This аction is before the court on the mandate of the U.S. Court of Appeals for the Eleventh Circuit. (Doc. # 35.) The
I. BACKGROUND
On review of thе bankruptcy court's determination that Appellee Alexandra Elizabeth Acosta-Conniff's ("Ms. Conniff") student loan debt was dischargeable under
As predicted by the Eleventh Circuit, remand is necessary. When reviewing a bankruptcy court's decision, "the district court ... is [not] authorized to make independent factual findings." Equitable Life Assurance Soc'y v. Sublett (In re Sublett) ,
II. DISCUSSION
In its opinion vacating this court's decision reversing the bankruptcy court's discharge order, the Eleventh Circuit set out the elements of the Brunner tеst that Ms. Conniff must prove to obtain a discharge of her student debts:
Under the Brunner test, a debtor is entitled to discharge of her student debts if she proves all of the following:
(1) That the debtor cannot maintain, based on current income and living expenses, a "minimal" standard of living for herself and her dependents if forced to repay the loans;
(2) That additional circumstances exist indicating that this state of affairs is likеly to persist for a significant portion of the repayment period of the student loans; and
(3) That the debtor has made good faith efforts to repay the loans.
In re Acosta-Conniff ,
A. Minimal Standard of Living
The first prong of the Brunner test is whether the debtor can maintain a " 'minimal' standard of living for herself and her dependents if forced to repay the loаns." Brunner ,
The bankruptcy court calculated Ms. Conniff's monthly student loan payment to be $915. (Doc. # 1-3, at 2.) In doing so, the bankruptcy court took judicial notice of the variables involved, apparently because it found the facts "not subject to reasonable dispute." Fed. R. Evid. 201(b). The bankruptcy court explained that it "fill[ed] the gap in Conniff's proof" when it made this calculation because Ms. Conniff, who was not represented by counsel, could not competently submit the evidence needed to make this calculation. (Doc. # 1-3, at 2 & n.2.)
Meanwhile, Ms. Conniff's student-loan creditor, Educational Credit Management Corp. ("ECMC"), argued that a much lower payment-$346 per month-was the benchmark. It explained that, if Ms. Conniff participated in an income contingent repayment plan ("ICRP"), her monthly payment would be $346, not $915. (Doc. # 1-3, at 12.)
Disposing of ECMC's argument, the bankruptcy court found that similar arguments "have been rejected both by the Eleventh Circuit and by this Court." (Doc. # 1-3, at 12.) The bankruptcy court string-cited four cases to support its contention that it need not consider what Ms. Conniff's payments would be were she to enroll in an ICRP. (See Doc. # 1-3, at 12) (citing Mosley ,
Because this court previously resolved this case on Brunner 's second prong, it found it unnecessary to consider the first and third prongs. (See Doc. # 21, at 13 & n.7.) Now, on review of the bankruptcy court's decision, this court finds that the bankruptcy court committed errors of law and fact in its analysis of whether Ms. Conniff satisfied Brunner 's first prong. Those errors fall into three categories.
The bankruptcy court's first error-a legal one, which this court reviews de novo -was its misapplication of the Eleventh Circuit's decision in Mosley , and the non-binding lower-court decisions in McLaney , Al-Riyami , and Bumps to find that potential ICRP payments were not relevant to the court's analysis of the first Brunner prong. The bankruptcy court failed to recognize that each of these cases
There is an additional distinction shared by these cases that the bankruptcy court overlooked. The courts, including the Eleventh Circuit, considered the lower ICRP payments but then concluded that the lower payments still were so high as to pose an undue hardship on the debtor. See Mosley ,
The bankruptcy court's second error pertains also to Brunner 's first requirement and is closely related to its first error: The bankruptcy court failed to determine whether Ms. Conniff was eligible for an ICRP and, consequently, did not consider whether participation in an ICRP would affect Ms. Conniff's ability to maintain a minimal standard of living while making payments on her debt. As will be explained, this error is both legal and factual.
The bankruptcy court committed legal error by improperly applying Brunner and not deciding whether Ms. Conniff could make a reduced ICRP payment. There is a split of authority as to how-and whether-courts should consider ICRP payments when deciding this first Brunner
In Johnson v. Education Credit Management Corporation (In re Johnson) ,
This approach, however, is not the rule of this circuit, and other bankruptcy courts have not followed Johnson 's lead. See, e.g., Sturtevant v. Educ. Credit Mgmt. Corp. (In re Sturtevant) , No. 6:09-BK-08565,
would yield an absurd result: almost every debtor would satisfy Prong 1 easily if courts were restricted to considering only the amount of their [original] contract payment. Congress's creation of the flexible income-based repayment options reflects an intent that debtors not be automatically or easily excused from their student lоan obligations.
