Jones v. ECMC

UNITED STATES BANKRUPTCY COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
In re : Chapter 7
IRVING COURTLEY JONES :
Debtor : Bankruptcy No. 06-13628bf
IRVING C. JONES,
Plaintiff
v.
EDUCATIONAL CREDIT
MANAGEMENT CORPORATION
Defendant Adversary No. 07-0217
MEMORANDUM
In the above-captioned adversary proceeding, the plaintiff, Irving C. Jones,
asserts that his numerous student loan obligations should be discharged under chapter 7
as they impose an undue hardship upon him pursuant to 11 U.S.C. § 523(a)(8). Mr.
Jones contends that he is now, and has been throughout the course of his life, indigent
and unable to repay his educational loans. He further asserts that his impecunious
financial condition is unlikely to change in the future. Mr. Jones asserts that he meets the
1
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three criteria for demonstrating undue hardship established in this circuit by In re Faish,
72 F.3d 298 (3d Cir. 1995). He prosecuted his complaint pro se.
Defendant Educational Credit Management Corporation (ECMC)1 opposes
plaintiffs requested relief. It maintains that Mr. Jones has been and could be gainfully
employed if he so chose, and that he could repay some or all of his student loans in the
future. ECMC also asserts that Mr. Jones has acted in bad faith because he has never
tendered any student loan payments, has not taken advantage of the Income Contingent
Repayment Plan, has discharged student loans through a prior bankruptcy case, and has
filed the instant bankruptcy petition just after expiration of an extended repayment
forbearance period, while fully employed, and without making any effort to commence
repayment of his student loans.
A one-day trial took place. Upon consideration of the testimony and
documents offered in evidence, I make the following factual findings.2
'ECMC's motion to substitute itself for defendants American Education Services and
Philadelphia Higher Education Assistance Agency was granted by order of this court on April 23,
2008.
2 The factual findings under Fed. R. Bankr. P. 7052 will be made in narrative format.
2
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I.
A.
On August 16, 2006, Mr. Jones filed a voluntary bankruptcy petition under
Chapter 7 of the Bankruptcy Code. This is his second chapter 7 filing. His earlier case
commenced on June 22, 1993 and was docketed at Bankr. No. 93-13727. During that
prior bankruptcy Mr. Jones discharged student loans obligations held by: Rutgers, The
State University of New Jersey, Adv. Proc No. 93-0720; Department of Veterans Affairs,
Adv. Proc No. 93-0721; New Jersey Higher Education Assistance Agency, Adv. Proc
No. 93-0722; and Morehouse College, Adv. Proc No. 93-0723.
Mr. Jones currently resides at 4609 Blakiston Street, Philadelphia,
Pennsylvania. See ex. D-l. At the time of trial, Mr. Jones was 52 years old. N.T. at
10:51.3 Mr. Jones is single, lives alone, and has no dependants. N.T. at 10:52. He
suffers from Type II diabetes, which he controls through diet and medication; otherwise,
he is in good health. Ex. D-3, at 100. Mr. Jones has no medical conditions that would
prevent him from working now or in the future. Id.
Defendant ECMC is a Minnesota nonprofit corporation, which acts as a
3No party ordered a transcript of the trial. Therefore, all reference to the testimony
("N.T.") shall include the precise time of day that the testimony was given during the one-day
trial, as disclosed on the audio disc.
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designated guaranty agency pursuant to the Higher Education Act of 1965, as amended,
20 U.S.C. § 1077 et seq. ECMC provides guaranty agency services to the United States
Department of Education, and also accepts bankrupt student loan accounts from other
guarantor agencies. ECMC has been assigned the 18 student loans at issue in this
adversary proceeding. See generally Ex. D-6.
Mr. Jones is a highly educated individual who has amassed numerous
degrees in diverse disciplines from various institutions. His extensive educational history
consists of the following:
He graduated from Columbus East High School in Columbus, Ohio in
1973. Ex. D-3, at 14. Mr. Jones did well in high school, graduating in the top third of
his class. In the autumn of 1973, he began undergraduate studies at Morehouse College
in Atlanta, Georgia. N.T. at 9:48; Ex. D-3, at 15-16. Mr. Jones was awarded a half-
tuition scholarship to attend Morehouse College, which was conditioned upon him
maintaining a 3.0 grade point average. D-3, at 15-16. His average dropped to 2.8 for a
period of time and he lost the half-tuition scholarship. Id., at 15. While at Morehouse,
he pursued a degree in history. Ex. D-3, at 17-18. He also participated in the school's
work study program. Id.
