*1 reorgani- Debtors’ plan content of the therefore, is,
zation inconsequential. Whitaker, citing 173 B.R. at In re Applied 957- Logic 576 F.2d (2nd Cir.1978). the Court Accordingly, Chapter finds that the confirmation of a plan extinguish does not alter credi setoff, right tor’s contrary Court’s conclusion was error. Conclusion herein, For the reasons stated the Order the Bankruptcy Court is REVERSED AND pro- REMANDED for such further
ceedings as a may result ruling,
of this and this is now ter- matter minated. CLINE,
In re Ann Julie Debtor. Cline, Plaintiff-Appellee, Julie Ann Illinois Student Assistance
Association, Defendant-
Appellant. No. 00-6007WM. Bankruptcy Appellate United States Panel Circuit. Submitted March 2000. May Decided
ing excepting a determination stu- from her obligations dent ISLAA Chapter discharge would constitute hardship pursuant U.S.C. 523(a)(8). court1 found that Cline’s student loan debt dis- on of undue charged the basis findings ISLAA Because the appeals. court are not erro- neous, we affirm.
BACKGROUND thirty-five years and single Cline dependents. with no She holds a bache- degree psychology sociology lor’s in College from Southwest Bible and a mas- degree sociology in ter’s from Central Mis- University. financed souri State Cline loans, education with student which she master’s earning consolidated after de- gree. The balance due ISLAA $53,522. consolidated loan exceeds decade, of a Cline Over course payments. made two repayment variety ISLAA offers plans. Under standard plan, obligation is over payable Cline’s ten in years monthly installments of $613. plan, extended the loans Under the payable thirty years twelve to over installments Under the graduated plan, monthly payments Cline’s begin with periodic increas- a repayment es over term of twelve to Beheler, MO, City, Richard M. Kansas years. thirty Finally, under the income appellant. contingent plan, monthly payments Cline’s Bobrink, MO, City, M. Jean Kansas thirty-five years. would be appellee. Although highly Cline is educated and KRESSEL, SCHERMER, and Before works her field as caseworker for the SCOTT, Judges. Services, Department Family Missouri her income has been modest. In
KRESSEL, Bankruptcy Judge. $25,000. In approximately earned debtor, Cline, $24,- filed approximately Julie Ann Cline earned adversary against the income was proceeding ap- Illinois 000. annual $22,500. seek- proximately Student Loan Assistance Association Federaran, The Honorable Arthur B. Chief the Western District Missouri. Judge, Bankruptcy Court United States assisting people duties consist of loans would constitute an Cline’s stamps seeking finding food and medical and other a factual and is reversible of public applica- assistance with the for clear forms error. See Andresen Nebraska process. Three times Cline succeeded tion Student Loan Andre higher sen), obtaining responsibility *3 in higher pay position but each slightly a
instance she lasted few months Section of new and returned to provides: Code position. According caseworker (a) discharge A under section Cline, positions the other involved more 1328(b) 1228(a), 1228(b), or of this Apparently than she could handle. stress title does not an individual manage responsibilities cannot ex- Cline any debtor from debt— of simple, repetitive cess tasks. (8) for overpay- an educational benefit petition filed her for relief under Cline made, ment guaran- or loan or insured Chapter 7 on 1999. In her sched- May unit, by governmental teed a or made and affairs ules statement financial she any under program funded whole or $1,424 listed and in part governmental unit or non- $1,438. fact, monthly expenses total institution, profit any obligation for $1,578, net monthly income is and she repay funds received as an educational sometimes has an to work opportunity benefit, scholarship or stipend, unless overtime that net from as little as could excepting such debt from un- to much a given as as extra in $65 $284 der paragraph this will impose month. hardship on the debtor and the debtor’s schedules, In her Cline list- dependents. ed that court found 523(a)(8). 11 U.S.C. modest
were and reasonable. Her month- hardship Undue is not defined by $465, expenses included rent ly food Circuit, the Code. In the the test $200, including dietary special items of $20 for undue is medical expenses, and dental for $73 circumstances, particular attention to insurance, toup car for car use and $130 the debtor’s current and future financial maintenance, recreation, $30 $50 resources, necessary living ex television, contri- cable charitable penses for the debtor and debtor’s butions, and a on nondis- dependents, unique other facts chargeable tax obligation. state Cline’s particular bankruptcy See case. An schedules also included a car drews v. South Dakota Student As However, payment. has since off (In Andrews), sistance re 661 F.2d Corp. that, loan on the car. The court found (8th Cir.1981); Andresen, see also 232 nevertheless, Cline would require B.R. at 139-40. each month in of her car maintenance eventually Admittedly, new car. this is a case could way.
