Coplin v. Wells Fargo Bank, N.A.
16-04122
Bankr. W.D. Wash.Dec 6, 2017Background
- Heather Coplin, a single mother of seven (five minors living with her, four disabled), holds a J.D. and incurred approximately $484,965 in student-loan debt; after a Navient/Sallie Mae stipulation, remaining defendant loans totaled ~$416,000 at trial.
- Coplin completed a Chapter 13 (confirmed 2013) and received a discharge in October 2016; she brought an adversary proceeding under 11 U.S.C. § 523(a)(8) seeking discharge of student loans as undue hardship.
- She works ~30 hrs/week as a night-shift waitress (net personal monthly income after payroll of about $1,850 when tax refund amortized is included); fiancé (Rohde) contributes $2,584.54/month toward certain household expenses but they are not married or fully commingled.
- Defendants showed Coplin qualifies for income-based repayment (IBR) plans with a $0 monthly payment based on current income; Coplin declined enrollment citing $0 payments would not reduce principal and risk future tax consequences on forgiveness and that private loans were in default.
- The court applied the Ninth Circuit/Brunner undue-hardship framework, found Coplin satisfied all three prongs, and granted a partial discharge: it ordered discharge of the portion of loans exceeding $222,000 (leaving $222,000 payable pro rata: ECMC $123,520.80; DOE $88,400.40; Pacific $10,078.80).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether repayment would impose "undue hardship" under Brunner (Prong 1: minimal standard of living) | Coplin cannot maintain a minimal standard of living and pay loans given her income, caregiving burdens, and expenses | Defendants: consider IBR $0 payment; include household income (fiancé) so Coplin can pay | Court: Coplin meets Prong 1; included only fiancé contributions that actually pay specified household expenses, rejected using IBR $0 as dispositive |
| Whether the inability to pay will persist (Prong 2) | Ongoing, significant care needs of disabled children, limited earning prospects, underemployment, lack of assets make situation likely to persist through repayment period | Defendants: IBR forgiveness period or other repayment terms could permit eventual payment | Court: Prong 2 satisfied — additional circumstances (dependent disabilities, limited earnings, lack of assets) make inability persistent over a standard 10‑year amortization period used here |
| Whether Coplin acted in good faith to repay loans (Prong 3) | Coplin made reasonable efforts (deferments/forbearances, interest-only hardship payments pre-bankruptcy, Chapter 13 payments); declined IBR enrollment because it would be $0 and not reduce principal | Defendants: lack of IBR enrollment and minimal prior payments show lack of good faith | Court: Prong 3 satisfied — Coplin made good faith efforts; Chapter 13 payments and past efforts weigh for her, and reasonable investigation (not enrollment) of IBR suffices given $0 payment outcome |
| Remedy: whether partial discharge and amount are appropriate; whether court must adopt IBR or other administrative programs instead | Coplin sought discharge of loans she cannot realistically repay | Defendants urged considering IBR/administrative remedies and full non-discharge if payment possible | Court: exercised equitable power to partially discharge loans; determined Coplin can reasonably repay $222,000 over 10 years and discharged amount exceeding that pro rata among defendants |
Key Cases Cited
- United Student Aid Funds, Inc. v. Pena, 155 F.3d 1108 (9th Cir. 1998) (adopted Brunner three-part undue-hardship test for § 523(a)(8))
- Brunner v. New York State Higher Education Servs. Corp., 831 F.2d 395 (2d Cir. 1987) (formulation of three-part undue-hardship test)
- Rifino v. United States, 245 F.3d 1083 (9th Cir. 2001) (discusses undue-hardship standards under § 523(a)(8))
- Saxman v. Educ. Credit Mgmt. Corp., 325 F.3d 1168 (9th Cir. 2003) (debtor bears burden to prove Brunner elements and court may grant partial discharge)
- Mason v. Educ. Credit Mgmt. Corp., 464 F.3d 878 (9th Cir. 2006) (court has discretion in calculating debtor's average monthly expenses for Brunner analysis)
- Nys v. Educ. Credit Mgmt. Corp., 446 F.3d 938 (9th Cir. 2006) (discusses second Brunner prong and rebutting presumption of income improvement)