Mr. Jones transferred from Morehouse to Georgia State University in 1975.
Id., at 16; see ex. D-2, #4. Mr. Jones graduated from Georgia State in 1978 with a
bachelor of arts degree in history and a minor in economics. Ex. D-2, #4. He earned a
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3.3 grade point average in his major and an overall grade point average of 3.19. Ex. D-3,
at 17-18. He also made the Dean's List several semesters. Id. While Mr. Jones attended
Georgia State University, he participated in the University's R.O.T.C. program. Id. at
20-21. Participation in the program required Mr. Jones to serve in the United States
Army. Id, Ordinarily his commitment to serve would have commenced upon his
graduation from Georgia State in 1978. However, Mr. Jones's entry into the army was
deferred for a period of three years because he gained admission to law school upon his
graduation from Georgia State. Id., at 20; ex. D-2, #4.
Mr. Jones enrolled at Rutgers (Newark), a State University of New Jersey
Law School, in 1978. Exs. D-3 at 20; D-2, #4. Mr. Jones successfully completed the
three year course of study and was awarded a juris doctorate degree in 1981. Exs. D-2,
#4; D-7. He graduated with a 2.2 grade point average. Ex. D-3, at 22. Mr. Jones never
became a licensed attorney, however. He sat for the bar exam on a number of occasions,
but never obtained the necessary minimum score for admission to the bar. N.T. at 9:50-
51.
In 1995, Mr. Jones enrolled at the University of the Arts in Philadelphia,
Pennsylvania. Ex. D-2, #4. He graduated in 1998 with a master's degree in teaching the
visual arts. Id.
In 1999, Mr. Jones enrolled in the Lutheran Theological Seminary at
Philadelphia as a part-time student. Ex. D-2, #4; N.T. at 9:57. He completed the
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program and graduated with a master's degree in divinity in 2005. Ex. D-3, at 30. Mr.
Jones expressed interest in pursuing a doctoral degree in divinity; however, he was not
eligible to receive additional financial aid through the school. N.T. at 9:57.
Thus, Mr. Jones holds a bachelor of arts degree in history, with a minor in
economics, as well as a juris doctorate, and two master's degrees - one in teaching the
visual arts and the other in divinity.
B.
Mr. Jones's employment history is as varied as his educational background,
as he has worked in different fields, both while attending school and after. He has also
experienced frequent and extended periods of unemployment.
As part of the work study program at Morehouse College, Mr. Jones
worked as a research assistant, and during the summer months, he worked at United
Parcel Service. Ex. D-3, at 35-36. While he was attending Georgia State University, Mr.
Jones worked as a parking attendant for Parking Company of America. Id. And, during
law school, Mr. Jones spent one summer working for the U.S. Department of Labor on
ERISA matters, and another summer with the legal advisor for the City of Atlanta. Id., at
24. Despite earning his juris doctorate, Mr. Jones has never worked in a private law
firm, nor did he pursue law related employment after law school. IcL
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As previously noted, Mr. Jones was commissioned into the United States
Army while he participated in Georgia State University's R.O.T.C. program. N.T. at
9:59-10:00. After he graduated from Rutgers School of Law, in 1982, Mr. Jones began
serving as a lieutenant in the Army. N.T. at 10:00. His term of service was three years,
1982-1985. N.T. at 10:00. He was an air defense artillery officer, N.T. at 10:01,
completing a Guided Missile Officer Training Course in 1982. Ex. D-2, #4. In the
Army, Mr. Jones held a leadership position wherein he was responsible for supervising a
platoon of soldiers made up of approximately 21 persons. Id. at 10:02. Mr. Jones was
honorably discharged in 1985. Exs. D-2, #4; D-3, at 25. Nonetheless, Mr. Jones testified
that he had some minor disciplinary issues in the Army, and received an Article 15 non-
judicial punishment. He acknowledged, however, that he could have continued serving
in the Army had he desired to do so. Id., at 37-38, N.T. at 10:03. While serving in the
Army, Mr. Jones earned approximately $24,000 per year. Complaint, at If 8.