be determined either
There are sev
DISCUSSION
eral factors that would
a determi
support
manage
repay
We
review the
nation that
could
Cline
loans,
findings
factual
error
court’s
clear
albeit with an extraordi
nary
perhaps
crossing
conclusions
law de
effort
its
novo. Johnson
but
(In
Johnson),
Border State
hardship.
Bank
threshold of undue
Cline is a
1999);
BAP
healthy thirty-five year
person
Cir.
Eilbert
with no
Eilbert),
523, dependents.
highly
v. Pelican
F.3d
She
educated and
(8th Cir.1998).
has worked in the field of
determination
her bachelor
requiring
degrees
years.
a debtor to
student master
twelve
She has
repay
clinically
maladjusted,
of or
disabled or
expenses,
surplus
modest
expressly
much as
found that
as
perhaps
fit for
higher responsibil-
Cline was not
hand,
shortage
there
no
On the
ity
higher paying positions
she tried
also
support
of circumstances
left.
no reason to
then
There is
view
finding that requiring
court’s
findings
the trial court’s
as unreliable
her student
loans
Cline
merely
expert
because
evidence was
While
constitute
offers no
introduced.
record
reason
work,
is social
profession
trained
Cline’s
that the
suggest
made
department of
worker for the state
a case
its decision without due consideration.
services,
never earned more
social
she has
evidence,
.took
bankruptcy court
$25,000 in
never
year.
than
one
She has
*4
credibility,
the debtor’s
and
judged
applied
pay-
able to afford her student loan
been
proper
circumstances
made two
only
payments
She has
ments.
finding
hardship
test.
Its
undue
year period.
in a ten
clearly erroneous.
has
nondischargeable
also
She
month,
payable
tax debt
at
and she
place
It is not our
to re-evaluate
eventually require a new car. More-
will
evidence,
when the
especially
proper
over,
payment
the smallest
even under
legal
case,
applied.
test was
In this
expend virtually all of
plan, Cline would
judge
cited
bankruptcy
ap
and
questionable surplus
thir-
already
totality of
plied the
the circumstances test
ty-five years
finally repay
her student
hardship
by
the Eighth
undue
set forth
seventy years
be
loans. She would
Andrews,
Circuit in
and in our recent opin
paid, assuming
are
loans
ion in Andresen. The
scheduled,
makes
carefully analyzed the debtor’s current and
financial
health
encounters
or
resources,
future financial
reasonable liv
problems.
ing
expenses,
any other relevant facts
modestly.
very
lives
She rents
Cline
position
in a
circumstances.
It was
duplex
in a
from her father
unit
for $465
credibility, and its’
determine Cline’s
con
expenses
per month and her other
are
unsupported by
clusion is not
the record.2
including
minimal. Not
a car
In a case like this that could be con-
that
found would
way,
at liberty
strued either
we are not
min-
eventually
required expense,
be
guess
second
court’s find-
approximately
are
expenses
imal
ings.
only,
are to look for clear error
We
$1578,
Her
home
ad-
take
clearly
nothing
there is
erroneous
mittedly
than the
more
ruling
about the court’s
in this case.
