630 B.R. 91
Bankr. D.N.D.2021Background:
- Debra Marchus (nearly 64) filed a Chapter 7 adversary on July 7, 2020 seeking discharge of a 2007 student loan held by Student Loans of North Dakota (SLND) under 11 U.S.C. § 523(a)(8).
- Loan origination for Aakers Business College; balance at trial was $38,514.50 after prior forbearances, deferments and a large 2015 inheritance payment (~$8,953) and two small 2016 payments.
- Marchus has minimal assets, no real property, and a 2021 vehicle purchase financed at high interest; average historical AGI ≈ $14,493/year over 15 years.
- Current income: part-time night stocker net ≈ $581.88/month + Social Security $772–$840/month + SNAP $204/month (total ≈ $1,558–$1,626); Medicaid is her only medical coverage.
- Extensive medical history and functional limitations (multiple surgeries, chronic sinusitis, arthritis, thyroid/kidney issues, sleep disorder) supported by 516 pages of records; work capacity limited and unlikely to increase materially.
- Trial held March 3, 2021; court found Marchus established undue hardship and discharged the SLND student loan under § 523(a)(8) (order dated May 18, 2021).
Issues:
| Issue | Plaintiff's Argument (Marchus) | Defendant's Argument (SLND) | Held |
|---|---|---|---|
| Whether the student loan is dischargeable under §523(a)(8) for undue hardship | Loan payments would preclude even a minimal standard of living given age, health, income, and assets | Debtor can earn more / has not shown undue hardship | Debt discharged — court found undue hardship |
| Likelihood of increased future income | Unlikely due to age, limited skills (esp. computers), health, and sparse work history | Debtor has not maximized income and imposed self-limited work restrictions | Court: future income unlikely to rise materially |
| Good faith effort to repay / maximize income | Pursued education, sought work, obtained forbearances/deferments, made a large inheritance payment, engaged debt counselor | Made few loan payments and failed to follow through on some low-payment plans | Court: Marchus made credible, good-faith efforts; failure to pay does not bar discharge here |
| Availability/notice of rehabilitation or alternative repayment | Says she was not adequately informed and could not afford rehabilitation payments | Rehab was available and debtor could have pursued it | Court: rehab availability did not negate undue hardship; required payments would still be unaffordable |
Key Cases Cited
- Educ. Credit Mgmt. Corp. v. Jesperson, 571 F.3d 775 (8th Cir. 2009) (holds debtor must show repayment would preclude a minimal standard of living)
- Walker v. Sallie Mae Servicing Corp., 650 F.3d 1227 (8th Cir. 2011) (endorses totality-of-circumstances test for undue hardship)
- Long v. Educ. Credit Mgmt. Corp., 322 F.3d 549 (8th Cir. 2003) (establishes multi-factor undue-hardship framework)
- Conway v. Nat’l Collegiate Tr., 495 B.R. 416 (B.A.P. 8th Cir. 2013) (section 523(a)(8) requires affirmative hardship determination to discharge student loans)
- Piccinino v. U.S. Dep’t of Educ., 577 B.R. 560 (B.A.P. 8th Cir. 2017) (lists additional factors courts may consider under the third prong)