After his Army discharge in 1985, Mr. Jones began working as a per diem
substitute teacher for the School District of Philadelphia. Exs. D-2, #5; D-3, at 44. Mr.
Jones worked as a substitute teacher until 2000, when he was offered a position with the
Philadelphia School District as a full-time art teacher. Exs. D-2, #5; D-3, at 45. When
Mr. Jones started substitute teaching he earned approximately $55 per day. This amount
increased over time, and when he ceased substituting in 2000 he was earning between
$100 and $120 per day. Exs. D-2, #5; D-3, at 45.
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From February 1986 through 1991, substitute teaching was Mr. Jones's
sole employment. See Ex. D-2, #23. Mr. Jones opined that he had difficulty obtaining a
full-time teaching position because he was relying predominately on his law degree as a
stepping stone into education, and he did not have a degree in teaching or any other
formal teaching certification. N.T. at 10:05. During the summer months of those years
(when the Philadelphia public schools were not in session), Mr. Jones received welfare,
including food stamps. See N.T. at 10:08; ex. D-2, #23. During one summer in 1988,
Mr. Jones was able to find additional work as a lifeguard at the Pennsylvania Institute, a
mental hospital; however, he was terminated from that employment. Ex. D-2, #23.
There was no testimony or other evidence reflecting whether Mr. Jones actively sought
employment in the private sector during this time frame.
In December 1991, Mr. Jones began work as a Social Worker Trainee for
the City of Philadelphia. Id. Mr. Jones was terminated from this position in June 1992.
Id. His salary was $20,000 per year. Id
From August of 1993, until he was terminated in January 1995, Mr. Jones
worked as an Income Maintenance Caseworker for the Commonwealth of Pennsylvania.
Id. His salary was $25,000 per year while in this position. Id.
As discussed above, Mr. Jones began classes at the University of the Arts
in 1995. Mr. Jones attended classes part-time and continued to work as a substitute
teacher during this time frame. He maintained his position as a substitute teacher
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through the year 2000.
No later than 1987, Mr. Jones began writing poetry, short-stories, political
essays, a novel and a theatrical play, and created a collection of photographs of his trip to
Africa. He lists about two dozen such artistic efforts as part of his personal property on
his bankruptcy Schedule B. But other than an occasional prize, these creative endeavors
have not provided Mr. Jones with commercial success.
In 1996, while attending the University of the Arts, Mr. Jones was evicted
from his apartment in West Philadelphia. Mr. Jones moved into 1215 Bainbridge Street,
a homeless shelter operated by a private contractor for the City of Philadelphia's Office
of Shelter for Homeless Adults. Ex. D-2, #23. Mr. Jones remained at the shelter for one
month, and then was reassigned to a shelter at Food for Life, which operated a shelter
and program for homeless veterans. Id, After a brief stay in a one room barracks-style
shelter, Mr, Jones was provided with a single room occupancy, i.e., a small one-person
apartment, at which he stayed for two years. Id. At the end of that two year period, the
shelter at Food for Life was closed, and Mr. Jones was moved to Reed House, located at
39th and Reed Street in South Philadelphia. Id. Mr. Jones was provided with a single
room occupancy apartment operated by the Salvation Army, a Section 8 subsidized
dwelling. Id. Mr. Jones stayed at Reed House until 2002, when he was eligible to
receive a voucher from PHA and the Section 8 program, and relocated to his current
address, which is also Section 8 housing.
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In September 2000, Mr. Jones obtained a full time art teacher position with
the Philadelphia public school system. Mr. Jones maintained this position for a full year,
until September 11, 2001, when he was terminated. Ex. D-3, at 46. While he was trying
to maintain discipline in the classroom, he grabbed a child and physically pulled him
over to a corner to sit. Id. Mr. Jones was no longer able to teach full time, or substitute
teach, in the Philadelphia public school system after that incident. Id, at 46-47. Mr.
Jones earned between $25,000 and $28,000 during the year he was a full time art teacher.
Id at 45-46.