court found. While Cline
earned over-
time, there was no evidence that overtime
appears
While the court
to have under-
mandatory,
available or
always
was either
$154,
estimated Cline’s
and no assurance that Cline
handle
could
it is
moment
the bankruptcy
of no
because
continuous overtime.
rely
exclusively
court did not
Cline’s
earning capacity,
limited income
and be-
court determined
probably
cause her
underes-
only
Cline could endure
work that was
expressly
timated. The court
decided that
essentially
ministerial
that she suf-
Cline’s lack of self-confidence was the rea-
respon-
fered from the stress of increased
self-confidence.
higher
due to
son that she could not maintain
sibility
a lack of
Indeed,
paying employment.
there
no evidence that the debt-
tran-
While
was
Bessemer,
City
heavily
2. See Anderson v.
470 U.S.
tone of voice
bear so
on the
564, 575,
S.Ct.
L.Ed.2d 518
understanding
listener's
of and belief what
(1985) (holding
judge can
the trial
said).
aware
variations
demeanor
script of the proceedings suggests a tearful
STANDARD OF REVIEW
times shameful debtor. The court
The majority correctly states that deter-
did not let Cline win an
hardship
mination of undue hardship is a factual
because she
limited
determination and is reversible only for
Instead,
her earning capacity.
the court
clear error. Andresen v. Neb. Student
found that the Cline was unable to main-
Andresen),
tain a
a higher income.
believe the
addition,
majority incorrectly applies
court’s determination of
and, therefore,
erroneous standard
would survive clear error
I respectfully dissent.
review even without the element of the
fragile
Cline’s
resistance to stressful work
because her financial situation alone is
DISCUSSION
highly precarious. An inevitable future
Pursuant
to Section
payment,
car
the tax
payments,
debt
Code,
a student
loan obli
the fact that her expenses were already
gation is excepted from discharge “unless
estimated minimally render what appears
excepting such debt from discharge ...
to be a
monthly surplus
likely
more
will impose an undue hardship on the debt-
barely
to be
enough to make ends meet.
*5
or and the
dependents.”
debtor’s
11
The bankruptcy court’s conclusion that
523(a)(8).
U.S.C.
The debtor bears the
Cline will never be able to
payments
afford
burden of proving undue hardship by a
loans,
on her student
not even at
preponderance of the evidence. Woodcock
month spread out over thirty-five years on
Bank,
(In
v. Chemical
NYSHESC
re
the income contingent repayment plan, is
Woodcock),
(10th Cir.1995);
years, so will her expenses, and she will (In Educ. Standfuss), 356, re 245 B.R. 359 likely not be able to afford the (Bankr.E.D.Mo.2000); Kopf v. Dept. U.S. the future either. (In 731, Educ. re Kopf), 245 B.R. 734-36 (Bankr.D.Me.2000), Finally, going citing over Grogan Cline’s ex v. Gar ner, 279, penses 654, dollar for dollar in 498 U.S. 111 order to find S.Ct. 112 (1991); every possible L.Ed.2d 755 way to boost a Clark v. surplus is United Stu Funds, Inc., given reasonable dent Aid that the overall total (Bankr.W.D.Mo.1999). firmly remains minimal. There are no case; luxuries to reduce in this it cannot Congress’ intent in excepting student be clear error for court to loans from discharge was clear: Congress have require failed to the debtor to aban prevent wanted to the “undeserving stu- don a month in charitable donations or dent borrower from abusing the bankrupt- to obtain a roommate to share cy process.” Andresen v. Neb. Student with her for the next thirty-five years. (In Andresen), Loan re (8th 1999). B.R. Con- CONCLUSION not, however, gress did define undue hard- judgment of the bankruptcy court ship. out, As the majority correctly points determining that the debtor’s debt to the Circuit, the test for undue defendant is not excepted from her dis- hardship requires inquiry into the total- charge is affirmed. ity of circumstances with special attention
to the debtor’s current and future financial SCHERMER, resources, Bankruptcy Judge living dissenting. expenses for the debtor and the debtor’s net average pay overtime any other circumstances When