Educ. Credit Mgmt. Corp. v. Beattie ,
Apart from these considerations, the Eleventh Circuit has suggested, in an unpublished opinion, that consideration of ICRP payments is approрriate when applying Brunner 's first prong. See Wieckiewicz v. Educ. Credit Mgmt. Corp. ,
eligibility under the [federal loan consolidation program] would play a substantial role in whether he would be able to show undue hardship under Brunner. If he qualified for the [program,] Wieckiewicz's loan payments could have been reduced to $0 per month, and eventually the loans would be forgiven. On the other hand, if Wieckiewicz did not qualify, the bankruptcy judge indicated a strong likelihood that Wieckiewicz's loan payments were high enough that he would be able to establish undue hardship under Brunner because he would not be able to maintain a minimal standard of living.
More specifically, the bankruptcy court's failure to develop the record and consider the relevant "outcome determinative" facts, see Sublett ,
Finally, the bankruptcy court's third error is that its calculation of Ms. Conniff's monthly expenses is clearly errоneous. There is no indication in the record that, when determining that Ms. Conniff could not maintain a minimal standard of living if forced to repay the loans, the bankruptcy court performed an itemized analysis of Ms. Conniff's budget to determine which expenses were reasonable and which were not. (See Doc. # 21, at 7 ("The bankruptcy court did not indicate whether it had determined that all of the Schedule J expenses were reasonable and necessary for the support of Conniff and her two dependent sons. The record is mostly silent as to this fact-bound undertaking.").) Because this court cannot make those findings of fact and those findings are needed to decide Brunner 's first prong, the bankruptcy court must develop the record and make findings as to the reasonableness of Ms. Conniff's monthly expenses.
Ultimately, consistent with the foregoing, the bankruptcy court must make specific
B. Additional Circumstances
The second prong of the Brunner test requires that additional circumstances exist such that the debtor's " 'state of affairs is likely to persist for а significant portion of the repayment period of the student loans.' " Cox ,
In its opinion, the bankruptcy court cited almost no evidence to support its conclusion that Ms. Conniff bore her burden of demonstrating the requisite additional circumstances. (See Doc. # 1-3, at 13 ("This was established by the evidence offered at trial.").) The apparent lack of evidence constitutes "silence ... as to an outcome determinative factual question" that this court cannot cure. Sublett ,
Regardless of which facts the bankruptcy court finds on remand, it must recite the facts that support its legal conclusion-which "additional circumstances," if any, indicate that Ms. Conniff's "state of affairs is likely to persist for a significant portion of the repayment period of the student loans." Brunner ,
C. Good Faith
The third and final prong of the Brunner test requires the debtor to have
Moreover, while failure to apply for an ICRP is not per se a lack of good faith, efforts to negotiate a repayment plan are a demonstration of intent to repay the loans in good faith. Mosley ,
The bankruptcy court based the good-faith decision on the actual payments made, Ms. Conniff's communication with the creditor in obtaining deferrals, and her applications for loan forgiveness based on teaching in a rural area. (Doc. # 1-3, at 13.) Ms. Conniff negotiated a deferral status for her loans for several years, paid over $9,000 towаrd her loans, and applied three times to a program that would forgive $17,500 of the loans for every five years she spends teaching in a rural area. (Doc. # 1-3, at 3-4.) These were relevant considerations. However, the bankruptcy court clearly erred by not also factoring into its analysis Ms. Conniff's efforts, if any, to minimize her expenses, to maximize her income, and to apply for аn ICRP. In light of the opinions of the Eleventh Circuit and this court, on remand the bankruptcy court should reexamine its factual findings and conclusions of law on Brunner 's third prong.
III. CONCLUSION
For the foregoing reasons, the bankruptcy court must make additional findings of fact and conclusions of law as to whether Ms. Conniff has satisfied her burden of proving each of the three Brunner elements. Accordingly, it is ORDERED that this case is REMANDED to the bankruptcy cоurt for further fact-finding and legal determinations consistent with the Eleventh Circuit's and this court's opinions.
Notes
Johnson was decided less than one week before the Eleventh Circuit formally adopted Brunner in Cox. See Cox ,
Ms. Conniff appeared pro se in the bankruptcy court and here. She had counsel on appeal, according to the Federal Reporter and this court's electronic record (see, e.g. , Doc. # 33). After the entry of the Eleventh Circuit's mandate, counsel also appeared on Ms. Conniff's behalf in this court. (See Docs. # 36-39.) Counselled or not, Ms. Conniff bears the burden of proving all three Brunner prongs.