Mr. Jones attended Lutheran Theological Seminary in the years between
1998 and 2005. Even though this was a part time program, Mr. Jones did not engage in
any type of employment between September 2001 and 2003. He lived in a Section 8
apartment, ex. D-3, at 48-49, and, because he was unemployed, paid no rent. Id. Mr,
Jones was eligible for food stamps during this period, and he supported himself with
whatever monies remained, after payment of tuition and expenses for school, from his
student loan disbursements. Id.
Mr. Jones was unemployed from September 12, 2001 through the spring
of 2003. His income for 2002 was $0. Ex. D-4. During the summer of 2003, Mr. Jones
worked for Fort Wayne Urban Ministries as a seminarian. Ex. D-2, #5. Presumably he
procured this employment through the Lutheran Theological Seminary. Mr. Jones earned
$3,500 that summer—which sum represents his total earnings for 2003. Id.: ex. D-4.
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Mr. Jones was unemployed throughout 2004, again earning $0 for that year. Ex. D-4.
From September 2005 to January 2006 Mr. Jones worked at Hancock St. Johns Ministry
UMC. D-2, #5. He earned $80 per week as a group leader. Id. His total earnings for
2005 were $1,791. See D-4.
On April 17, 2006, Mr. Jones commenced working for the Pennsylvania
Department of Corrections as a corrections officer at Graterford prison. His primary
responsibilities included the care, custody, and control of inmates. N.T. at 10:12-13. He
held this position until February 2008. Mr. Jones was making $32,000 per year in this
position.
Mr. Jones voluntarily terminated his employment with the Department of
Corrections because his car, a 2006 Suzuki Forenza, which he purchased new, was
repossessed on February 16, 2008 due to non-payment.4 After the vehicle was
repossessed, Mr. Jones decided that he had no alternative means of transportation to get
him to and from work. N.T. at 10:23.
The prison at which he was employed is located 34 miles away from Mr.
Jones's home in Philadelphia. Id. Mr. Jones believed that he had no choice but to quit
his job. He acknowledged, however, that he did not discuss alternatives to quitting with
his employer, such as rescheduling his duties to coincide with those of co-workers living
near him, if any, with whom he could commute to work from Philadelphia, nor working
4By order dated February 4, 2008,1 granted AmeriCredit Financial Services' motion for
relief from the automatic stay.
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any alternative shifts for which public transportation may have been possible. N.T. at
10:27-29. Furthermore, Mr. Jones did not seek to relocate his residence nearer to
Graterford after his automobile was repossessed. He believed it would be difficult to
find rent subsidized Section 8 housing near Graterford. N.T. at 10:24.
As of the date of trial in this adversary proceeding, Mr. Jones had been
unemployed for approximately four months. He acknowledged that he had passed the
Parole Agent I examination while being employed as a corrections officer. See Ex. D-2,
#23. He had interviewed for a position as a parole agent and for a position with the
professional management association for the Commonwealth of Pennsylvania, without
receiving an offer of employment. N.T. at 10:30. There was no evidence that Mr. Jones
has applied for other positions in addition to the two cited above. Nor is it clear that his
applications for these positions were made after he terminated his employment at
Graterford.
C.
The 18 student loan obligations that Mr. Jones now seeks to discharge were
incurred while attending the University of the Arts and the Lutheran Theological
Seminary. Exs. D-3, at 51-56; D-6; N.T. at 9:53. He incurred approximately $140,000
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in student loan debt while attending these institutions.5 Mr. Jones's student loan payment
is scheduled at $ 1,770 per month. See Complaint and Answer, at 16.
II.
Plaintiff contends that his student loan obligation should be discharged
under section 523(a)(8) because it imposes an undue hardship upon him. Section
523(a)(8) states that:
[a] discharge under section 727 ... does not discharge an
individual debtor from any debt—
(8) unless excepting such debt from discharge under this
paragraph would impose an undue hardship on the debtor and
the debtor's dependents, for—
(A)(i) an educational benefit overpayment or loan made,
insured, or guaranteed by a governmental unit, or made under
any program funded in whole or in part by a governmental
unit or nonprofit institution; or
(ii) an obligation to repay funds received as an educational
benefit, scholarship, or stipend; or
(B) any other educational loan that is a qualified education
'According to Plaintiffs Schedule F, ex. D-l, plaintiff owes $138,490.46 in student
loans. ECMC claims the amount is slightly higher, $143,635.12. Neither party requested that I
fix the final amount due and owing on Mr. Jones's student loans; nor did the parties suggest that
I have the power to discharge a portion of the loans only. See generally In re Allen. 329 B.R.