dependents, bankruptcy case. particular regular monthly to the net unique to the added Debtor’s Assistance Student Loan Andrews v. S.D. pay is pay, her total take home (8th Andrews), (In F.2d 702 Corp. re $1,720.43. under- Cir.1981); Neb. Student Andresen by pay stated Debtor’s (In Andresen), Program, Inc. additional income This $295.55. 127, 139-40 BAP Cir. is sufficient to enable bankrupt- argues Appellant Appellant her student loan cy applying court erred per rate of month under the test to the Debtor’s situa- circumstances contingent repayment plan income offered determining excepting and in tion Appellant. The court’s by impose an un- home to consider the Debtor’s take failure agree on the Debtor. due pay pay as evidenced stubs —the Appellant. rate most accurate evidence her current and Future I. Debtor’s Current pay mandating clear error reversal. —is Financial Resources Furthermore, determining when it erred re current and future financial Debtor’s gross monthly income found Debtor’s sources, take court did not and her take home to be account fact that into the Debtor $1,424.88. trial, At the Debtor pay to voluntarily income. chosen to minimize her evidence stub for pay introduced into The Debtor cannot reduce her September, and her regular pay for of her then seek September, pay stubs for overtime loan debt as an undue (Pl.’s November, October, Ex. Rose), Dept. Educ. v. Rose U.S. *6 6.) clearly stub regular pay Her indicates (W.D.Mo.1998); 518, Healey 227 B.R. 1999, for pay September, that her gross Higher Healey), v. Mass. Educ. $2,078.00 pay was and her net was 389, (E.D.Mich.1993);3 B.R. 394-95 Leh Furthermore, $1,578.08. pay overtime her v. N.Y. Higher man Educ. Serv. and gross pay net overtime stubs indicate (Bankr.D.Vt.1998). ma The $76.66, and September, for $83.92 jority determines the and respectively, gross pay net overtime court found that the Debtor was $65.71, October, for and $71.93 job to a more paid unable maintain for No- gross pay and and net overtime job and con present than her therefore vember, 1999, of and The $311.70 $284.73. voluntarily cludes that Debtor did the not average Debtor earned on net $142.35 disagree. limit her The Debtor income. each which overtime for month for pay jobs testimony voluntarily left several which evidence was No provided. current In addi- presented job.4 to contradict these amounts. more than her Healey applied 3. The court the Brunner totali situation.” Andresen Neb. Student Loan test, (In Andresen), ty it me of circumstances under which chanically situa light tested debtor's economic In of this instruction, if the debtor could appropriate tion determine for this court it obligations. guidance application her student loan The con seek from other courts’ cluded debtor had failed to maximize prong that the test in of evaluating economic Brunner her therefore would not be dis income and the debtor’s financial resources charged obligations her student from as living expenses un Eighth an undue The Circuit der Andrewstest. Appellate has noted that Panel at- test the Andrews test are 4. On number of occasions the Debtor "Brunner similar, greater tempted responsibil- controlling employment with [in allowing ity greater pay position. simply present test than her Circuit] Andrews example, position an effi- any broader case and For she took as consideration manager approxi- specific given particular ciency factors to a debtor's case DFS tion, fact her majority expen- fails address the schedule of current steps the Debtor taken no other ditures. Her schedules differed her income, such obtaining increase her testimony, however. She testified to second of a menial nature which would expenses monthly aggregate which self-imposed within level. fit her comfort testimony Such included $971.50. $100 dependents Debtor has no per month food plus unknown reflects other record factors which special contrast, amount for a diet. prevent obtaining her from addition- monthly listed food costs her schedule employment supplement al her income. Additionally, testimony her did Alternatively, sought Debtor has her expenses not address scheduled of $20 employment fields which for expenses, medical dental skills and which might her are suited insurance, recreation, automobile more. for charitable contributions. The Debtor the burden of proving bears When scheduled expenses these as well as hardship. The monthly additional scheduled food it equated pres- erred when Debtor’s added aggregate cost are to the ent limited income with the testified, expenses about which she her present Debtor’s and future re- financial $1,259.50. total holding sources without ac- The Debtor testified that she has made options countable for the available for an repay nondischargeable offer to taxes individual with the Debtor’s educational owed to the Internal Revenue Service and background job skills to increase to the State Missouri at rate of $50 even if her- she continues to limit per month each. these payments When jobs com- self-imposed self within added, monthly expenses total level. fort $1,359.50. in- Debtor’s Necessary II. Debtor’s Reasonable come of exceeds her total Expenses Living monthly expenses, including her projected majority that the Debt- determines payments for nondischargeable tax lia- very modestly. lives bility, by which is more that $360.93 court found that ex- the Debtor’s enough to fund under penses as listed on schedules and as contingent repayment plan come offered *7 testimony “both supplemented her are by Appellant. 