543 B.R. 1
Bankr. S.D. Iowa2015Background
- Plaintiff Jason Ebelsheiser filed an adversary proceeding seeking discharge of consolidated federal student loans (about $381,820) under 11 U.S.C. § 523(a)(8).
- He holds chiropractic degrees from Palmer College and formerly operated a chiropractic practice; his license is suspended (eligibility to reapply in 2022) but not revoked.
- In 2010 he was convicted of sexual offenses and is serving a state sentence with a special lifetime parole term; anticipated release in April 2016 (special parole minimum ten years).
- During incarceration he participated in an Income Based Repayment Plan (IBRP) and made no loan payments due to zero income; wife Tiffany has modest earnings (~$300/month from photography and ~$436/month teaching during school year) and the household receives $339/month in food assistance.
- The family’s documented monthly expenses (~$1,895.56) are modest; plaintiff argues parole conditions and exclusion from certain government payer programs will limit future earnings.
- The court considered the Eighth Circuit’s totality-of-circumstances undue-hardship test (past/present/future resources; necessary living expenses; other relevant factors) and denied discharge.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether repayment would impose an "undue hardship" under § 523(a)(8) | Ebelsheiser: parole restrictions, lifetime sentence and exclusion from certain payer programs will prevent meaningful repayment | College Assist: debtor has earning potential, modest expenses, and remedies like IBRP; hardships stem from his convictions | Denied — plaintiff failed to prove undue hardship by preponderance of evidence |
| Effect of criminal convictions and special parole on future employability | Convictions and parole conditions will restrict travel, education and ability to participate in payer programs, reducing income | Parole restrictions are individualized; no proof they will bar employment or education; limitations are self-imposed consequences of his conduct | Court treats limitations as largely self-imposed and speculative; they do not establish undue hardship |
| Availability and adequacy of Income Based Repayment Plan (IBRP) | Continued IBRP would be unduly burdensome on family (asserted) | IBRP protects borrowers with low income and would require no payments until earnings reach threshold; balances borrower and lender interests | IBRP availability undermines undue-hardship claim; no factual basis showing IBRP would be unworkable |
| Whether debtor made good-faith efforts / other totality factors (expenses, age, spouse’s income) | Ebelsheiser: family budget is tight; incarceration interrupted payments; future constraints justify discharge | Defendant: debtor has substantial education, diverse work history, wife can earn more, budget is modest, debtor previously made payments | Court finds family expenses reasonable, debtor has future earning potential, and other factors weigh against discharge |
Key Cases Cited
- Grogan v. Garner, 498 U.S. 279 (1991) (plaintiff bears the burden to prove nondischargeability defenses by a preponderance of the evidence)
- Long v. Educ. Credit Mgmt. Corp., 322 F.3d 549 (8th Cir. 2003) (adopts a totality-of-circumstances test for undue hardship under § 523(a)(8))
- Walker v. Sallie Mae Servicing Corp., 650 F.3d 1227 (8th Cir. 2011) (court cannot rely solely on past five years or speculation about future employment to find undue hardship)
- Educ. Credit Mgmt. Corp. v. Jesperson, 571 F.3d 775 (8th Cir. 2009) (limitations resulting from a debtor’s own conduct do not ordinarily establish undue hardship)