544, 549-50 (Bankr. W.D. Pa. 2005). Therefore, for the purposes of this proceeding, I will
assume that Mr. Jones owes approximately $140,000, and this debt is either completely
dischargeable or nondischargeable.
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loan, as defined in section 221(d)(l) of the Internal Revenue
Code of 1986, incurred by a debtor who is an individualf.]
11 U.S.C. § 523(a)(8) (emphasis added). Neither party has suggested that plaintiffs
debts to ECMC are anything other than educational loans made, insured or guaranteed by
a governmental unit, or made under a program funded in whole or in part by a
governmental unit or non-profit institution. Thus, the obligations are presumptively
nondischargeable pursuant to 11 U.S.C. § 523(a)(8). In drafting this exception to
discharge,
Congress sought principally to protect government entities
and nonprofit institutions of higher education-places which
lend money or guarantee loans to individuals for educational
purposes-fas well as entities who guarantee such loans] from
bankruptcy discharge. Because such loans are not based
upon a borrower's proven credit-worthiness, and because
they serve a purpose which Congress sought to encourage,
section 523(a)(8) protects the lender when a borrower, who
often would not qualify under traditional underwriting
standards, files a chapter 7 bankruptcy.
In re Segal. 57 F.3d 342, 348 (3d Cir. 1995).
The Third Circuit has adopted the three-prong test for determining "undue
hardship" articulated in Brunner v. New York State Higher Education Services Corp.,
831 F.2d 395 (2d Cir. 1987). In re Faish. 72 F.3d 298 (3d Cir. 1995). In order to
demonstrate undue hardship, the chapter 7 debtor must demonstrate:
(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;
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(2) that additional circumstances exist indicating that this
state of affairs is likely to persist for a significant portion of
the repayment period for student loans; and
(3) that the debtor has made good faith efforts to repay the
loans.
In re Faish, 72 F.3d, at 304-305; see also Pelliccia v. United States Dept. of Education,
67 Fed. Appx. 88, 90 (3d Cir. 2003) (non-precedential). The chapter 7 debtor has the
burden of proving each prong of the test by a preponderance of the evidence. See In re
Brightful, 267 F.3d 324, 327-28 (3d Cir. 2001); Sperrazza v. University of Maryland.
2008 WL 818616, at *2 (E.D. Pa. 2008); see generally Grogan v. Garner, 498 U.S. 279,
291 (1991). If the debtor fails to prove any prong, the student loans cannot be
discharged. See In re Brightful, 267 F.3d at 327-328; Sperrazza v. University of
Maryland, 2008 WL 818616, at *2.
This three-part test is dispositive: A bankruptcy court may not consider
equitable concerns or other factors not contemplated by the three factors in its undue
hardship analysis. In re Brightful, 267 F.3d at 327-28; Sperrazza v. University of
Maryland, 2008 WL 818616, at *2.
By way of further explication of these three factors, the Third Circuit in
Faish noted:
"[t]he first prong of Brunner requires an examination of the
debtor's current financial condition to see if payment of the
[student] loans would cause his standard of living to fall
below that minimally necessary."
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***
The second prong of the Brunner test requires "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." Brunner, 831 F.2d at
396. . .. [T]his requirement "properly recognizes the
potential continuing benefit of an education, and imputes to
the meaning of 'undue hardship' a requirement that the
debtor show his dire financial condition is likely to exist for a
significant portion of the repayment period."
The third prong of the Brunner test is the good faith inquiry..
.. [T]he question of good faith should only be reached if the
debtor has satisfied the first two elements.... The good faith
inquiry is to be guided by the understanding that "undue
hardship encompasses a notion that the debtor may not
willfully or negligently cause his own default, but rather his
condition must result from 'factors beyond his reasonable
control.'"
72 F.3d, at 305 (quoting Matter of Roberson. 999 F.2d 1132, 1135-36 (7th Cir. 1993))
(citations omitted).
