Hendel v. Pennsylvania Higher Education Assistance Agency et
23-00019
Bankr. E.D. Pa.May 2, 2025Background
- Joseph Michael Hendel borrowed educational loans to finance his daughter's college education at Penn State, becoming the sole obligor on the loans.
- After his daughter graduated in 2009, the loans remained largely in deferment; Hendel made minimal payments and never entered an income-driven repayment plan.
- Hendel and his wife, both in their 70s, have experienced ongoing financial difficulties since losing his long-term job, but both are still employed and recently began collecting Social Security benefits.
- Hendel filed for Chapter 7 bankruptcy in November 2022 and sought to discharge the educational loans as an undue hardship under 11 U.S.C. § 523(a)(8).
- The outstanding loan balance as of June 2023 was $54,124.16; the primary factual dispute was whether Hendel could afford loan payments given his current circumstances.
- At trial, Hendel admitted he is currently able to make loan payments without sacrificing a minimal standard of living due to increased household income from Social Security.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Are educational loans dischargeable for undue hardship under § 523(a)(8)? | Hendel argued that repaying the loans would impose an undue hardship, especially given his age, limited income, and speculative future hardships as he and his wife continue to age. | ECMC/Defendants contended Hendel could presently pay the loans without undue hardship, and he failed Brunner's test. | The court held the loans are not dischargeable because Hendel currently has the ability to pay without undue hardship. |
| Satisfaction of the first Brunner prong (minimal standard of living) | Hendel claimed he could not maintain a minimal standard of living if repayments were required. | Opposed, citing Hendel’s admission that he could presently afford payments. | Court found the first Brunner prong unmet, as Hendel admitted current ability to pay while maintaining minimal living standard. |
| Satisfaction of the second Brunner prong (persistence of hardship) | Argued hardship would persist as advancing age reduces future employment prospects. | Opposed, noting both Hendel and his wife currently work, with no identified long-term disability or imminent retirement. | Court ruled hardship persistence not established; current fears were speculative. |
| Satisfaction of the third Brunner prong (good faith repayment effort) | Claimed good faith because of prior payments and overall circumstances. | Argued that Hendel made minimal payments and never tried income-driven plans. | Court found insufficient good faith; efforts over two decades were lacking. |
Key Cases Cited
- Brunner v. New York State Higher Education Services Corp., 831 F.2d 395 (2d Cir. 1987) (establishes three-prong test for student loan dischargeability based on undue hardship)
- Pa. Higher Educ. Assist. Agency v. Faish (In re Faish), 72 F.3d 298 (3d Cir. 1995) (adopts Brunner test as definitive standard in the Third Circuit)
- Brightful v. Pa. Higher Educ. Asst. Agency (In re Brightful), 267 F.3d 324 (3d Cir. 2001) (applies Brunner test and clarifies standard of proof for student loan discharge)