476 B.R. 699
Bankr. E.D.N.Y.2012Background
- Pro se plaintiff Dr. Celeste C. Grubin seeks discharge of student loan debt in a bankruptcy adversary proceeding
- Discharge order from Chapter 7 entered January 19, 2010, but plaintiff contends HEAL and general student loans remain discharged or dischargeable
- HEAL Loans are two DHHS promissory notes from 1990–1991; district court default judgment entered 2008
- General Student Loan Debt originally 16 loans; consolidated with Sallie Mae in 2001; transferred to NY-HESC in 2008
- Consolidation of pre-petition debt occurred post-petition via Federal Direct Consolidation Loan arranged through College Educational Services (CES) on plaintiff’s behalf
- Court finds plaintiff bound by the Federal Direct Consolidation Loan via actual authority or ratification; plaintiff selected income-contingent repayment and has not paid since 2011
- HEAL Loans dischargedability governed by 42 U.S.C. § 292f(g); plaintiff has not shown unconscionability; HEAL not dischargeable
- General Debt dischargeability analyzed under 11 U.S.C. § 523(a)(8) and § 727(b); court finds non-dischargeable due to post-petition status or lack of undue hardship
- Court concludes neither HEAL nor General Debt is dischargeable and denies discharge on both sets of loans
- Plaintiff’s assets and income (disability benefits, child support, residence with mortgage, daughter ages, etc.) do not support discharge
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Grubin is bound by the Federal Direct Consolidation Loan | Grubin contends CES lacked authority to consolidate and she did not sign | CES acted as plaintiff’s agent with actual authority or through ratification | Plaintiff bound by consolidation (agency authority/ratification) |
| Whether the General Student Loan Debt is dischargeable | Discharge would undue hardship for debtor and dependents | Debt is non-dischargeable; not met hardship standard or post-petition | Non-dischargeable under either 11 U.S.C. § 727(b) or § 523(a)(8) |
| Whether the HEAL Loans are dischargeable | HEAL debt should be dischargeable under bankruptcy | HEAL debt dischargeability is highly restricted | Non-dischargeable under 42 U.S.C. § 292f(g); not unconscionable |
Key Cases Cited
- Hiatt v. Indiana State Student Assistance Comm’n, 36 F.3d 21 (7th Cir. 1994) (consolidation can extinguish pre-petition debt, create post-petition debt)
- Brunner v. New York State Higher Educ. Svc’s Corp., 831 F.2d 395 (2d Cir. 1987) (three-pronged undue hardship test for student loans)
- In re L.K., 351 B.R. 45 (Bankr.E.D.N.Y. 2006) (Brunner test factors; good faith and minimal standard of living)
- In re Woody, 494 F.3d 939 (10th Cir. 2007) (unconscionability standard for HEAL loans; totality of circumstances)
- In re McBurney, 357 B.R. 536 (9th Cir. BAP 2006) (adopts Brunner framework for student loan dischargeability)