In so defining undue hardship, the Third Circuit Court of Appeals intended
to meet the following policy concerns:
The Brunner standard meets the practical needs of the debtor
by not requiring that he or she live in abject poverty for up to
seven years6 before a student loan may be discharged. On the
other hand, the Brunner standard safeguards the financial
integrity of the student loan program by not permitting
6An earlier version of section 523(a)(8) rendered all student loans dischargeable if they
were more than 7 years old at the time of the bankruptcy filing. That provision was eliminated
by Congress in 1998. See In re Clarke. 266 B.R. 301, 306 n.6 (Bankr. E.D. Pa. 2001). Mr. Jones
was able to use this earlier version to discharge prior student loan obligations in his 1993
bankruptcy case.
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debtors who have obtained the substantial benefits of an
education funded by taxpayer dollars to dismiss their
obligation merely because repayment of the borrowed funds
would require some major personal and financial sacrifices.
Id. at 305-06; see Sperrazza v. University of Maryland, 2008 WL 818616, at *2.
The parties in the instant adversary proceeding agree that the sole issue
posed is whether repayment of the debtor's student loans would constitute an undue
hardship, applying the three-part Faish test. I note that the undue hardship standard is
difficult for an individual debtor to meet. For example, in In re Brightful, the Third
Circuit Court of Appeals concluded that the chapter 7 debtor—a 46-year-old single
parent of a 14-year-old minor, who resided with her sister, was employed part-time
earning about $8,500 per annum at the time of trial, and also had psychiatric
problems—could repay her outstanding $52,000 student loan obligation without an
undue hardship. 267 F.3d at 326.
In his complaint, Mr. Jones avers that his monthly student loan payment
was $1,770. ECMC contends that Mr. Jones's payment could have been $400 per month
while he was working as a corrections officer, and now that he is unemployed, it could
be $0. The difference in monthly loan payments is based on ECMC's position that Mr.
Jones is eligible for the "William D. Ford Federal Direct Loan Program." See 34 C.F.R.
Part 685. Under this program an individual holding certain types of student loans may
consolidate those loans into one direct loan. See 34 C.F.R. § 685.220; see also In re
Wallace, 259 B.R. 170, 174 (C.D. Cal. 2000). The borrower may then choose among
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different repayment options. See 34 C.F.R. § 685.208.
The option which ECMC emphasizes in this proceeding is the one styled
the "income contingent repayment plan" or ICRP. See 34 C.F.R. § 685.208(k). One
court summarized the salient aspects of this repayment option:
[A] borrower may qualify for an Income Contingent
Repayment Plan, where the amount of the required monthly
payment is recalculated yearly based on the borrower's
Adjusted Gross Income, family size and the "poverty
guidelines" promulgated by the United States Department of
Health and Human Services. The repayment period covers a
maximum of 300 months, The amount of payments are
dependent on the borrower's income and payment may not be
required at all during times when the borrower has little
income. The balance remaining after the 300-month period is
deemed forgiven.
In re England. 264 B.R. 38,44 (Bankr. D. Idaho 2001).
To qualify for this program, an individual must formally apply, which then
authorizes the IRS to release tax information to the Secretary of Education. See Inre
Thomsen. 234 B.R. 506, 509 (Bankr. D. Mont. 1999). The borrower's monthly payment
obligation is then determined based upon his income, with periodic reviews. See id.
Interest on the consolidated loan accrues at a rate established in the regulations, and if the
borrower's payments are insufficient to cover the accruing interest, at least some of it
will be capitalized. 34 C.F.R. § 685.209. At the end of 25 years, the unpaid balance may
be "discharged" by the Secretary of Education, with this discharge considered by the IRS
as a taxable event. Thomsen. 234 B.R. at 509-10. ECMC maintains that were Mr. Jones
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to apply for the ICRP program he would have little or no payment obligation based upon
his present financial circumstances, albeit a continuing legal obligation to repay his
student loan debts if his financial circumstances improved.
III.
A.
To establish the first prong of the Faish test, a chapter 7 debtor must show
that he cannot maintain, based on current income and expenses, a minimal standard of
living for himself and his dependents were he to repay his outstanding student loans.
Faish, 72 F.3d at 304-05. This prong requires that the debtor show more than tight
finances. Id. at 306. After considering the debtor's basic needs (and those of his
dependents) for food, clothing, shelter, and medical treatment, one must determine
whether the debtor has any additional funds available to make the necessary payments
toward his student loans. See In re Carlson, 273 B.R. 481, 484 (Bankr. D.S.C. 2001).