7.) modest and (Mem.Op. reasonable.” at bankruptcy The court noted that the expenses may While the Debtor’s mod- be no longer monthly Debtor had a car pay- est, they must be considered in to relation ment of as included in her scheduled $250 her income and student obli- her loan because she had off the car gation. The erred loan, yet determined that an “allowance of it determined that the Debtor would suffer per month for maintenance undue hardship required repay $250.00 an if to her and/or payments is (Mem.Op. loan her reasonable.” at 7- Appellant light student to of 8.) Court’s of expenses. per income and Debt- The allowance The $250 listed monthly expenses recognize or on month did not that the Debtor months, mately position positions attempted high four she took a she "too were stress [her],” disability department yet diagnosed she the determinations has never been months, approximately learning disability a nine she took with a or other medical position drug ability impacts per- at a rehabilitation The which center. condition her to (Tr. 17-18.) position efficiency manager paid job. as the case at form Debtor is pres- per job requir- $100 $200 more in a than month than her uncomfortable other one instance, tasks, (Tr. 18.), position. ing simple repetitive at ent In each the Debtor voluntarily employment jobs left the alternate has left several therefore present position self-imposed return to her as a case man- which did not fall her within Debtor, ager. According to the the alternate level. comfort testimony expenses proving her $130 included that maintenance, court erred when it concluded and oil.5 gas, month
per Debtor met that burden. Debtor 8.) (Tr. If we at assume failed to demonstrate that her determining was correct $250 living expenses are such that spend a reasonable amount month is per required if will face she maintenance, the for a car and/or repay her student loan. already to and been has testified Debtor Unique gas III. Other Circumstances per credit for month given $130 Bankruptcy to Debtor’s Case add If we regular maintenance. aggre- per month to her additional $120 court found (the monthly expenses difference be- gate “appears Debtor to be uncomfortable with she to as her actual what testified tween any position anything where her tasks what deemed rea- expenses the court ministerial,” repetitive than sonable), aggregate monthly expenses her 3), at concluded that (Mem.Op. $1,479.50. amount is subtract- When this “totally lacking is in self-confi- Debtor 7-8.) monthly pay (Mem.Op. Debtor’s bankrupt- ed dence.” at $1,720.43, surplus cy she court found that each time the Debtor job could used to attempted which which involved discretion $240 obligation.6 responsibilities, decision making she to adequately perform was “unable such surplus un- While Debtor’s 3-4.) (Mem.Op. tasks.” Nowhere does analysis shy of the der this $283 $42 record indicate that Debtor was the in- to make under needed perform any of the higher-pay- unable contingent program, this repayment come jobs was ing attempted. She never consideration analysis has taken into jobs. or asked to of these fired leave expenses of the reasonableness of contrary, To she left each recreation, cable, $25 Undoubtedly own accord. contributions, if which elimi- for charitable determining court was correct in provide budget nated from self-confidence; lacks I do not dis- per surplus Debtor with additional finding question pute nor do surplus more than suffi- month. Such trial court’s determination that the witness stu- cient to fund of Debtor’s However, a lack of credible. self- under Appellant dent loan confidence does not constitute unique contingent leaving option, to or circumstance which contributes es- discretionary per month Debtor undue hardship tablishes under Section fit. spend come to she sees Code. Lehman here is how The intent not to dictate Higher N.Y. Educ. Serv. however, (Bankr.D.Vt.1998) spend money; (healthy,
Debtor should
un-
*8
thirty-four
the burden of married
with no
year
I must note
she bears
de-
per
monthly expenses by
the
5.
