450 B.R. 235
Bankr. M.D. Ga.2011Background
- Debtor Perdeta Bush filed a Chapter 7 petition and later an adversary to discharge student loan debt to the United States Department of Education; trial occurred February 24, 2011, with memorandum opinion issued May 31, 2011.
- Bush graduated Georgia Southern University in 1997 with a public relations degree; repayments on loans began in March 1998, after various jobs with incomes around $7–35k annually.
- In 2005 Bush and her husband consolidated their loans; they divorced in 2006, with Bush remaining liable for roughly two‑thirds of a consolidated debt of about $96,000.
- Bush currently pursues a Master's in Adult Education at the University of Georgia; her current income is about $1,700 per month and her budget shows a negative monthly net income.
- Bush has a total student loan debt exceeding $104,000 at 3.75% interest; she has received deferments but made only a $100 payment in December 2007 and applied a $1,725 Americorps benefit to her loans in 2008.
- The court applies the Brunner three‑prong test under § 523(a)(8) to determine undue hardship, ultimately ruling that Bush did not prove she would incur undue hardship and denying discharge.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Bush meets Brunner prong I (minimal standard of living). | Bush argues current expenses exceed income, showing insufficient funds for a minimal standard. | Education debt impairs ability to maintain minimal living standard if required to repay. | Bush fails to prove inability to maintain minimal standard if required to repay. |
| Whether Bush meets Brunner prong II (likely persistence of financial hardship). | Bush contends hardship will persist due to income prospects and ongoing education. | Court should consider present circumstances; future improvement is likely given potential income and repayment options. | Bush did not show a certain hopelessness; financial outlook likely to improve. |
| Whether Bush meets Brunner prong III (good faith efforts to repay). | Bush attempted to pay when possible and faced deferments; no deliberate avoidance. | Long periods with no payments despite income above $30k show lack of good faith. | Bush failed to show good faith efforts to repay. |
| Overall: does discharge of the student loans constitute undue hardship under § 523(a)(8). | If undue hardship is shown under Brunner, discharge is warranted. | Brunner not satisfied; discharge is not warranted. | Undue hardship not proven; discharge denied. |
Key Cases Cited
- In re Mosley, 494 F.3d 1320 (11th Cir. 2007) (discharge burden under Brunner standard remains in § 523(a)(8))
- In re Douglas, 366 B.R. 241 (Bankr.M.D. Ga. 2007) (explains Brunner three‑prong test and burden on debtor)
- Hemar Insurance Corp. of America v. Cox, 338 F.3d 1238 (11th Cir. 2003) (adopts Brunner test for undue hardship in § 523(a)(8))
- In re Howe, 319 B.R. 886 (9th Cir. BAP 2005) (IRS standards are not controlling in Brunner analysis; expenses must reflect actual necessity)
- In re Albee, 338 B.R. 407 (Bankr.W.D. Mo. 2006) (IRS standards not binding in undue hardship determinations)