At present Mr. Jones has no dependents and is living in a Section 8 rent
subsidized apartment. When he commenced this proceeding on June 18, 2006 (two days
after he filed his bankruptcy petition), he was fully employed and had monthly net
income of $ 1,900, based on a salary of $32,000 per year. Since quitting his job in
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February 2008, Mr. Jones has no income.
The debtor has the burden of proving that he cannot maintain a minimal
standard of living while making payments on his student loans. Based on the evidence
introduced at the hearing,71 will accept arguendo that Mr. Jones has demonstrated a
present inability to make payments on his student loans because he has no income and his
only means of support is public assistance. See In re Brunner, 46 B.R. 752, 757-58
(Bankr. S.D.N.Y.), affd 831 F.2d 395 (2d Cir. 1987); In re Holzer. 33 B.R. 627, 631
(Bankr. S.D.N.Y. 1983).
However, a present inability to maintain a minimal standard of living while
paying off student loans, standing alone, is insufficient to support a finding of undue
hardship. Mr. Jones must also establish that additional circumstances exist that indicate
he will be unable to maintain a minimal standard of living and make loan payments in the
future, and that he has made good faith efforts to repay his student loans.
7Mr. Jones presented very little evidence about his current living expenses and income.
Based on his bankruptcy schedules, I can approximate his monthly expenses, which were
reasonable; however, there was no evidence about the monetary value of any public assistance
received by debtor. Debtor seemed to be operating under the false assumption that the court
could access his records maintained by the Pennsylvania Department of Public Welfare and the
United States Department of Veterans Affairs. See exs. P-l, P-3.
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B.
In addition to demonstrating a present inability to repay one's student loans
while maintaining a minimal standard of living, the Faish test requires that the debtor
demonstrate that this dire financial condition will persist for a significant portion of the
loan repayment period for reasons not within the debtor's control. See In re Brightful.
267 F.3d at 328. Dischargeability should be based on "certainty of hopelessness, not
simply a present inability to fulfill financial commitment." Id. (quoting In re Brunner, 46
B.R. at 755). Undue hardship "is reserved for the exceptional case and requires the
presence of 'unique' or 'extraordinary' circumstances which would render it unlikely that
the debtor ever would be able to honor his obligations." In re Ballard, 60 B.R. 673, 675
(Bankr. W.D. Va. 1986). Typically, the set of circumstances that justify a finding of
undue hardship under the second prong of the test are long-term physical or mental
problems precluding employment, lack of marketable job skills, or the necessity of fully
supporting several dependents which precludes sufficient income. See generally In re
Roberson. 999 F.2d 1132, 1137 (7th Cir. 1993) (and cases cited therein).
As noted earlier, in In re Brightful the Third Circuit held that the 46-year-
old part-time legal secretary, raising her 14-year-old child and living with her sister, and
who had psychiatric problems and had twice attempted suicide, did not present sufficient
evidence that she could not obtain full-time secretarial employment in the future and thus
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failed to meet the second Faish test. In this adversary proceeding, I am not persuaded by
Mr. Jones's position that, considering his educational background, employment history
and age, he will be unable to make any meaningful student loan payments in the future.
Mr. Jones is a relatively healthy, 52-year-old individual with no
dependents. He has no medical or psychiatric condition that prevents him from
employment. Although he is presently unemployed, he has not demonstrated that he has
made diligent efforts to secure stable employment now or in the past. See In re Greco,
251 B.R. 670, 677 (Bankr. E.D. Pa. 2000). His present employment situation does not
exist because he is unemployable. On the contrary, Mr. Jones is a highly educated
individual who has marketable skills in a variety of areas: e.g., legal, managerial,
correctional, religious, literary and artistic.
A review of the debtor's employment and educational history reveals that
Mr. Jones has made certain choices that, in the aggregate, have made his financial
position more precarious than it might otherwise have been. For example, between 2002
and 2005 the only employment Mr. Jones sought was connected to obtaining his master's
degree in divinity, even though the pay was extremely small and his educational program
was only part-time. Mr. Jones could have sought out more lucrative employment in order
to support himself, but he chose not to do so. Instead, Mr. Jones elected to pay his living
expenses from the proceeds of student loans, which was possible because Mr. Jones was
also receiving governmental assistance for his food and rent expenses.