costs do not
include
her
The court
These
not
taxes,
spends
property
personal
she
on
budget
month
ed that the
did not
debtor's
include
maintaining
per
$2.50
cost of
the
month
any
payment,
per
pays $80
car
that she
month
license,
per
nor the
month she
drivers
transportation expenses
$26 per
for
pays
automobile
If these costs
for
insurance.
170,000
insurance,
that her car has
month
permitted
pay-
car
are added to
it,
anticipates
miles on
that the debtor
maintenance,
ment
her actual
and/or
transportation expenses in the
additional
near
$336.50.
related to
vehicle total
future, given
age
and wear and tear
Nonetheless,
the court refused
vehicle.
to
(In Kopf),
Kopf v.
Dept.
U.S.
re
6. See
Educ.
discharge
give the
the debt nor did it
debtor
(Bankr.D.Me.2000).
Kopf
perceives as marketable “stu- degrees CONCLUSION might it impossible get
dents find stu- to study philoso- dent loans art history or majority notes that it is phy.” v. N. place appellate Melton Y. State Educ. Higher court to re-evaluate majority repayment notes that the Debtor has schedule based on payments made two toward her student expenses. plan, come and Under the if years. in ten Had she made pay- debtor were unable to make due, payments they became even ments, would be set at zero. payments, partial period Kopf While the record does not reflect the substantially would be shorter. The Debtor $14,- rate at which interest accrues on the create hardship by failing cannot an undue balance, it 716.82 loan is clear that with years make for ten com- and then *9 (the monthly payment ranging zero min- plain long. period that the too (the payment) imum amount of debt- surplus), budget or's debtor would not discharge 8. Kopf, the court refused the student able to retire loan indebtedness scheduled debtor's $14,761.82 student loan time, period for theless, an extended if ever. None- where the debtor’s Kopf court refused to monthly expenses by $66. come exceeded her hardship. the loan as an undue policies permit The student loan creditor's apply debtor to for an amended decelerated appellate This is true. The evidence. the trial guess not to second
court’s role the record to rather to review judge but the tri- supports if evidence determine al court’s conclusions. the bank- majority concludes applied cited and ruptcy court test for undue of circumstances agree I the bank- hardship. While test for un- ruptcy proper cited court majori- disagree I with the hardship, due court ty’s conclusion It is the role that test. properly applied whether appellate determine court’s con- supports the evidence the trial exists, ap- clear error clusion. Where the trial court. pellate court must reverse sup- I the evidence does conclude that hardship, port finding of to meet her burden of has failed under Section establishing Code, Bankruptcy and that clearly erred when it the Debtor’s student determined that not be ex- obligation Appellant should to do so cepted from because an undue Accord- impose order of the ingly, would reverse the bankruptcy court. Boul, Columbia, MO, D.
Harry for debt- ors. Columbia, MO, Harrison,
Thomas M.
Bank, N.A. Planters Union Ray FITZMAURICE,
In re Jimmie Johnson, TN, George Memphis, T. Kay Fitzmaurice, Pamela Chapter Trustee.
Debtors. ORDER MEMORANDUM No. 99-21398. ROGER, Judge. FRANK W. Chief Court, United States W.D. Missouri. This matter is before Court on Bank, N.A., motion filed Planters by Union May motion filed dismiss the Jimmie Fitzmaurice to the se- Pamela determine status Bank under cured of Union Planters For and to avoid hens. U.S.C. reasons, grant the Court will following Union Planters Bank’s motion to dismiss.