598 B.R. 907
Bankr. N.D. Ga.2019Background
- Debtor Risa Hill filed Chapter 7 (Apr 11, 2017) and an adversary complaint seeking discharge of federal student loans under 11 U.S.C. § 523(a)(8); ECMC was the remaining defendant after DOE claims were resolved in Debtor's favor.
- ECMC held multiple FFELP loans (original principal ≈ $127,000; later unilaterally reduced to $70,000); monthly payments at filing exceeded $1,400 (later >$770 after reduction).
- Debtor, age 46 at trial, is SSDI‑eligible (disability onset Oct 15, 2013) and receives $1,341/month; she has not worked since 2013 due to Bipolar I with psychotic features and PTSD and requires ongoing medication and therapy.
- Debtor’s monthly necessities (rent subsidized by voucher, utilities, food, medical copays, transport) leave a small surplus (~$212/month) that cannot cover the loan payments. Many benefits and medical services depend on her disabled status and Representative Payee management.
- REPAYE would yield a $0 monthly payment but requires annual recertification and debt consolidation; Debtor fears administrative noncompliance (memory/medication side effects) and potential loss/offset of SSDI if she defaults.
- At trial the court received medical records, deposition excerpts, and stipulated facts; the court applied the Brunner undue‑hardship test and held for Debtor.
Issues
| Issue | Hill's Argument | ECMC's Argument | Held |
|---|---|---|---|
| 1. Minimal standard of living: can Debtor maintain basic needs if forced to repay? | Debtor: SSDI income and expenses make required loan payments unaffordable; needs housing/medical supports. | ECMC: REPAYE (income‑driven plan) would reduce payment to $0 so repayment is feasible. | Held: Debtor cannot maintain minimal standard of living if forced to repay; REPAYE’s $0 payment does not negate undue hardship and is infeasible given administrative burdens. |
| 2. Persistence: will inability to repay likely persist? | Debtor: mental illness is permanent/long‑term; SSDI granted for persistent disability; ongoing treatment precludes gainful employment. | ECMC: Therapy plus medication may cure PTSD and enable return to work. | Held: Debtor’s condition and low earning history make inability to repay likely to persist for a significant portion of repayment period. |
| 3. Good faith: has Debtor made sincere efforts to repay? | Debtor: sought and used forbearances/deferments; loans never in default; inability to pay preceded disability onset. | ECMC: Never made payments; failed to pursue administrative options (REPAYE, disability discharge). | Held: Debtor acted in good faith; lack of payments alone doesn’t show bad faith and refusal to require administrative program participation. |
| 4. Overall undue hardship under §523(a)(8) / Brunner | Debtor: all three Brunner prongs met. | ECMC: availability of repayment/discharge programs and prior earnings undermine undue hardship. | Held: Court granted hardship discharge — all Brunner elements satisfied. |
Key Cases Cited
- Hemar Ins. Corp. Am. v. Cox, 338 F.3d 1238 (11th Cir.) (adopting Brunner standard for undue hardship)
- Brunner v. New York State Higher Educ. Servs. Corp., 831 F.2d 395 (2d Cir.) (establishing three‑part undue hardship test)
- Grogan v. Garner, 498 U.S. 279 (U.S. 1991) (preponderance standard for exceptions to discharge)
- Educ. Credit Mgmt. Corp. v. Mosley (In re Mosley), 494 F.3d 1320 (11th Cir.) (factors relevant to persistence and good‑faith inquiry)
- Barrett v. Educ. Credit Mgmt. Corp. (In re Barrett), 487 F.3d 353 (6th Cir.) (work history relevant to projecting future earning capacity)
- Educ. Credit Mgmt. Corp. v. Nys, 446 F.3d 938 (9th Cir.) (discussing circumstances relevant to undue hardship)
- Polleys v. U.S. Dept. of Educ. (In re Polleys), 356 F.3d 1302 (10th Cir.) (failure to pay does not alone establish lack of good faith)