Amy Piccinino v. U.S. Dept. of Education
17-6022
| 8th Cir. | Dec 7, 2017Background
- Plaintiff Amy Piccinino, a single mother with a six‑year‑old child, filed bankruptcy seeking discharge of federal and private student loans totaling over $79,000 as an undue hardship under 11 U.S.C. § 523(a)(8).
- Piccinino earned a bachelor’s degree in 2011, worked intermittently in part‑time positions since 2013, and reported annual income (averaged) of $17,442 (≈ $1,453.50/month) including wages, SNAP, Medicaid eligibility, and an averaged tax refund.
- She claimed limited earning capacity due to childcare responsibilities, prior unemployment, a shoulder injury, dental issues, and uncertain housing costs (lives with mother, pays irregular/no formal rent).
- The Department of Education approved her for an income‑driven repayment plan yielding a $0 monthly payment under current circumstances; Piccinino previously offered modest payments to lenders and sought loan modifications.
- The Bankruptcy Court applied the Eighth Circuit’s totality‑of‑the‑circumstances undue‑hardship test, found many restrictions on income to be self‑imposed, determined Piccinino had modest surplus capacity to pay, and denied discharge as to DOE and Aspire loans (one private scholarship loan was discharged and not appealed).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Piccinino proved "undue hardship" to discharge student loans under § 523(a)(8) | Piccinino argued the Bankruptcy Court speculated about her employment, housing, and future earnings and ignored unique circumstances (injury, childcare costs, unreliable income) showing inability to repay | DOE/Aspire argued Piccinino is underemployed by choice, lacks evidence of permanent incapacity, has available income and a $0 IDR payment but nonetheless could make modest payments | Court affirmed denial: Piccinino failed to carry burden under the Eighth Circuit totality test; factual findings not clearly erroneous |
| Proper treatment of lump‑sum tax refund in monthly income calculation | Piccinino argued the annual refund should not be treated as monthly income | DOE/Aspire contended averaging is appropriate given income variability | Court upheld averaging the refund into monthly resources |
| Whether housing expense was established as necessary and fixed | Piccinino asserted $500/month rent to mother; lack of formal agreement and threat of sale justify higher future housing expense | DOE/Aspire pointed to absence of record evidence of consistent $500 rent or imminent sale | Court found rent likely lower/irregular; Piccinino failed to prove increased housing burden |
| Whether availability of income‑driven repayment and other remedies foreclose discharge | Piccinino noted possible future tax liability and dominant purpose of bankruptcy to discharge loans | DOE/Aspire noted IDR plan (currently $0/mo) and offers to make modest payments show ability to pay | Court held availability of repayment options and ability to make modest payments weigh against discharge |
Key Cases Cited
- Long v. Educ. Credit Mgmt. Corp., 322 F.3d 549 (8th Cir. 2003) (adopts totality‑of‑the‑circumstances undue‑hardship test in Eighth Circuit)
- Educ. Credit Mgmt. Corp. v. Jesperson, 571 F.3d 775 (8th Cir. 2009) (clarifies burdens and factors for undue‑hardship analysis under totality test)
- Grogan v. Garner, 498 U.S. 279 (1991) (debtor bears preponderance‑of‑the‑evidence burden in nondischargeability proceedings)
- Brunner v. New York State Higher Educ. Serv. Corp., 831 F.2d 395 (2d Cir. 1987) (articulates three‑part test for undue hardship followed by many circuits)
- United States v. United States Gypsum Co., 333 U.S. 364 (1948) (standard for clear error review)
- Anderson v. Bessemer City, 470 U.S. 564 (1985) (deference to trial court fact findings when multiple reasonable inferences exist)