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Furthermore, Mr. Jones may need to investigate employment opportunities
outside of the public sector in order to secure stable gainful employment in the future. I
observe that throughout his work history, Mr. Jones generally has pursued governmental
employment of one type or another. Since graduating from college, it appears that Mr.
Jones has rarely sought any type of employment in the private sector. At the hearing, Mr.
Jones expressed interest in becoming a parole agent for the Commonwealth of
Pennsylvania. If positions in Mr. Jones's chosen field are unavailable, then the FaJsh test
requires that he must seek employment opportunities in other fields. See Greco, 251
B.R. at 677; In re Vinci, 232 B.R. 644, 652-53 (Bankr. E.D. Pa. 1999) ("Borrowers
under the various guaranteed student loan programs are obligated to repay their loans
even if they are unable to obtain employment in their chosen field of study."). See also
In re Ovler, 397 F.3d 382, 386 (6th Cir. 2005):
Oyler's choice to work as a pastor of a small start-up church
cannot excuse his failure to supplement his income so that he
can meet knowingly and voluntarily incurred financial
obligations. By education and experience he qualifies for
higher-paying work and is obliged to seek work that would
allow debt repayment before he can claim undue hardship.
See In re Storey, 312 B.R. at 872 (debtor must do everything
in his power to improve financial situation); In re Kraft, 161
B.R. at 86-87 (debtor needed to look for all job opportunities
before claiming undue hardship).
Mr. Jones has affirmatively chosen to sustain long periods of
unemployment so that he could obtain additional education. Having received that
education, Mr. Jones is now obligated to look at all viable career alternatives to repay his
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loans.
Mr. Jones contends that his age prevents him from making any substantial
payments on his student loans in the future by precluding meaningful full-time
employment. I find this argument unpersuasive. Mr. Jones is a highly-educated
intelligent, and employable individual. With some effort and flexibility, it is likely that
he can find full-time, gainful employment.
Moreover, Mr. Jones had already earned a bachelor's degree and juris
doctorate degree before he enrolled in the master's degree program at University of the
Arts in 1995, where the student loans at issue were initially incurred. At that time, he
was approximately 40 years of age, his first bankruptcy case was completed and his
undergraduate and law school student loans had been fully discharged by his 1993
bankruptcy filing. Mr. Jones was the recipient of a "fresh start" and he chose to embark,
educationally and professionally, into new arenas. Mr. Jones may not now complain that
age alone will prevent him from paying back his student loans. See Jones v. Bank One
Texas, 376 B.R. 130, 139 (W.D. Tex. 2007) ("Debtor cannot now use her age as grounds
to avoid repaying her student loans as she chose to go to school later in life, which
resulted in the student loan debts persisting into her later age."); Educational Credit
Management Corp., v. Spence, 341 B.R. 825, 828-29 (E.D. Va. 2006) (holding that
student loans are not dischargeable under second prong of Brunner test even though
debtor is in her sixties and her loan debt is more than $160,000).
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In sum, Mr. Jones has failed to illustrate the sort of financial hopelessness
that is necessary before student loans may be discharged. On the contrary, many of Mr,
Jones's present financial problems stem from restrictive choices he has made. Mr. Jones
chose to obtain additional higher education later in life, the result of which was
substantial student loan debt. While attending part-time programs, Mr. Jones failed to
work on any consistent, long term basis. Instead, he chose to use his student loan
proceeds and public assistance to pay his expenses. Lastly, Mr. Jones has not fully
investigated all viable career paths, and he has not done enough to ensure that he remains
employed once he procures a suitable position. Therefore, I find that he has failed to
sustain his burden of demonstrating the second prong of the Faish test.
C.
The third prong of the Faish test requires that the debtor demonstrate that
he has made good faith efforts to repay his student loans. Faish, 72 F.3d at 305.
Fundamental to the good faith inquiry is the notion that the debtor did not willfully or
negligently cause his own default, but that his condition results from factors beyond his
control. Id A debtor's good faith may be measured by his efforts to obtain employment,
maximize income, and minimize expenses. In re Mason, 464 F.3d 878, 884 (9th Cir.
2006). In making this determination, the Third Circuit has noted two non-exclusive
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