from bi-polar disorder, diagnosed in 1994, and alleges her condition worsened around 1998, yet she maintained employment until 2005. Currently, she lives on a $712 monthly Social Security disability income.
No expert testimony was presented to substantiate her claims of disability or its impact on her employment capability. The Court noted that she voluntarily resigned from her previous jobs while meeting job expectations and has not actively sought employment since quitting. Although she attributes her resignations to emotional issues, her former supervisor did not recall witnessing such behavior. Since her bankruptcy discharge, she claims to have incurred no new debts and has managed to pay her bills on time. The Court ultimately denied her request for loan discharge.
The debtor made eight monthly payments of $50.00 to the Department of Education from August 5, 2004, to March 7, 2005, without evidence of further payments. Student loans are typically non-dischargeable under 11 U.S.C. § 523(a)(8), though they can be discharged if repayment would cause undue hardship to the debtor or dependents. The burden of proving dischargeability lies with the debtor due to the presumption of nondischargeability established in case law.
The term "undue hardship" is not defined in the Bankruptcy Code, and its interpretation has been left to the courts. The Fourth Circuit follows the Brunner test, which requires the debtor to demonstrate: (1) an inability to maintain a minimal standard of living if required to repay the loans; (2) additional circumstances indicating this inability is likely to persist for a significant portion of the repayment period; and (3) good faith efforts to repay the loans.
The debtor currently maintains a minimal standard of living on Social Security disability income and claims she could not make loan payments if employed. However, she has not shown that her inability to pay is likely to continue, failing to meet the second prong of the Brunner test, which requires evidence of a “certainty of hopelessness” regarding future payments. Factors such as serious illness can support a finding of undue hardship, particularly if they impair earning capacity. The debtor alleges a mental condition that hinders her ability to work, but additional evidence is necessary to establish the required circumstances for undue hardship.
To satisfy the second prong of the Brunner standard for undue hardship discharge of student loans, the Court must establish that the debtor has a physical or mental condition impairing her ability to work, likely persisting throughout a significant portion of the loan repayment period. The Court requires substantial credible evidence to support the debtor's claims, which may include medical records but not solely the debtor's testimony. In this case, the debtor did not provide expert testimony or medical records to corroborate her claims, nor did she demonstrate that her condition was serious enough to prevent her from working, as she worked for approximately seven years after her condition allegedly deteriorated. Additionally, the debtor failed to show she made a good faith effort to repay the loans, as she had not sought employment since 2005 and declined repayment options that would have required no payment based on her income. Consequently, her request for a discharge of student loans due to undue hardship was denied, and the Court dismissed her complaint. Any factual findings were to be interpreted as legal conclusions where applicable.
